Sai Service Private Limited Vs Union of India (Bombay High Court)
Bombay High Court disposed of the case filed by Sai Service Private Limited against the Union of India concerning the availability of Input Tax Credit (ITC) on demo vehicles under the Goods and Services Tax (GST) framework. The case became redundant following a clarification issued by the Central Board of Indirect Taxes and Customs (CBIC) through a circular dated 10.09.2024. The circular explicitly confirmed that businesses like automobile dealers are entitled to claim ITC on demo vehicles, effectively overriding the disputed order that had previously led to litigation.
Sai Service Private Limited had approached the court after being denied ITC on demo vehicles, which are used by automobile dealerships for customer demonstrations before sale. The dispute centered on whether such vehicles qualified as capital goods eligible for ITC under the GST regime. The petitioner argued that since demo vehicles are an essential part of the business, their tax treatment should align with standard capital goods provisions under GST laws.
However, during the legal proceedings, the CBIC released a policy clarification confirming that ITC on demo vehicles is indeed permissible. Given that government circulars have binding authority on tax officers and serve as an interpretation of tax laws, the Bombay High Court acknowledged the circular’s precedence over the impugned order. With no remaining controversy, the court concluded that the petition required no further adjudication.
