TMI Blog2022 (12) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... e another but not when intersecting / overlapping with each other - on a combined reading, it becomes imperative to assess or classify the service availed by the appellant, i.e., to say whether it qualifies as 'works contract service' or not - the services availed by the appellant is nothing but, 'works contract' in as much as the service involved is construction of immovable property with transfer of property in goods. Hence, the supply is covered under Para 6(a) of the Schedule II of the Act. As can be seen from the sections that section 16 provides for availment of ITC subject to certain conditions and procedures to be followed by the assessee. Whereas, such availment is restricted under Section 17 and various kinds of supplies/conditions are covered - even though a general condition is prescribed under Section 16 of the Act, for availment of ITC, specific exemptions or disallowance cannot be overlooked or ignored merely because one provision allows it. Section 17(5)(c) clearly specifies that ITC is allowed on input of 'works contract' only if the output service is also works contract. In the instant case, the output service provided by the appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the rules made thereunder shall apply to the appellant as if such Advance Ruling has never been made. Subject: GST - Appeal filed by Shri Satya Dev Bommireddy, Villa 33, Lalitha Bloomfield, Khajaguda, Nanakramguda Rd, Hyderabad 500008 under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.21/2021 dated 30.09.2021 passed by the Telangana State Authority for Advance Ruling -Order-in-Appeal passed - Regarding. 1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as TGST Act, 2017 or the Act , in short) by Shri Satya Dev Bommireddy, Villa 33, Lalitha Bloomfield, Khajaguda, Nanakramguda Rd, Hyderabad 500008 (hereinafter referred in short as the appellant ). The appellant is registered under GST having GSTIN number 36ASEPB8739M1ZB, as an individual engaged in the activity/supply of leasing out commercial premises for earning lease rental income. The appeal is filed against the Order No.21/2021 dated 30.09.2021 ( impugned order ) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax) ( Advance Ruling Authority / AAR / lower Authority ). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth of August 2019 onwards in the GSTR-3B returns for the relevant months. Since the Appellant has paid input GST at the time of purchasing the under-construction commercial immovable property, and since the Appellant is utilizing the same property with improvements towards providing output supply of lease services, the Appellant is claiming input tax credit of the tax paid at the time of purchasing the immovable property in the GSTR-3B returns, since August 2019. 7. The appellant filed an application seeking Advance Ruling with regard to the following : 7.1. The GST paid for the purchase of the under construction of commercial premise should be allowed to be claimed as input tax credit since the Appellant is providing output supply of leasing out the same immovable property which is in the course of furtherance of business. 7.2. The appellant in his application before lower authority raised the interpretation of statute with regard to Clause 5(b) of Schedule II of the CGST Act, and its relevance to Section 17(5)(c) or 17(5)(d) of CGST. 8. On examining the submissions of the appellant, the lower authority framed following questions :- 1. Given that the supply of und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty? 9. Regardless of its applicability to the case of the Applicant herein, given the numerous clarifications and notifications by the Dept of Revenue that clearly states that input credit is available for the sale of under construction commercial complexes sold before the issuance of the completion certificate, is not the Authority now precluded from taking a different stand?, since:- (a) it is against the principle of contemporanea expositio and (b) they are bound by such executive constructions as well as rules of executive estoppel. 10. Is not purchase of under construction commercial immovable property under an indivisible contract without explicit purchase of goods and/or services therein, a valid and legitimate input required for the business of the Applicant i.e. lease of immovable property? 11. Given that the Applicant's Vendor (Sohini Developers LLP) has taken the input tax credit of the GST paid by the Applicant, what specific law/rule prevents the flow of that tax and excludes the Applicant from doing the same against the GST received for leasing of his immovable property? 12. Is the Applicant eligible and entitled to claim input tax cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease of immovable property) or to the input receipt (purchase of under construction commercial immovable property) of the taxable person (Applicant)? Sec 17(5)(d) of CGST Act, 2017 refers to inputs on which ITC is not available for any taxable person. 6. Does the term for construction of an immovable property on his own account in s.17(5)(d) of CGST Act refer to output supply (lease of immovable property) or to the input receipt (purchase of under construction commercial immovable property) of the taxable person (Applicant)? Sec 17(5)(d) of CGST Act, 2017 refers to inputs on which ITC is not available for any taxable person. 7. If the term Goods or Services or both received in s.17(5)(d) of CGST Act refer to input received, then can the meaning of the term for construction of an immovable property on his own account in s.17(5)(d) of CGST Act include the business of the Applicant herein, i.e. for the lease of immovable property? If the applicant utilizes goods or services or both for construction of immovable property on his own account then the Sec 17(5)(d) is applicable with respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty? As discussed in detail above, the answer to this question is No. 10. The present appeal challenges the ruling and is contested on the following grounds :- 1. The Lower Authority, erroneously held that the Appellant is not entitled to claim the input tax credit on the transaction between the Vendor (Sohini Developers) and the Appellant. In terms of Section 16(1) of the CGST Act, 2017 which deals with eligibility and conditions for taking input tax credit, every registered person is entitled to take credit on any supply of goods or services or both which are used or intended to be used in the course of furtherance of business. Thus, the Appellant being a registered supplier of lease is statutorily entitled to avail the credit of input tax credit charged by his vendor for the purpose of the commercial premises under construction. 2. The TSAAR erroneously interpreted that the provisions of Section 17, sub-section 5 Clause (c) and Clause (d) of the CGST Act, 2017 which deals with apportionment of credit and blocked credit with. The Appellant has received supply of service in terms of purchase of under construction commercial property as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, a specific entry is included in Schedule II Clause 5 as a taxation entry for buildings and complexes for sale. Even if there are two separate entries in Schedule II which describe the eligibility of immoveable property to tax, the statement that the construction given by the Statute cannot be extended to any provision in the act is not tenable and the AAR failed to appreciate that a specific entry will take precedence over a general entry, the same is reiterated by the Apex Court in numerous cases. Since Classification of goods under the laws of Customs, Central Excise and GST is always an area of dispute. The Hon'ble Supreme Court's judgement in the case of Westinghouse Saxby Farmer Ltd Vs., Commissioner of Central Excise Calcutta, AIR 2021 SC 1409 will clear these disputes. In this case the dispute was about the classification of electric relays for use in railway signalling equipment, Chapters 86 and 87 (falling under Section XVII) provide for the classification of locomotives and automobiles and parts thereof respectively. The Apex Court adopted the sole or principal use test and agreed with the Assessee to classify the electrical relays as part of locomotives under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me immovable property which is in the course of furtherance of business. 11. Thus the appellant prayed that Advance Ruling may be set aside/modify the impugned Advance Ruling passed by the AAR or pass any such further orders as maybe deemed fit and proper in the facts and circumstances of the case. Whether the appeal is filed in time: 12. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 30.09.2021 was received by the appellant on 01.11.2021 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 30.11.2021, which is within the prescribed time-limit. Personal Hearing: 13. In terms of Section 101(1) of the Act, the appellant was given personal hearing, in virtual mode on 31.01.2022. Shri Kailash Nath P S S, Advocate, and Authorised Representative appeared for the Appellants. The appellants reiterated their written submissions made along with the application and no additional submissions were made at the time of personal hearing. They requested to set aside the advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression construction includes additions, alterations, replacements or remodelling of any existing civil structure; 18. Section 2 (119) defines works contract as :- works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract; Hence, for a contract to be termed as works contract, it should satisfy the following conditions:- (i) It should be a contract for building, construction, fabrication , etc. of any immovable property. (ii) There should be transfer of property in goods involved in its execution. In the said case both the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; the appellant has relied on Hon'ble Apex Court judgement in Commissioner, Central Excise and Customs, Kerala and Ors Vs. Larsen and Toubro Ltd others (2016)1 SCC 170 . The relevant text is extracted as under :- 17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows:- To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices alone. Parliament had all genre of works contract in view when clause (29-A) was inserted in Article 366. (at para 72) 21. Therefore, on a combined reading, it becomes imperative to assess or classify the service availed by the appellant, i.e., to say whether it qualifies as 'works contract service' or not. As discussed earlier, it is evident from the facts of the case that an agreement of sale for commercial property was entered into when the property was under construction. This clearly implies that certain material/goods were involved in completing the construction service. Subsequently, the property was registered/transferred in the name of appellant. From the above, it is amply vivid that the services availed by the appellant is nothing but, 'works contract' in as much as the service involved is construction of immovable property with transfer of property in goods. Hence, the supply is covered under Para 6(a) of the Schedule II of the Act. 22. Now, we proceed to examine the provisions of Section 16(1) and 17(5) of the Act, governing the aspect of 'Input Tax Credit' (in short 'ITC'). For ease of understanding, the same are reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ITC is allowed on input of 'works contract' only if the output service is also works contract. In the instant case, the output service provided by the appellant is leasing/renting of immovable property. As such input tax paid on supply of works contract cannot be availed by appellant for payment of tax on supply of renting of immovable property. 25. Further, the AR himself has clearly mentioned that notification and clarifications issued by board pertains to ITC being available to the contractor for the sale of under construction complexes. The present case doesn't pertain to applicability of ITC to the contractor, constructing the commercial complexes, but to the buyer of such constructed complexes. Hence, the applicability of principles of contemporanea expositio and being bound by rules of executive estoppels doesn't arise in this case. 26. From the above, the case laws relied upon, do not come to rescue, in as much as they are against the submissions made by the appellant as discussed above. The contentions of the appellant are not valid in as much as, Para 5(b) of Schedule II and Section 17(5)(c) are two different and distinct provisions of CGST Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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