Sai Service Private Limited Vs Union of India

The Bombay High Court addressed a case filed by Sai Service Private Limited against the Union of India regarding the entitlement to claim Input Tax Credit (ITC) on demo vehicles used by automobile dealerships. Sai Service Private Limited had been denied ITC, prompting the legal challenge centered on whether these vehicles, used for customer demonstrations, qualified as capital goods eligible for ITC under GST. The situation changed when the Central Board of Indirect Taxes and Customs (CBIC) issued a circular on September 10, 2024, clarifying that businesses like automobile dealers are indeed entitled to claim ITC on demo vehicles. This policy clarification rendered the ongoing litigation redundant, leading the Bombay High Court to acknowledge the circular's authority and conclude that there was no need for further adjudication. The court noted that circulars from tax authorities hold binding authority and that previous judicial precedents supported the idea that such clarifications should resolve tax disputes decisively. The ruling emphasized that official clarifications should prevent unnecessary litigation and ensure consistency in tax administration. Consequently, Sai Service Private Limited and other automobile dealers are now empowered to claim ITC on demo vehicles as per the CBIC circular, fostering clarity in the tax landscape. As such, the petition was disposed of, confirming the entitlement to ITC under the newly released guidelines.