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2025 (6) TMI 517 - HC - GSTPrinciples of promissory estoppel - Estoppel from denying the additional G.S.T demand - delay in handing over possession - Whether after agreeing to a particular price and expressly mentioning it to be inclusive of G.S.T the additional amount also claimed as G.S.T can be pursued by the Housing Board or not? - HELD THAT - he petitioners have an alternative remedy under the RERA Act which requires consideration of several factors to determine whether there was a delay and whether the petitioners are entitled to compensation. Therefore although the learned Senior Counsel for TNHB argues based on Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. Vs. Sipahi Singh and Ors. 1977 (9) TMI 114 - SUPREME COURT it is believed that since the project is registered under the RERA and a specific remedy is available for the petitioners under this Act this contention is not addressed while keeping open the liberty of both sides in that regard. The facts in this case are not under dispute. The 100% cost required by TNHB which was determined and directed to be paid for the petitioners by TNHB has already been paid. According to the advertisement issued it explicitly states that this amount is inclusive of G.S.T. Nothing contrary is mentioned in the allotment letter or the agreement entered into between the parties. It should be noted that TNHB is in a dominant position to draft the clauses of the said agreement and in fact the prospective purchasers must sign the common format determined solely by TNHB. Whether this case portrays an exceptional circumstance where due to the genuine mistake of not noticing or considering a tax liability TNHB should be permitted an additional amount of 5%? - HELD THAT - TNHB only has to reconcile its accounts and properly pay the GST to the authorities and it cannot involve the prospective purchaser who has already paid the entire amount in this exercise. It would be open for the TNHB to suitably calibrate the sale price and the GST within the amount that is paid by the petitioner as they have specifically mentioned the same in their advertisement. This apart for their default as per the GST Act if TNHB has to pay any penalty or interest for the belated payment and non-issue of invoices it must pursue the matter in the manner known to law in the Writ Petition that is said to be pending and that has got nothing to do with the petitioners herein. The rights of TNHB vis- -vis the petitioners have nothing to do with the numerous contentions made by TNHB with reference to the claim made by GST authorities. In fact even if any further benefit accrues to TNHB due to its litigation or claim with the G.S.T authorities nothing further needs to be refunded to the petitioners herein. Therefore for the petitioners who have already paid the full flat cost TNHB is not entitled to claim any additional amount and the sale deed must be executed. For the petitioners who have without prejudice also paid the additional 5% the extra sum collected from them must be refunded. Accordingly the necessary sale deeds shall be executed in favour of the petitioners. Conclusion - i) In respect of the petitioners herein who have paid the 100% sale price as calculated according to the advertisement rate TNHB without insisting on any further payment of G.S.T shall appropriately calculate the sale price and the G.S.T and by mentioning the sale price shall execute the sale deed in favour of the petitioners. ii) Regarding the petitioners who have without prejudice also made the additional payment the aforementioned exercise shall be conducted in addition to refunding the extra 5% collected from them. Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions addressed by the Court in this matter include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Can TNHB claim additional 5% G.S.T after advertising the price as inclusive of G.S.T? Relevant legal framework and precedents: The contractual principles under the Indian Contract Act, 1872, especially the doctrine of consent under Section 3, and the principle of promissory estoppel are relevant. The contra proferentem rule, which construes ambiguous contract terms against the drafter, is also pertinent. Court's interpretation and reasoning: The Court noted that the advertisement issued by TNHB clearly stated the price per square foot inclusive of G.S.T. The petitioners relied on this representation and paid the agreed sale consideration. The agreements did not contradict or disclaim the inclusion of G.S.T in the price. TNHB, being in a dominant position and solely responsible for drafting the agreements, cannot now backtrack from its clear representation. The Court emphasized that the principle of promissory estoppel prevents TNHB from reneging on its promise once the petitioners have acted upon it. Key evidence and findings: The advertisements in Tamil and English, the site display boards, and the absence of any contrary clause in the agreements were critical. The Court also relied on the detailed cost breakdown filed by TNHB, which showed that the 12% G.S.T applicable to under-construction properties was factored into the price, but the additional 5% G.S.T now claimed was not included. Application of law to facts: The Court applied the principle that a party cannot resile from a clear representation made to induce action by the other party. Since the price was held out as inclusive of G.S.T, TNHB cannot demand an additional amount. The contra proferentem rule was applied to interpret the contract terms against TNHB, the drafting party. Treatment of competing arguments: TNHB contended that the advertisement was only indicative, and the agreements did not specify inclusion of G.S.T. It also argued that the additional 5% G.S.T was a separate tax liability not factored earlier. The Court rejected these contentions, holding that the petitioners were entitled to rely on the advertised inclusive price and that TNHB's failure to clearly communicate the tax liability in the agreements was not acceptable. Conclusion: TNHB is estopped from demanding the additional 5% G.S.T from petitioners who have paid the full sale consideration as advertised inclusive of G.S.T. Issue 2: Is the non-joinder of the G.S.T authorities fatal to the Writ Petitions? Relevant legal framework: The Court considered procedural principles regarding necessary parties in Writ Petitions. Court's interpretation and reasoning: The Court held that the Writ Petitions do not seek to determine TNHB's liability to pay G.S.T to authorities or challenge any tax assessment. The petitions only concern the contractual relationship between TNHB and the purchasers regarding the price payable. Hence, the G.S.T authorities are not necessary parties. Conclusion: Non-joinder of G.S.T authorities is not fatal, and the petitions are maintainable without them. Issue 3: Remedy for delay in possession and whether the Court should entertain such claims here Relevant legal framework: The Real Estate (Regulation and Development) Act, 2016 (RERA) provides a specific remedy for delay in possession and compensation. Court's interpretation and reasoning: The Court observed that since the projects are registered under RERA, the petitioners have an adequate alternative remedy to pursue claims related to delay. Therefore, the Court refrained from adjudicating on delay claims in these proceedings, leaving liberty open to parties to approach the appropriate forum under RERA. Conclusion: Delay claims are to be pursued under RERA; this Court does not address them in the present petitions. Issue 4: Whether TNHB's claim for additional G.S.T is justified based on cost and tax credit considerations Relevant legal framework: Principles of tax law under the Central Goods and Services Tax Act, 2017, and accounting treatment of tax credits. Court's interpretation and reasoning: The Court examined the detailed cost statements filed by TNHB, which showed that the 12% G.S.T on outsourced construction contracts was included in the cost. TNHB had paid this tax and was entitled to input tax credit. The additional 5% G.S.T claimed now was not factored into the sale price but was demanded separately. The Court found that TNHB had already collected more than the actual cost plus tax credits, and hence the plea of loss was unsustainable. Application of law to facts: The Court applied the principle that TNHB cannot recover more than the actual cost borne plus lawful profit. Since the tax credits exceed the additional amount claimed, TNHB's demand is unjustified. Treatment of competing arguments: TNHB argued that the additional 5% G.S.T was a separate tax liability and not included in the advertised price. The Court rejected this, noting that the petitioners paid the full advertised price inclusive of G.S.T, and TNHB must reconcile its accounts internally. Conclusion: TNHB is not entitled to recover additional 5% G.S.T from petitioners who have paid the full advertised price inclusive of G.S.T. Issue 5: Application of principles of promissory estoppel and contra proferentem Relevant legal framework and precedents: The Court relied on established principles of contract law, including the Indian Contract Act, 1872, and precedents emphasizing that ambiguous contract terms are construed against the drafter (contra proferentem), and that a party is estopped from reneging on a clear promise (promissory estoppel). Court's interpretation and reasoning: The Court applied these principles to hold that TNHB, having advertised the price inclusive of G.S.T and drafted the agreements without disclaiming this, cannot claim additional amounts. The petitioners relied on the advertisement to their detriment, and TNHB's attempt to backtrack is impermissible. Conclusion: The principles of promissory estoppel and contra proferentem bar TNHB from demanding additional G.S.T beyond the advertised inclusive price. 3. SIGNIFICANT HOLDINGS The Court held: "Since the amount was held out as inclusive of G.S.T, the respondent cannot renegotiate or backtrack from the promises made." "The advertisement clearly states that the amounts are only Rs. 9462/- and Rs. 10,500/- per Sq.ft respectively for each of the projects. Given that the project is a straightforward real estate venture as per market value, the respondent, as a real estate promoter and an entity of the Government, cannot retreat from the contractual obligation while being fully aware of the circumstances." "The contra proferentem rule applies as TNHB is in a dominant position and did not include any clause to the contrary." "The petitioners are entitled to rely on the advertised price inclusive of G.S.T, and TNHB is estopped from demanding any additional amount." "For the petitioners who have already paid the full flat cost, TNHB is not entitled to claim any additional amount, and the sale deed must be executed." "For the petitioners who have, without prejudice, also paid the additional 5%, the extra sum collected from them must be refunded." "The authorities under the G.S.T Act are not necessary parties to these petitions." "Claims relating to delay in possession are to be pursued under the RERA Act and are not addressed in these proceedings." The Court ordered:
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