HomeGSTMadras High Court Stays GST Order Denying ITC on Captive Solar Power...

Madras High Court Stays GST Order Denying ITC on Captive Solar Power Plant

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The Madras High Court has granted interim relief to Kanishk Steel Industries Limited by staying a GST order that disallowed Input Tax Credit (ITC) claimed on a solar power plant established for captive consumption. 

The bench of Justice Senthilkumar Ramamoorthy observed that a key legal issue requiring examination is whether electricity generated in a captive solar plant and transmitted through the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) grid can be regarded as a “supply” under the Goods and Services Tax (GST) framework.

A writ petition was filed challenging an assessment order passed by the State Tax Officer, Mylapore Assessment Circle, Chennai. The petitioner sought quashing the order on the ground that it was arbitrary and contrary to law.

The petitioner/assessee is engaged in the manufacture of steel and steel products. To meet its electricity requirements, the company established a solar power plant in Thoothukudi. According to the petitioner, the electricity generated from the solar facility was intended exclusively for captive consumption at its manufacturing unit located in Gummidipoondi.

As part of the operational arrangement, the electricity produced at the solar plant was fed into TANGEDCO’s grid, and an equivalent quantity of electricity was drawn at the company’s factory. The GST authorities subsequently held that the ITC availed in relation to the solar power plant was not permissible and passed the impugned order denying the credit.

The department informed the Court that the petitioner had also challenged rulings issued by the Authority for Advance Ruling (AAR) and the Appellate Authority for Advance Ruling (AAAR) on similar issues. The State sought time to file a counter affidavit in the matter.

The High Court noted that the electricity generated from the solar power plant appeared, at least prima facie, to be intended for captive consumption by the petitioner. The Court observed that the central question requiring adjudication is whether routing electricity through the TANGEDCO grid and drawing an equivalent quantity elsewhere amounts to a “supply” of electricity to TANGEDCO.

The Court recorded a prima facie view that such an arrangement may not qualify as a supply under GST law. If that position is ultimately upheld, the basis for denying ITC on the solar power plant could be significantly weakened.

Considering the existence of a prima facie case, the court ordered an interim stay of the impugned GST order until the next date of hearing. The matter has been listed for further consideration on July 10, 2026.

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Read More: Assessee Can’t Use Writ Jurisdiction to Bypass GST Appeal Deadline: Allahabad High Court

Nikhil Bhandari
Nikhil Bhandari
Nikhil Bhandari is a Chartered Accountant and a Indirect Tax professional with over 4.5 years of post-qualification experience in tax advisory, compliance management, and tax process optimization. Associated with SDU LLP since August 2015 spanning his articleship through to his current role as Assistant Manager Nikhil has uniquely navigated India’s transition from the legacy tax regime into the GST era.His expertise encompasses both strategic advisory and Indirect Tax litigation, where he represents clients in complex disputes across the manufacturing, service, and e-commerce sectors. By providing high-level counsel to corporate leadership, he ensures that tax positions are not only robust and compliant but also structured for long-term operational efficiency.Beyond his core practice, Nikhil is a proactive contributor to the GST ecosystem. He is dedicated to tracking and analyzing judicial precedents from various High Courts and the Supreme Court, fostering greater clarity and ease of access to tax intelligence for the wider professional community.

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