TMI Blog2019 (4) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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). Availability of MVAT Paid in Pre-GST regime - HELD THAT:- Section 142(1) of the MSGST Act is applicable in the given scenario to the extent of value of goods cancelled. (i.e. to the extent of VAT paid) - As per section 142(2) of the CGST Act, in case of downward revision of price a registered person can issued the credit note for the contract entered in Pre-GST regime and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act. The substantial benefit should not be denied to the applicant because of new law which assessee was eligible under pre-GST regime - it is settled position in law that procedural aspect should not take away substantial benefits of the assessee. Reading both the above provisions viz.- Clause (63) and (62) together, it is aptly clear that the question enumerated at (d) of Section 97(2), supra does not deal with the admissibility of the credit of taxes paid other than the taxes mentioned in the Clause (62) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain reasons, the flats booked by the customer in the pre-GST regime, are cancelled by the customer on or after 1st July 2017 (i.e. after implementation of GST). D. In pre-GST regime, Developer was entitled to avail service tax credit in case of cancellation flat as per Rule 6(3) of Service Tax Rules, 1944. Hence, the customer who cancelled flat was not required to bear indirect tax cost as the CENVAT credit for the same was available to the Developer. E. In view of the above, the issue for determination before the Authority for Advance Ruling ('AAR') was: - a. Whether GST input tax credit of Service Tax and State VAT paid while booking of flat is available to the Developer, if cancelled in GST regime? b. What will be the methodology to avail Input Tax Credit on the said taxes paid? F. At the time of preliminary hearing dated 17th July 2017, the legal aspect of the submission were discussed and Advance Ruling Authorities were of the view that, refund of Service Tax is required to be claimed under Pre-GST regime, hence, the underlying question may not be admissible for Advance Ruling. However, Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of GST on retention charges collected from the customer. 1.6 Given the aforesaid, the contention of the AAR that, the applicant had decided not to contest the issue about cancellation with retention of some amount is incorrect. Hence, both the question given below amongst which one question wrongly has not been considered by the AAR need to be considered: - What is the legal procedure in case of cancellation with retention of certain amount (could be referred as cancellation charges) - What is the legal procedure in case of cancellation without retention of any amount. The underlaying transaction is well covered under GST law and hence can be considered for determination of GST liability. 1.7 As per para 5 of the of the ruling given by AAR: '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. 1.8 It is pertinent to note that, the underlaying transaction can be divided in two-fold given below Sr. No. Nature of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Section 142 (2) of the CGST Act, credit note can be raised: a. b. where, in pursuance of a contract entered into prior to the appointed day, the price of any goods or services or both is revised downwards on or after the appointed day, the registered person who had removed or provided such goods or services or both may issue to the recipient a credit note, containing such particulars as may be prescribed, within thirty days of such price revision and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act: Provided that the registered person shall be allowed to reduce his tax liability on account of issue of the credit note only if the recipient of the credit note has reduced his input tax credit corresponding to such reduction of tax liability. 1.15 Given the aforesaid, the 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. 1.16 In this regard, the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can be concluded as per section 142(2) of the CGST Act. 2. Express and implied intention of repealed statute shall be used for Interpretation of the provisions of the new statute I. As per the Service Tax Rules, 1994 2 if an invoice is issued for which service is not provided then the taxpayer allowed to avail credit of such excess service tax paid. II. Reference is drawn to section 174(2) of the CGST Act, the repeal of the said Acts 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. b. affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered there under; or c. affect any right, privilege, obligation, or liability acquired, accrued or incurred b. . III. Accordingly, the GST law cannot be interpreted to withdraw the rights of the Repealed Act (i.e. Finance Act, 1994) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act, the express and implied intention of the old statute should be considered. The Finance Act, 1994 allow to avail credit of excess service tax paid in case of cancellation. Hence, new statute shall not be interpreted to abrogate the provision in question. 3. Cancellation is covered under downward revision as there is no restriction in the law I. It is to be noted that GST law does not provide any specific restriction to cover cancellation of flat within the provision of downward revision of price. II. As per the Subordinate Legislation under Repealed Statute when the statute is repealed and re-enacted, Section 24 of the General Clause Act, 1897, provides for continuous of any appointment, notification, order, scheme, rule, form or byelaws made or issued under the repealed statute in so far as it is not inconsistent with the provisions re-enacted. Such appointments, notification, order, scheme etc. are deemed to be made under the corresponding provisions of the new statute and continue to be enforce unless suspended by appointments, notification, order, sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If invoice has not being issued within stipulated time then POT shall be the date of completion of provision of Service Given the aforesaid, there could be instances where amount received form the customer is lower than Service Tax paid. III. Given the aforesaid, even if refund is to be filed under erstwhile provisions of the Act it will be difficult to define the person responsible for claiming the refund i.e. Developer or Buyer. IV. As per section 174 (3) of the CGST Act, the mention of the particular matters referred to in sub-sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal that as per the clause. V. Hence, reference to Section 6 of the General Clause Act is required to be taken for interpretation of GST Law. VI. Further, cause (c) to (e) of Section 6 of the General Clauses Act, 1987 is speaking briefly to prevent the obliteration of a statute in spite of it's repeal to keep rights acquired or accrued and liabilities incurred during its operation and permits continuance or institution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 1.18 Hence, the cancellation of flat shall be equated with the downward revision of price to allow the benefit available to the builder in erstwhile law. The Developer/ Builder is eligible for refund as per Rule 6(3) of Service Tax Rules, 1944 1.19 When the transaction itself is cancelled the Government has no right over the taxes from the citizen. I. In this regard, reference is drawn to Rule 6(3) of Service Tax Rules, 1944 which 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 s uch 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. Construction of immovable property is a continuous supply service and required sufficient time to complete th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that any duty paid by mistake cannot be termed as 'duty'. Similar view has been taken in the other case laws relied upon by the Respondent. In view of the above, it has to be held that the amounts paid by the Respondent cannot be termed as payment of duty but has to be considered as a 'deposit' to which provisions of Section 11B of the Central Excise Act, 1944 will not be applicable. XI. Further, In the case of Jyotsana D. Patel [2014 (35) S.T.R. 77 (Tri. - Mumbai) = 2014 (10) TMI 642 - 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 (supra). 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. Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash, as it is specifically not carried forward in GST regime. XVII. Further, citizen of India who will cancel flats for any reason may not have to bear the impact. Also, anyways, the developers will pay the GST, if applicable, on the supply of said flats to another customer. Certainly, levying double taxes is not the intention of Government having deliberate shift of focus towards building more affordable homes for citizens. XVIII. Thus, refund of service tax paid on cancellation of flat where service is not provided shall be allowed without limitation of time as prescribed in the section 11B of the Central Excise Act, 1944. 1.20 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 even the time limit of one year is applicable in the given case it should be considered from the date of cancellation of flat. II. As per the Principles of Interpretation it is well settled law that there are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g given by AAR: The above provision says that the goods which are being returned should have been sold not earlier than six months prior to the appointed day and which is 1st July 2017. Since no document has been provided, the date of sale is not known to us. Further, the provision says that the goods should have been returned within a period of six months from the appointed day and such goods are identifiable to the satisfaction of the proper officer. Even this information about date of return of goods is not available to us. But the point to be noted is that mere return of goods within the specified time is not enough. 1.23 In this regard, refer section 142(1) of the MSGST Act, where any goods on which tax, may, had been paid under the existing law at the time of sale 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 registered person shall be eligible for refund of the tax paid under the existing law where such goods are returned by a person, other than a registered person, to the said place of business within a period of six months from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deemed to have been paid. 1.33 Hence, sub-clause (d) of the section 97(2) of the CGST Act, even the admissibility of the input tax credit where tax deemed to have been paid. 1.34 As per section 142(2) of the CGST Act, in case of downward revision of price a registered person can issued the credit note for the contract entered in Pre-GST regime and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act. 1.35 Further it is pertinent to note that, as per proviso to section 142(2) of the CGST Act, the registered person shall be allowed to reduce his tax liability on account of issue of the credit note. Alternately, it could be construed that said proviso allow to avail the input tax credit of taxes deemed to have been paid. 1.36 Without prejudice to the aforesaid, proviso to section 142(2) of the CGST Act allow to reduce GST liability on account of issue of credit note. Hence, the Advance Ruling Application will cover within the ambit of Section 97 (2) (e) of CGST Act which is stated as 'The determination of the liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnment sought for the first date fixed by the Appellate Authority, that too when the Appellate Authority itself could not convene or could not hear the matter for the first 60 days of the period contemplated under Section 101 (2) of the Act, appears wholly harsh and unreasonable on the part of the Appellate Authority to have refused the short adjournment sought, and to have proceeded to decide the appeal itself on merits. 1.43 Given the aforesaid, unless requesting of the documents and/or agreement (if any) required by the AAR the order passed is not sustainable. The eligibility of refund or credit of Service Tax paid and VAT paid in erstwhile law in case of goods are returned and/or services not provided should be as per the discretion of taxpayer. 1.44 Reference is drawn to the sub para (d) and (f) of the Ruling given by ARA: (e) The above provision says that the goods which are being returned should have been sold not earlier than six months prior to the appointed day and which is 1st July 2017. Since no document has been provided, the date of sale is not known to us. Further, the provision says that the goods sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid 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. 1.52 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. 1.53 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. 1.54 Additionally, the Proviso to section 142 (2) specifically provides that 'Provided that the registered person shall be allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosure in GST return in such senario. 1.59 Thus, developers and property buyers are seeking clarity on the aforesaid as to whether the Service Tax/VAT paid earlier can be claimed as credit or allowed as refund to property buyers at a discretion of the taxpayer. Personal Hearing A personal Hearing in the matter was conducted on 14.03.2019, wherein Shri Pritam, Advocate, representative of the Appellant, attended and stated that the Appellant is concerned about the refund of Service tax paid. However, he did not reiterate the grounds of appeal in the matter. Ms. Kanika Sharma, Asstt. Commissioner, appearing as jurisdictional officer, reiterated the submissions made before AAR. Discussion and Findings 2. We have gone through the record, facts of the case and have also taken on record the written and oral submissions made by the appellant as well as by the department. We have also gone through the impugned order issued by the Advance Ruling Authority, which says that since questions or issues raised in the Advance Ruling application filed by the Applicant is not covered under the set of the questions/is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax paid or deemed to have been paid. To understand the implication of this provision, we will first discuss the input tax credit as defined in the clause (63) of Section 2 of the CGST Act, 2017, which is being reproduced herein under: (63) 'input tax credit' means the credit of input tax; Now, the input tax has defined in Clause (62) of Section 2 of the CGST Act, 2017, which has been reproduced herein under: (62) 'input tax', in relation to a registered person, means the Central Tax, State tax, Integrated Tax, or Union Territory Tax charged on any supply of goods or services or both made to him and includes - . .; Thus, reading both the above provisions viz.- Clause (63) and (62) together, it is aptly clear that the question enumerated at (d) of Section 97(2), supra does not deal with the admissibility of the credit of taxes paid other than the taxes mentioned in the Clause (62) of Section 2 of the CGST Act, 2017, which has been cited herein above, In other words, Section 97(2), which encompasses the questions, meant for the ruling by the AAR or AA ..... 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