ARS Steels and Alloy International Private Limited Vs State Tax Officer (Madras High Court)
Madras High Court dismissed a plea by ARS Steels and Alloy International Private Limited challenging the denial of Input Tax Credit (ITC) under the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017. The petitioner sought ITC on purchases of gold coins and T-shirts used for sales promotion activities, which the authorities had disallowed citing Section 17(5)(h) of the Central GST (CGST) Act, 2017. The court upheld the orders of the Appellate Commissioner affirming the assessment orders for the financial years 2017-18 to 2019-20, which included a reversal of ITC and penalties. The total disputed ITC for these years amounted to ₹7,31,369, with an additional tax liability of ₹22,91,282 arising from stock discrepancies during an audit in August 2019.
The petitioner argued that the promotional activities were integral to business operations and cited precedents from the Value Added Tax (VAT) and Central Excise regimes, which allowed such credits. However, the court clarified that under the GST framework, Section 17(5)(h) expressly prohibits ITC claims on goods disposed of as gifts or free samples. It further stated that earlier rulings under VAT or Central Excise laws do not override the explicit provisions of the GST Act.
