TaxTMI 
TaxTMI 
2018 (12) TMI 1355
X X X X Extracts X X X X
X X X X Extracts X X X X
....erefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the "GST Act". 02. FACTS AND CONTENTION - AS PER THE APPLICANT This application is being filed by KOLTE PATIL DEVELOPERS LTD which is engaged in the activity of Construction of Residential and Commercial complex. When the flats were booked by the customer, the applicable service tax and MVAT was deposited. Given this, indirect tax burden borne by the individual customer on flat booked in pre-GST regime ranged from 4.50%- 5.50%. However, due to certain reasons, the flats are cancelled by the customer on or after 1st July 2017 (i.e. after implementation of GST) which are booked by the customer in the pre-GST regime. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at can be equated with the downward revision of price In said scenario, as discussed aforesaid 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. 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. 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. In this regard, it is to be noted that, the Developer has paid service tax at the rate of 4.50% and MVAT @ 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of section 11B of the Central Excise Act, 1944." Given the aforesaid, the amount already paid in pre- GST regime towards Service tax or Excise, could be refunded in cash, as it is specifically not carried forward in GST regime. Further, we would like to bring your kind attention to the fact 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 such form as may be prescribed and the application shall be accompanied by such documentary or other evidence' As the cancellation of flats would have entitled the developer claim credit of the same in Service Tax Returns, the date of cancellation needs to be considered as the relevant date. This is particularly true as introduction of GST Law may not have the intention of creating a burden of double taxes (....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be raised with GST. A.1 Cancellation is covered under downward revision as there is no restriction in the law I. 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 fiat. 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. ll. Further we would like to bring your kind attention to the fact that Rule 6(3) of Service Tax Rules, 1944 states-Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in the contract, the assessee may take credit of such excess service tax paid by him, if the assessee, (a) has refunded the payment or part thereof, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equated with the downward revision of price. A.2 New law cannot create a situation to deny the benefit available under earlier law as provisions I. Erstwhile in the Finance Act, 1994 the Builder/ Developer is allowed to avail service tax credit with respect to cancellation of flat by way of issue of credit note as per Rule 6(3) of Service Tax Rules, 1944. ll. Further, the section 142 (2) of the CGST Act is allowed to avail the credit of taxes paid in the pre-GST regime in case of downward revision of contract price. Hence, question under consideration is whether cancellation of contract can be considered as a downward revision of price or not. III. In this regard, reference can be given to the principle of interpretation of statute wherein beneficent construction involves giving the widest meaning possible to the statutes. When there are two or more possible ways of interpreting a section or a word, the meaning which gives relief and protects the benefits which are purported to be given by the legislation, should be chosen. IV. A beneficial statute has to be construed in its correct perspective so as to fructify the legislative intent. Given this, in case of legislations ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pex Court in the case of Mafatlal Industries Ltd Vs. UOI 1997 (89) ELT 247 = 1996 (12) TMI 50 - SUPREME COURT OF INDIA held that, All refund claims to be adjudicated under Sec. 11B except where the levy is held to be unconstitutional. V. Given the aforesaid, it is important to analyse whether the one-year time limit is applicable in case of excess of payment of service tax due to cancellation of flat. VI. As per Section 66B of the Finance Act, 1994 specifies the charge of service tax which is essentially that service tax shall be levied on all services provided or agreed to be provided in a taxable territory, other than services specified in the negative list. VII. Given this, in case of cancellation of fiat service is not provided which is agreed to be provided. Hence, service tax is not levied at all. VIII. We would like to bring your kind attention to the fact that, what is paid erroneously which was not required to be paid at all by the law and doesn't become of the nature of service tax. IX. Given this, if assessee has paid service tax which was not payable at all, then time limit does not apply to amount paid which is not service tax (as no service is provided). X....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the refund of the said amount. If we consider this payment as service tax and duty payable, automatically, Section 11B would be applicable. When once there was no compulsion or duty cast to pay this service tax, the amount of Rs. 1,23, 96,948/- paid by petitioner under mistaken notion, would not be a duty or "service tax" payable in law. Therefore, once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act.' XIII. In the case of ITC Limited (1993 (67) E.L.T. 3 (S.C.)] = 1993 (7) TMI 75 - SUPREME COURT OF INDIA honourable Supreme court upheld the view taken by the Division Bench of the Delhi High Court with regard to the question of limitation. On the question of limitation, the Division Bench of the Delhi High Court had observed that "the duty of excise is that which is levied in accordance with law" and that "any money which is realised in excess of what is permissible in law would be a realisation made outside the provisions of the Act". XIV. Therefore, in case service tax paid which was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t (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 we consider that the time limit of one year is applicable in the given case it should be considered from the date of cancellation of flat. ll. As per the Principles of Interpretation it is well settled law that there are two exceptions to non-compliance of mandatory requirement viz: a. When the performance of the requirement is impossible in such cases the performance is excused b. If the requirements are provided by Statute in the interest of a particular person, the requirement although mandatory may be waived by him. In such cases the act done will be considered as valid act Wilson v. McIntosh (1894) AC 129). III. In the given case it is not possible for the assesse to file a claim of refund by complying conditions of one year due to implementation of GST law from 1st July 2017 and hence based on the aforesaid principle it can be said that the requirement is impossible to be complied with. IV. Further, there are a plethora of judicial pronouncements wherein it has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Patil Road, Pune-411001, have filed an application No. 40. Dtd. 19.06.2018 for Advance Ruling before the Authority for the Advance Ruling. 2. M/s. Kolte Patil Developers Ltd., Pune, in the pre-GST regime, had obtained registration under Service Tax (No. AAACK7310GST001) w.e.f. 20.03.2007 for services rendered, 3. M/s. Kolte Patil Developers Ltd., Pune (hereinafter referred to as "Appellant"), is engaged in the activity of Construction of Residential and Commercial Complex. When the flats were booked by the Customer, the applicable Service Tax and MVAT was deposited. Given this, Indirect Tax burden borne by the Individual Customer on the flat booked in Pre-GST regime ranges from 4.50% -5.50%. However, due to certain reasons, the flats are cancelled by the Customer on or after 1st July 2017 (i.e. after implementation of GST) which are booked by the Customer in the Pre-GST regime. 4. In terms of Section 142 (2) of the CGST Act, credit note can be raised: 5. a.... 6. 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(3) of Service Tax Rules, 1994. 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. 5. The taxpayer, in their application dated 19.06.2018 to the Advance Ruling Authority has sought clarification/determination in respect of following issues:- 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? What will be the methodology to avail Input Tax Credit on the said taxes paid? b) What is the legal procedure for cancellation of flat which is booked in Pre-GST Regime and cancelled in Post-GST Regime. Also, GST liability in cases where some small amount is retained, for cancellation. COMMENTS ON 5(a):- 6. As regards to the Point 5(a), attention is drawn to the Cenvat Credit Rules, 2004, as quoted below. "Effect of Refund or Receipt of Credit Note on CENVAT Credit: According to third proviso to substituted Rule 4(7) [substituted Vide Notification No. 13/2011- Central Excise (N.T.) dated 31.03.2011 with effect from 01.04.2011], if any payment or part thereof made towards an input service is refun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ould take Disclaimer Certificate from their client and ensure that the refund amount is passed on to their client ultimately. 9. Regarding the point -cancellation charges on the flats booked during Pre-GST Regime and cancelled during the Post GST Regime, the Service Provider (Developer ) has to pay GST on cancellation charges, as cancellation took place after implementation of GST w.e.f. 1.7.2017. Further, the developer may have notified their clients, the terms of cancellation in any important documents of the contract (like invoice, Builder Buyer Agreement etc.)made in this regard and therefore, they have to go as per the terms of cancellation notified by them. COMMENTS ON 5(b):- 10. It should be noticed that cancellation of flats have taken place after 1.7.2017 i.e. after implementation of GST, as such this service (cancellation of flat) will be governed by the provisions of GST Act. When the contract (providing of house to customer) itself is cancelled and refund to the said customer is paid by the developer (and also GST on cancellation charges is being paid), there is no question of upward revision or downward revision of contract price. Hence, cancellation of flat cannot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fits available under earlier law. 3. Though this office's reply dt.13.7.2018 is sufficient to decide the admissibility of the case and the issues raised therein, even then, the comments on the issues raised by the taxpayer, in their additional submissions is as under:- a) Comments on Point 1 - Cancellation of contract can be equated with the revision in contract. When the contract (providing of house to customer) itself is cancelled and refund to the said customer is paid by the developer (and also GST on cancellation charges is being paid), there is no question of upward revision or downward revision of contract price. Hence, cancellation of flat cannot be equated with revision of contract price. For a contract to be revised, it has to be remain live. When contract itself, is cancelled, there is no question of revision. Only the remedy available to customer/developer for claiming excess service tax paid by them for cancellation of flat booked in Pre-GST Regime and cancelled during Post-GST Regime is to file an application for refund of excess service tax paid by them in terms of Section 11B of the Central Excise Act, 1944 read with Section 140 of the CGST Act. b) Commen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2)(c), the GST Law has not affected any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act (the Finance Act, 1994,) or repealed Acts (Central Excise Act, 1944 and other Acts mentioned in said Section 174(1) of the CGST Act), on the issue raised by the taxpayer in as much as it was open to the said taxpayer to take credit of the excess service tax paid by them, either by filing revised Service Tax Return within stipulated time on the services not offered to the clients or by filing refund claim of the excess service tax paid by them as per the provisions of the Finance Act, 1994 read with the provisions envisaged in Section 11B of the Central Excise Act, 1944 and Section 140 of the CGST Act. Hence, it seems that the taxpayer has mis-construed the said provisions of the CGST Act. c) Comments on Point 3 - Cancellation is covered under downward revision as there is no restriction in the law. No restriction in the law does not mean that a situation or case can be interpreted as suitable to one's needs and convenience. No comments can be offered on the points/issue not existing in the GST law. d) Comments on Point 4 - New law cannot be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....peared and made written submissions. 05. OBSERVATIONS We have gone through the facts of the case. At different places in the application and the submission thereafter, we find that the following issues have been raised for our consideration thus - i. Clarification about the legal procedure for availment of Service Tax and VAT paid on cancellation of flat which is booked in pre-GST Regime and cancelled in post-GST Regime. ii. Whether cancellation of flat can be equated with the downward revision of price where the credit note can be raised with GST as per Section 142 (2) of the CGST Act. iii. Whether cancellation of flat can be equated with the downward revision of price and hence service Tax/VAT paid earlier can be claimed as credit or allowed as refund to property buyer as per Rule 6(3) of Service Tax Rules, 1944 along with applicability of time of limitation for refund as specified under section 11B of Central Excise Act. iv. 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? What will be the methodology to avail Input Tax Credit on the said taxes paid? v. What is the legal pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the proper officer: Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply. 142. (1) Where any goods on which tax, many, 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 appointed day and such goods are identifiable to the satisfaction of the proper officer : Provided that if the said goods are returned by a registered person, the return of such goods shall be deemed to be a supply. (3) Every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of CENVAT credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in Cash, notwithstanding anything....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant has not provided any details as to when the flat was sold. Neither any detail as to when the booking was cancelled is provided. We have been given no agreement or document as such. Therefore, applicability of MVAT Act or Finance Act, 1994 cannot be checked. d) 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. The return has to survive the test of identification to the satisfaction of the proper officer. e) The return of such goods is deemed to be a supply under the GST Act if the return of such goods is by a registered person. No information on this aspect is available to us. f) In respect of services not provided,....