2025 (8) TMI 64 - HC - GST

GST demand quashed on 100% property under unregistered JDA as developer paid full GST liability, preventing double tax

M/s. Shyamaraju And Co (India) Private Limited Versus The Deputy Commissioner of Commercial Taxes (Audit) -1. 7, The Deputy Commissioner of Commercial Taxes (Audit) -1. 3 Bangalore.

The HC quashed the impugned adjudication order demanding GST from the petitioner on 100% of the property under an unregistered Joint Development Agreement ... Levy of GST towards 100% of the property - Joint Development Agreement (JDA) - agreement entered via unregistered document which did not have the effect of creating / transferring / assigning any rights by the petitioner / land owner in favour of the aforesaid M/s. DivyaSree Projects, who is a Developer of the property - HELD THAT:- The adjudication order dated 28.12.2023 was passed against the registered person i.e., Developer - M/s. DivyaSree Projects pursuant to which the said person discharged the entire GST liability in relation to the entire property including the 30% share of the petitioner under the Joint Development Agreement dated 06.02.2017 and consequently, the question of there being double taxation i.e., payment being made by the aforesaid M/s. DivyaSree Projects and once again payment being demanded from the petitioner would not arise in the facts and circumstances of the instant case and the impugned order deserves to be quashed. In so far as the contention of the learned Additional Government Advocate and the finding recorded by the respondent No. 1 that the Joint Development Agreement dated 06.02.2017 being unregistered cannot be made the basis to exempt the petitioner from payment of GST is concerned, as stated supra, prior to the impugned order, Deputy Commissioner of Commercial Taxes, (Audit)-4.1, DGSTO-4, Bengaluru has already recognized, accepted and acted upon the aforesaid Joint Development Agreement for the purpose of coming to the conclusion that the GST liability was to be discharged by the Developer and has accepted payment from it and consequently, in the light of the finding recorded by Deputy Commissioner of Commercial Taxes, (Audit)-4.1, DGSTO-4, Bengaluru, the respondent No. 1 clearly was estopped from taking a diametrically opposite stand and rendering a contrary finding that the Joint Development Agreement dated 06.02.2017. Under these circumstances, this contention urged by the learned Additional Government Advocate cannot be accepted. The impugned adjudication Order dated 30.12.2023 and Summary of the Order in Form GST DRC-07 passed by the respondent No. 1 in Order bearing No. DCCT/AUDIT-1.7/GST(ADT)-02/ADJ./T.NO.-794/2023-24 are hereby quashed - Petition allowed. ISSUES: Whether the Joint Development Agreement (JDA) dated 06.02.2017, being unregistered, can be the basis for exempting the petitioner from GST liability on construction services rendered.Whether GST liability for construction services relating to the entire property under the JDA falls on the developer or on the landowner/petitioner.Whether double taxation arises when GST liability is discharged by the developer and again demanded from the petitioner under the same agreement.Whether the adjudicating authority is estopped from taking a contrary stand after accepting the JDA for GST liability determination.Whether the issuance of the Show Cause Notice and adjudication order without proper consideration of submissions and documents violates principles of natural justice.Whether interest under Section 50 of the CGST/KGST Act is leviable where no GST tax is payable.Interpretation of agreements for determining the supplier and recipient of construction services under GST law. RULINGS / HOLDINGS: The court held that the impugned adjudication order concluding that the unregistered JDA did not create/transfer rights and thus fixed GST liability on the petitioner was erroneous, as the Deputy Commissioner had earlier recognized and acted upon the JDA for the developer to discharge the entire GST liability.It was held that the GST liability for construction services relating to the entire property under the JDA was correctly fastened on the developer, who had discharged the liability, and consequently, double taxation on the petitioner does not arise.The adjudicating authority was estopped from taking a diametrically opposite stand after the Deputy Commissioner accepted the JDA and the developer's GST discharge, hence the impugned order and show cause notice deserved to be quashed.The issuance of the show cause notice without considering the submissions and documents placed on record was held to violate principles of natural justice and was impermissible in law.Interest under Section 50 is compensatory and leviable only when tax is payable; where no GST tax is payable, interest cannot be demanded.The agreements must be read as a whole to ascertain the real intention of the parties; it is not open to authorities to rewrite or dissect contracts to impose tax liabilities contrary to their terms. RATIONALE: The court applied the provisions of the CGST/KGST Act, 2017, particularly Sections 2(31), 2(93), 7 (scope of supply), 17 (Registration Act), 34 (Karnataka Stamp Act), 50 (interest), 73 (demand and recovery), and 122 (penalty), along with relevant rules and notifications including Notification No. 4/2018-Central Tax (Rate).The principle of estoppel was invoked to prevent the revenue from taking inconsistent positions regarding the validity and effect of the JDA, after the Deputy Commissioner had accepted it for GST liability determination.The court emphasized the settled jurisprudence that contracts must be construed as a whole, referencing Supreme Court precedents which prohibit authorities from rewriting contracts or ignoring their commercial expediency.The judgment reaffirmed that interest is accessory to tax liability and cannot be imposed independently where no tax is due, relying on Supreme Court authority.The court underscored the violation of natural justice principles where the show cause notice merely reiterated allegations without considering the taxpayer's submissions and evidence.The decision reflects a doctrinal adherence to the proper interpretation of agreements for GST purposes and the avoidance of double taxation, ensuring that tax liability is not imposed on multiple persons for the same transaction.