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2025 Supreme(Guj) 1798
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
Arraycom (India) Limited - Petitioner
Versus
State Of Gujarat & Ors. – Respondents
R/Special Civil Application No. 11979 of 2025
Decided On : 13-11-2025
The eligibility for Input Tax Credit depends on the correct classification of insurance policies, where erroneous classification leads to unlawful denial of ITC.
Headnote:(A) Constitution of India - Article 226/227 - Goods and Services Tax Act, 2017 - Section 17(5) - Petition to quash order disallowing Input Tax Credit (ITC) on an insurance policy classified incorrectly as motor vehicle insurance - Court found that the insurance was for stock-in-trade and not for motor vehicles, hence ITC was admissible - The impugned order was held contrary to facts. (Paras 7, 10, 20, 24, 26)
(B) Interpretation of statutes - The court emphasized the importance of accurate classification of insurance policies for determining ITC eligibility, finding the respondent's interpretation erroneous. (Paras 25)
Facts of the case:
The petitioner, engaged in manufacturing and installation services, claimed ITC on insurance premiums for stock and premises but faced demands from authorities claiming the insurance was for motor vehicles.
Findings of Court:
The court ruled that the respondent's findings were based on an incorrect classification and thus remitted the matter.
Issues: The main issues included the correct classification of the insurance policy and the implications for ITC under the GST Act.
Ratio Decidendi: The court reasoned that the insurance policy did not pertain to motor vehicles and thus the denial of ITC was misapplied under Section 17(5) of the GST Act, granting relief to the petitioner.
Result: Impugned order and notice quashed.
| Table of Content |
|---|
| 1. improper classification of itc by the authorities. (Para 4 , 5 , 8 , 10 , 12) |
| 2. grounds for disallowance of itc. (Para 6 , 7 , 11) |
| 3. argument against wrongful invocation of section 17(5) of gst. (Para 16 , 17 , 18 , 19) |
| 4. finding that insurance policy covers stock, not vehicles. (Para 20 , 21 , 23) |
| 5. order to quash impugned notice and order. (Para 24 , 26) |
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned advocate Mr. Chaitanya S. Joshi for the petitioner and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondents.
2. Rule returnable forthwith. Learned Assistant Government Pleader Ms. Shrunjal Shah waives service of notice of rule on behalf of the respondent State.
3. By this petition under Article 226/227 of the Constitution of India, the petitioner has prayed for the following reliefs:
“a) Issue a writ of certiorari or mandamus or any other appropriate writ, order or direction quashing and setting aside the impugned order dated 07.02.2025 (Annexure A) passed by the Respondent No. 2 and holding that the ITC denied under Section 17 (5) of the CGST Act is wrongly classified and fully admissible; &
(b) Issue a writ of mandamus or appropriate direction to quash and set aside the notice dated 09.06.2025 (Annexure F) issued by Respondent No. 2 under S. 17(1)(c) to the Respondent No. 3 Bank and direct respondent no.3 bank to immediately release Rs. 1,72,884 held in the Petitioner's bank account; &
(c) During the pendency and final hearing of the present petition stay the operation and implementation of the impugned order dated 07.02.2025 (Annexure A) passed by the Respondent No.2 as well as direct respondent no.3 bank not to deposit the said amount with Government in compliance with aforesaid order; & (d) Pass such other and further orders as may be deemed just and proper in the interest of justice.”
4. Brief facts of the case are that the petitioner Arraycom (India) Limited which is registered under the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 is having business divisions such as (i) Thick film material- manufacturing conductive paste, resistor paste, insulation paste etc.; (ii) Solar Power Division: installation of Roof top solar systems for Residential, industrial and commercial purposes and (iii) System Integration: in the field of professional electronics encompassing satellite communications, terrestrial communication, broadcast engineering, signals intelligence etc.
5. For the Financial Year 2020-2021, the petitioner filed returns and claimed Input Tax Credit (ITC) in accordance with the law. One such claim was for Input Tax Credit (ITC) availed on the premium paid towards an insurance policy taken from United India Insurance Co. Ltd., covering the stock-in-trade and the business premises of the petitioner.
6. An intimation dated 25.10.2024 in Form DRC-01A under section 73(3) of GGST ACT, 2017 read with CGST ACT 2017 was issued by the respondent No.2. Subsequently adjudication was initiated and show cause notice in Form DRC-01 under section 73(1) was issued on 13.11.2024.
7. It is the case of the petitioner that the demand was primarily based on the disallowance of ITC against the premium paid to United India Insurance Co. Ltd. for stock and premises insurance policy which was mistakenly classified as motor vehicle insurance, allegedly falling under the ineligible category of Section 17 (5)of the GST Act.
8. The petitioner submitted a detail reply in Form DRC-06 dated 22.11.2024 enclosing the insurance policy and invoices, stating that the policy covers stock-in-trade and business premises, not motor vehicles, hence, the ITC was availed lawfully and reflected appropriately in returns in Forms GSTR-3B and 2A and there was no over-claim or mismatch between returns filed and invoices.
9. It is the case of the petitioner that the said two policies dated 26.10.2020 issued by United India Insurance Co. Ltd. vide policies nos. 0607001120P108360334 and 0607001120P1
