Service Tax on flats post Completion Certificate

[Ritesh Mehta]

A dealer has wrongly taken 100% Input tax credit without reversing the proportionate credit in respect of flats sold post Completion Certificate. Neither he has intimated the department about receiving the Completion Certifcate. The department has raised a show cause on the builder asking it to pay 7% on the exemted receipts of flats sold after CC as per Rule 6 of Cenvat Credit Rules. The Input tax credit reversal is quite less as compared to tax payable on exempted services.

Kindly guide how to reply and any judgement in favour....

[KASTURI SETHI]

The case is worth fighting legally. Case laws can be traced out. It is not the intention of legislature that you take credit of RS.10 and pay RS.100/-. The purpose of framing such rule was not such.

[KASTURI SETHI]

M/S. ASTER PVT. LTD. VERSUS CC&CE, HYDERABAD  [ 2016 (6) TMI 866 - CESTAT HYDERABAD ]

 

AI Summary

Input tax credit reversal required where flats sold after completion certificate are treated as exempt supplies, prompting tax demand. Builder sold flats after the Completion Certificate while retaining full input tax credit without proportionate reversal or notification; the department issued a show cause seeking tax on exempt receipts under the Cenvat Credit Rules, and the reversal made is materially less than the tax demanded. Advice offered recommends legal challenge and cites Aster Pvt. Ltd. v. CC&CE as a relevant precedent.