TMI Blog2018 (12) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by KOLTE PATIL DEVELOPERS LTD , the applicant, seeking an advance ruling in respect of the following questions :- What is the legal procedure for cancellation of flat which is booked in pre-GST Regime and cancelled in post-GST Regime. Also, GST liability in cases where some small amount is retained, for cancellation (after discussion with customer) At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION - AS PER THE APPLICANT This application is being filed by KOLTE PATIL DEVELOPERS LTD which is engaged in the activity of Construction of Residential and Commercial complex. When the flats were booked by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation like revision of price upward or downward is addressed via sub clause (a) and sub clause (b) of Section 142 (2) of the CGST Act wherein credit note can be raised if the revision of price is downward. However, said section does not appear to exclude cancellation of contract cases. Hence, can cancellation of flat be equated with revision of contract price is the question of law. Given this, we submit that, there could be two scenarios: Cancellation of flat can be equated with the downward revision of price Cancellation of flat cannot be equated with the downward revision of price Cancellation of flat can be equated with the downward revision of price In said scenario, as discussed aforesaid as per section 142(2)(b) of the CGST Act, credit note can be raised for cancellation of flat by the builder and same is treated as Outward Supply . Further, as per proviso to said section tax liability on account of issue of credit note can be reduced only if the recipient of credit note has reduced his input tax credit. As regards to said legal pronouncement tax liability is to be reduced to the extent of input tax credit reduced/reversed by the recipient. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person from whom it was received; or (b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued As per the aforesaid rule of Service Tax Rules, 1944 if an invoice is issued for which service is not provided then the taxpayer allowed to avail credit of such excess service tax paid. Also, we would like to bring your kind attention towards Sub Section 5 of Section 140 of CGST Act, reproduced below: Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944. Given the aforesaid, the amount already paid in pre- GST regime towards Service tax or Excise, could be refunded in cash, as it is specifically not carried forward in GST regime. Further, we would like to bring your kind attention to the fact that, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, we request to consider following submissions as well. 2. OUR SUBMISSIONS 2.1 Two options available as discussed given below can be considered while cancellation of contract A. The cancellation of contract could be equated with downward revision of price then it will be covered under Section 142 (2) of the CGST Act, where the credit note can be raised with GST. B. Cancellation of flat cannot equated with the downward revision of price and builder is eligible for refund as per Rule 6(3) of Service Tax Rules, 1944 A. The cancellation of contract could be equated with downward revision of price then if will be covered under Section 142 (2) of the CGST Act, where the credit note can be raised with GST. A.1 Cancellation is covered under downward revision as there is no restriction in the law I. With respect to cancellation of flat this could be construed as the Builder/Developer is required to reduce GST to the extent of Service Tax or VAT paid at the time of booking of fiat. Also, it is to be noted that in case of citizen, who were not registered under indirect tax, the question of availment of cenvat credit not arises. Further, cenvat credit wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Greater Mumbai (2005 (6) SCC 404, P. 414) = 2005 (8) TMI 666 - SUPREME COURT OF INDIA it was held that In the construction of Statutes means the Statute as a whole, the previous state of the Law, other Statutes in the pari-materia, the general scope of the Statutes and the mischief that the intend to remedy. X. Thus, if we see this from holistic perspective then it can be stated that the context i.e. change of tax regime from erstwhile Service Tax regime to the new GST regime also should be considered to interpret the terminology. XI. Hence, we submit that, considering the intention of the inclusion of the section 142 (2) of the CGST Act is to allow the credit of taxes paid in the pre-GST regime in case of revision of contract the cancellation of flat can be equated with the downward revision of price. A.2 New law cannot create a situation to deny the benefit available under earlier law as provisions I. Erstwhile in the Finance Act, 1994 the Builder/ Developer is allowed to avail service tax credit with respect to cancellation of flat by way of issue of credit note as per Rule 6(3) of Service Tax Rules, 1944. ll. Further, the section 142 (2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we would like to refer Rule 6(3) of Service Tax Rules, 1944 states that, in accordance with Section 11B of Central Excise Act, 1944 Any person claiming refund of any duty of excise may make an application for refund of such duty to the Assistant Collector of Central Excise before the expiry of one year from the relevant date in such form as may be prescribed and the application shall be accompanied by such documentary or other evidence II. The expression relevant date has been defined in clause (f) of Explanation (B) to Section 11B of the CE Act as the date of payment of duty III. We would like to bring your kind attention that Construction of immovable property is a continuous supply service and required sufficient time to complete the same. The one-year time limit is not justifiable in the said case. IV. Hon ble Apex Court in the case of Mafatlal Industries Ltd Vs. UOI 1997 (89) ELT 247 = 1996 (12) TMI 50 - SUPREME COURT OF INDIA held that, All refund claims to be adjudicated under Sec. 11B except where the levy is held to be unconstitutional. V. Given the aforesaid, it is important to analyse whether the one-year time limit is applicable in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - CESTAT MUMBAI it is held that, It is admitted fact that the appellant was not required to pay any service tax for acquisition of residential unit as held by the Hon ble High Court in K.V.R. Constructions (2009 (8) TMI 150 - KARNATAKA HIGH COURT) . As it is not an amount of service tax, therefore, provisions of Section 11B of the Central Excise Act are not applicable to the facts of this case. Therefore, the time limit prescribed under 11B is not applicable. Hence impugned order deserves no merit and same is set aside. Appeal is allowed with consequential relief. Stay petition also disposed of in the above terms. XII. Karnataka high could in the case of KVR Construction (2012 (26) S.T.R. 195 (Kar.) =2012 (7) TMI 22 - KARNATAKA HIGH COURT held that, Where the claim of the respondent/assessee is on the ground that they have paid the amount by mistake and therefore they are entitled for the refund of the said amount. If we consider this payment as service tax and duty payable, automatically, Section 11B would be applicable. When once there was no compulsion or duty cast to pay this service tax, the amount of ₹ 1,23, 96,948/- paid by petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11B of the Central Excise Act B.2 New law cannot create a situation to deny the benefit available under earlier law as provisions (i.e. to claim credit of excess paid) I. Without prejudice to other arguments we submit it is settled position in law that procedural aspect should not take away substantial benefits of the assesse. The substantial benefit of refund should not be denied. II. The erstwhile law did not provide for any restriction on cancellation (as even the wholly cancelled contracts were eligible for the benefit of Rule 6 (3) of Service Tax Rules, 1994) and thus, the new provision which essentially is to cover the scenarios provided for under earlier law, cannot curtail the rights of the taxpayers. III. Thus, we submit that, the substantial benefit should not be denied to the applicant that because of new law which assesse was eligible under pre-GST regime B.3 Time limit should apply from date of cancellation as that is the trigger point (and not payment of tax) - Law cannot enforce impossible condition to claim within one year if the contract is cancelled after 1 year (say in July 2018) I. Without prejudice to aforesaid submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed then the taxpayer. VII Thus, practically the period of one year should be reckoned from the date of cancellation of flat and not from the date of payment of service tax. Thus, refund should be allowed in such cases as per new law without any time restriction to file refund claim. 2.2 Developers and property buyers are seeking clarity that Whether cancellation of flat can be equated with the downward revision of price where the credit note can be raised with GST as per Section 142 (2) of the CGST Act. Or Whether cancellation of flat cannot be equated with the downward revision of price and hence service Tax/VAT paid earlier can be claimed as credit or allowed as refund to property buyer as per Rule 6(3) of Service Tax Rules, 1944 along with applicability of time of limitation for refund as specified under section 11B of Central Excise Act. 04. CONTENTION - AS PER THE CONCERNED OFFICER COMMENTS ON THE APPLICATION NO.40 DATED 19.06.2018 FILED BY M/S. KOLTE PATIL DEVELOPERS LTD., PUNE 1. M/s. Kolte Patil Developers Ltd. Pune, having GSTIN Number 27AAACK7310G1ZT having it s registered office at First, 201A, City Point, Dhole Patil Road, Pune-41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(b) of the CGST Act, credit note can be raised for cancellation of flat by the builder and same is treated as Outward Supply . Further, as per proviso to said section tax liability on account of issue of credit note can be reduced only if the recipient of credit note has reduced his input tax credit. 12. As regards to said legal pronouncement tax liability is to be reduced to the extent of input tax credit reduced/reversed by the recipient. With respect to cancellation of flat this could be construed as the Builder/Developer is required to reduce GST to the extent Of Service Tax or VAT paid at the time of booking of flat. Also, it is to be noted that in case of citizen, who were not registered under indirect tax, the question of availment of cenvat credit not arises. Further, cenvat credit with respect to construction service in Service Tax was not available as per Finance Act, 1994 hence, in case of registered business entity also, the same was not available. 4. As claimed by the Appellant in their application before Advance Ruling Authority (hereinafter referred to as ARA ), in the Pre-GST regime, they were entitled to avail service tax credit in case of cancellati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially for any reason, [or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract], the assessee may take the credit of such excess service tax paid by him, if the assessee.- (a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or] (b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued. 8. There is no provision like the earlier provision of Rule 6(3) of Service Tax Rules, 1944 in GST because the very essence of GST is matching of input tax credit both at Supplier s and Receiver s end and therefore, situation like excess credit paid on the same transaction or excess credit paid by the Supplier to be adjusted against his future tax liability will not arise in GST, because in GST there is choice for correction and matching of the data by the Supplier and Receiver. so, if the excess service tax is paid, the option of refund to the Appellant or to their customer on submission of application for refund by them, as per Section 11B of the Central Excise Act, 1944 is availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ED BY M/S. KOLTE PATIL DEVELOPERS LTD., PUNE 1. M/s. Kolte Patil Developers Ltd. Pune, having GSTIN Number 27AAACK7310G1ZT having it s registered office at First, 201A, City Point, Dhole Patil Road, Pune-411001, have filed an application No. 40 dt. 19.06.2018 for Advance Ruling before the Authority for the Advance Ruling. They have also submitted additional submissions on 19.06.2018 to the Authority for the Advance Ruling. 2. The taxpayer, in their additional submissions, submitted to the Advance Ruling Authority on 19.06.2018, has mentioned that the case under consideration is covered under clause (d) of Section 97(2) of CGST Act called as admissibility of input tax credit of tax paid or deemed to have been paid . In their submissions, they dwelled on following issues to justify that their case can be admitted before the Advance Ruling Authority:- Cancellation of contract can be equated with the revision in contract. Express and implied intention of repealed statute shall be used for interpretation of the provisions of the new statute. CanceIIation is covered under downward revision as there is no restriction in the law. New law cannot be interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the amendment of the Finance Act, 1994 (hereafter referred to as such amendment or amended Act , as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not- (a) revive anything not in force or existing at the time of such amendment or repeal; or (b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or ; ( c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts: As regards the interpretation of Section 174(2)(a), the GST Law has not revived anything that was in force or existing at the time of such amendment of the Finance Act, 1994 or repealment of Central Excise Act, 1944 and other Acts mentioned in said Section 174(1) of the CGST Act, on the issue raised by the taxpayer. As regards the interpretation of Section 174(2)(b), the GST Law has not affected the previous operation of the Amended Act i.e. the Finance Act, 1994, on the issue raised by the taxpayer. Rule 6(3) of the Finance Act, 1994 still holds good, if any case or iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is requested to the Advance Ruling Authority (GST), Mumbai that further enquires/correspondence/proceedings in the matter be conducted with the officers of the said jurisdiction. 5. In view of above, the Advance Ruling Authority (GST), Mumbai may like to decide whether case should be admitted on merits or not. 04. HEARING The case was taken up for preliminary hearing on dt. 17.07.2018 with respect to admission or rejection of the application when Sh. Pritam Mahure, C.A.,aIong with Ms. Vaishali Kharde, C.A. and Sh. Ramchandra Bhong, Sr. Manager Accounts appeared and requested for admission of application as per details in their application. Further with respect to admissibility U/ s. 97 (2) of CGST Act, it was decided that the applicant would make further written submissions latest by 24.07.2018 and then the admissibility would be decided. Jurisdictional Officer MS. Ritu N Bijwar, Supt., Pune-l, Commissionerate appeared and made written submissions. Further hearing in respect of admission/ rejection of application as mentioned at the time of earlier hearing was held on 01.082018 when Sh. Pritam Mahure, C.A., along with Ms. Vaishali Kharde, C.A. and Sh. Ramchand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The other, though not expressly stated, is cancellation without retention of any amount for cancellation. It has been submitted before us that the cancellation with retention of some amount is being considered as a service by the applicant and GST is being discharged in respect of the same. For the reason being so, the applicant has decided not to contest, in the present proceedings, the issue about cancellation with retention of some amount. We therefore move to the issue of cancellation of booking without any consideration for effecting the cancellation. It is a admitted fact that the transaction of booking has taken place in the pre-GST regime. That being so, it would be but obvious an inference that no transaction has taken place in the GST regime. There is no supply under the GST Act. However, we find the following provisions under the GST Act CGST ACT MGST AXT 142. (1) Where any goods on which duty, if any, had been paid under the existing law at the time of removal thereof, not being earlier than six months prior to the appointed day, are returned to any place of business on or after the appointed day, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the said law Provided that where any claim for refund of the amount of input tax credit is fully or partially rejected, the amount so rejected shall lapse. Provided further that no refund shall be allowed of any amount of input tax Credit where the balance of the said amount as on the appointed day has been carried forward under this Act. (5) Every claim filed by a person after the appointed day for refund of tax paid under the existing law in respect of services not provided shall be disposed of in accordance with the provision of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944. With the facts as attending and the above provisions, we observe thus - a) The amounts received towards construction of a flat was considered a taxable event, a sale, under the provisions of the Maharashtra Value Added Tax Act, 2002 [MVAT Act]. The M VAT Act applied to tangible and intangible goods and not to servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of any goods or services or both; (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of tax paid or deemed to have been paid: (e) determination of the liability to pay tax on any goods or services or both; (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. h) Having regard to the transaction in the instant case, the questions which are being contested are not about - i. the classification of any goods or services or both. ii. the applicability of a notification issued under the provisions of the GST Act. iii. the determination of time and value of supply of goods or services or both. iv. the admissibility of input tax credit of tax paid or deemed to have been paid. Input tax credit is defined u/s 2(63) of the GST Act as being input tax credit means the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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