A.M. Motors, 2018 (18) G.S.T.L. 93 (A.A.R. – GST- Kerala)

Input Tax Credit allowable for the goods used in trial run of production/ demonstration


  1. In the matter of A.M. Motors reported in 2018 (18) G.S.T.L. 93 (A.A.R. – GST- Kerala), it is held that Input tax paid by a vehicle dealer on the purchase of motor car used for demonstration purpose of the customer can be availed as input tax credit on capital goods and set off against output tax payable under GST.
  2. CESTAT, Mumbai branch in the matter of DY. General Manager Tata Motors Ltd. reported in 2015 (40) S.T.R. 269 (Tribunal – Mumbai), held that Prototype is a necessary step before commercial production; hence, Consulting Engineers Services used in Research and Development in Engineering Research Centre for manufacture of prototypes of cars, can be said to be used in relation to manufacture of car and, therefore, credit of such service is available.
  3. In the matter of Lupin ltd. – The Hon’ble CESTAT, Mumbai vide its order dated 23rd August 2007 in Appeal No.- E/3165/2005 – Mumbai,  held that “appellants are entitled for Cenvat credit on the inputs as such furnace oil used as fuel. As rightly contended by the ld. Advocate for the respondents the cases cited by the Revenue are distinguishable from the facts of this case. The inputs which are used as fuel is given special treatment in Cenvat Credit Rules. The definition of inputs is explained in two different categories. There is also inclusive part of the input definition which shows the fuel as one of the inputs, which is used within the factory of production, is sufficient for entitlement of the Cenvat credit. There is no other condition attached to the raw material used as fuel…”. In this case it is decided that credit is allowed for fuel oil used for trial run of DG set which generate electricity which was in turn used in manufacture of final product.
  4. In the matter of Tetra Pak India Pvt. Ltd. 2010 (252) E.L.T. 283 (Tribunal – Mumbai), it is held that raw materials used in the trial production of the final product are ‘inputs’ for purpose of MODVAT/CENVAT Credit.

Similar decision is taken in the matter of:

    1. Chowgule Industries (P) Ltd. 2020 (33) G.S.T.L. 288 (AAR-GST- Maharashtra)
    2. Khatwani Sales (2021) 47, G.S.T.L. 525 (A.A.R. – GST – Madhya Pradesh)
    3. Platinum Motocorp L.L.P. (2021) 47, G.S.T.L, 198 (AAR-GST-Haryana)


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