Facts of the Case

ABB India Limited, engaged in the manufacture and sale of switchgear, industrial electronic controllers, drives and related electrical goods, supplied solar inverters classifiable under Chapter 85 of the HSN, intended for use in solar power projects, industries and large residential complexes. The Petitioner discharged GST at the concessional rate of 5% under Entry 234 of Notification No. 1/2017-CT(R) dated 28.02.2017, treating the inverters as part of a solar power generating system. Following audit, the Department issued show cause notices under Section 73 contending the goods were 'general electrical devices' under Chapter Heading 8504, attracting 18% GST, leading to three connected orders-in-appeal/orders-in-original under challenge (WP Nos. 9686, 11788 and 16708 of 2025), the third also challenging the vires of Notification No. 56/2023-Central Tax under Section 168A.

Issues Involved

  1. Whether solar inverters supplied for use in solar power generating systems attract the concessional 5% GST rate under Entry 234 of Notification No. 1/2017-CT(R), or the general 18% rate applicable to electrical devices under Chapter Heading 8504.
  2. Whether the exemption Notification requires proof of the goods' actual/direct use in the generation system, or merely that they were "intended for use" as such.

Petitioner's Arguments

  • The solar inverters supplied are either solar-power-based devices or form part of a solar power generating system falling squarely within Entry 234 of Notification No. 1/2017-CT(R), and the exemption Notification imposes no further condition requiring the Department to trace a nexus between the specific unit supplied and its eventual end-use.
  • ITC could not be denied for a fault attributable to the supplier, and one of the connected matters also challenged demand raised via Notification No. 56/2023-Central Tax as being ultra vires Section 168A.

Respondent's Arguments

  • The subject goods were properly classifiable as general electrical devices under Chapter Heading 8504, attracting the standard 18% rate, since they were not shown to be exclusively/directly used in solar power generation.

Court Order / Findings

  • Applying the Supreme Court's construction of the phrase "for use" in State of Haryana v. Dalmia Dadri Cement Ltd. — that "for use" means "intended for use", not "actually used" — the Court held that Entry 234 of Notification No. 1/2017-CT(R) imposes no further mechanism to establish nexus between the specific supply and its ultimate deployment; it suffices that the goods are intended, and by their nature restricted, to be used as part of a solar power generating system.
  • The material on record established that the subject solar inverters could not be put to any other use and were, by their design, always intended as parts of the solar power generating system.
  • Consequently, the impugned orders-in-appeal in WP Nos. 9686/2025 and 11788/2025 were quashed in full; in WP No. 16708/2025, the impugned order-in-appeal and order-in-original were quashed to the extent challenged, with liberty reserved to the petitioner to pursue appellate remedies on the remaining, un-adjudicated demands.

Important Clarification

  • The concessional GST entry for "solar power generating systems and parts thereof" is satisfied where the goods are, by their design and restricted usage, intended for use as part of such a system — actual, traceable end-use of each individual unit need not be separately established, following the Supreme Court's construction of "for use" as "intended for use" in Dalmia Dadri Cement.

Sections Involved

  • Entry 234, Notification No. 1/2017-Central Tax (Rate) dated 28.02.2017 – concessional 5% GST rate for solar power generating systems and parts.
  • Section 73, CGST/KGST Act, 2017 – demand of tax not involving fraud/suppression.
  • Section 168A, CGST Act, 2017 – vires of extension notifications (raised in WP No. 16708/2025).

Decision – In Favour of

Decided substantially in favour of the Assessee – the demand orders premised on an 18% classification of the solar inverters are quashed; the third petition is only partly allowed with certain un-adjudicated issues left to be pursued in appeal.

Case Details

  • Court: High Court of Karnataka at Bengaluru
  • Case No.: WP No. 9686 of 2025 (T-RES) (with connected WP Nos. 11788 of 2025 and 16708 of 2025)
  • Neutral Citation: NC: 2025:KHC:54480
  • Coram: Hon'ble Justice S.R. Krishna Kumar
  • Date of Order: 15 December 2025

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