No GST liability on developer at JDA entry; Notification No.04/2018 fixes supply at transfer/allotment; Rs7 crore refund with 6% interest

HC held that no GST liability arose on the developer at the time of entering the JDA and, applying Notification No.04/2018, the time of supply is the date of transfer by conveyance or allotment; consequently tax did not fall on the petitioner. The court directed refund of the deposited amount of Rs. 7 crores with interest at 6% per annum from the date of deposit, the refund to be effectuated within six weeks.

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ISSUES PRESENTED AND CONSIDERED

1. Whether adjudication proceedings under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) against a developer in a joint development agreement (JDA) were time-barred having regard to statutory time limits and subsequent Notifications extending timelines.

2. Whether, for a JDA executed on 13.10.2017, tax liability for construction services arose on the date of the JDA (time of supply under Section 13(2)(b)) or only upon transfer/possession/conveyance in light of Notification No.4/2018-Central Tax (Rate) dated 25.01.2018.

3. Whether an amount voluntarily remitted under protest by the developer during the course of investigation is refundable with interest where, on the Revenue's later stand and subsequent transfer of the land to the developer, no liability is held to have arisen.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Time-bar for adjudication under Sections 73/74 and effect of extensions (Section 75 and Notification No.9/2023)

Legal framework: Sections 73 and 74 prescribe timelines for issuing show cause notices and passing adjudication orders for short-paid/undisclosed tax (three years under s.73; five years under s.74 for fraud/suppression). Section 75(10) deems adjudication proceedings concluded if the order is not issued within the specified periods. Notification No.9/2023 extended time limits in special circumstances and included sub-section (10) of Section 73 for the specified extension. Separate notifications extended time for furnishing annual returns for 01.07.2017-31.03.2018, fixing dates applicable to certain States.

Precedent treatment: The Court relied on the statutory scheme as provided; no judicial precedent was cited or overruled on the point in the judgment.

Interpretation and reasoning: The Court analysed the interplay between the statutory temporal limits and the executive Notifications. It accepted the petitioner's contention that, if proceedings were under Section 73, the operative extension fixed the outer limits for issuance of notice and passing orders (e.g., up to 31.12.2023 for FY 2017-18 under the Notification relied upon), and if under Section 74, a different extended timeline would apply. The Court noted the Revenue had not issued the requisite order within the applicable timeline, and drew attention to Section 75(10) deeming adjudication concluded where the order is not issued within prescribed period.

Ratio vs. Obiter: Ratio - where statutory timelines and valid extensions prescribe definitive outer limits for adjudication, failure to issue order within those periods engages s.75(10) and results in adjudication being deemed concluded. Obiter - detailed calendar computations for alternative timelines under Section 74 versus Section 73 were discussed by way of illustration of the petitioner's contention.

Conclusions: The Court accepted that the statutory time limits, as extended by applicable Notifications, govern the life of adjudication proceedings and that the Revenue had not proceeded in time such as to sustain continuing adjudicatory liability under the invoked provisions.

Issue 2: Time of supply for construction services under Section 13(2)(b) vis-à-vis Notification No.4/2018 - whether liability arose on date of JDA or on transfer/possession

Legal framework: Section 13(2)(b) fixes time of supply of services in certain circumstances; Notification No.4/2018-Central Tax (Rate) dated 25.01.2018 introduced special provisions for JDAs, stating liability for central tax in respect of developers supplying construction services to landowners arises only upon transfer of possession or any right in the completed structure by conveyance deed, allotment letter or similar instrument.

Precedent treatment: The Court treated the Notification as a binding clarification of the incidence of tax for JDAs and did not rely on contrary earlier interpretations advanced by Revenue in earlier affidavits; no authority was overruled.

Interpretation and reasoning: The Court examined successive stands in Revenue affidavits. Initially, Revenue contended time of supply was the JDA date (13.10.2017) and tax was thus payable then under Section 13(2)(b) and Notification No.11/2017. However, a later affidavit by the Revenue's officer conceded that Notification No.4/2018 stipulates liability arises only upon transfer/possession/conveyance. The Court held that, in light of that clear admission and the subsequent Notification, the earlier stand that liability arose on the JDA date could not be sustained. The Court further considered the subsequent factual development - sale deed transferring the land to the developer extinguishing rights/claims under the JDA - and reasoned that, given the Notification's time-of-supply rule and the extinguishment of JDA claims by sale, no liability fell upon the petitioner as a developer on the JDA date.

Ratio vs. Obiter: Ratio - Notification No.4/2018 governs the incidence of tax for JDAs executed prior to its issuance by stipulating that liability arises only upon transfer/possession/conveyance; where Revenue concedes this position, liability does not arise on the JDA date. Obiter - observations about the inadmissibility of the Revenue's initial coercive stance (e.g., threats to attach bank accounts) are ancillary to the dispositive finding.

Conclusions: The Court concluded that the tax liability did not arise upon execution of the JDA on 13.10.2017, because the Revenue's later stand adopting Notification No.4/2018 meant liability would arise only upon conveyance/transfer, and subsequent sale extinguishing JDA claims left no liability on the petitioner.

Issue 3: Refundability of amount remitted under protest and interest entitlement

Legal framework: Principles of restitution and statutory entitlement to refund where tax is not due; interest on erroneous or undue deposits where statutory regime or equitable considerations mandate repayment with interest (Court applied a 6% per annum rate from date of deposit).

Precedent treatment: The Court applied established restitutionary logic and refund principles implicit in tax law where payments are shown not to have been due; no specific case law cited.

Interpretation and reasoning: The petitioner deposited Rs. 7 crores under protest during the investigation (21.12.2021). Having determined that no liability ever arose on the JDA date and that the sale deed extinguished the JDA obligations, the Court found the deposit to be not exigible. Given the Revenue's later concession on timing of liability and the extinguishment of the JDA, the deposit was held to be recoverable. The Court directed refund of the entire amount with interest at 6% per annum from the date of deposit and fixed a timeline of six weeks for refund.

Ratio vs. Obiter: Ratio - where a deposit is shown to have been made under protest and no liability is found to have arisen, the deposit is refundable with interest. Obiter - specification of the 6% interest rate and six-week time frame for refund are directions in the exercise of the Court's discretion in the circumstances of this petition.

Conclusions: The Court directed refund of Rs. 7 crores with interest at 6% per annum from date of deposit, to be remitted within six weeks; the petition was made absolute on that basis.

Cross-references and interrelation of issues

The resolution of Issue 2 (time of supply under Notification No.4/2018) was decisive for Issue 3 (refund), as the finding that liability never arose on the JDA date rendered the Rs. 7 crores deposit non-exigent. Issue 1 (time-bar and s.75(10)) contextualised the viability of continuing adjudication proceedings but was not the sole basis of relief; the Court's primary operative conclusions rested on the admitted applicability of Notification No.4/2018 and the extinguishment of JDA claims by subsequent sale.

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