AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 549
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.... Direct Respondent No. 3 to process the refund claim filed by the Petitioner and sanction the same without any further delay along with interest; and c) Grant such other order or direction as deemed fit by this Hon'ble Court in the facts and circumstances of the case." 2. The brief facts giving rise to the present petition are as under: The petitioner is a private limited company engaged in the business and development of real estate projects having various commercial and residential projects in and around Mangalore. On 17.12.2022, the petitioner filed an application / refund claim before the respondents seeking refund of GST amount of Rs. 14,32,64,614/-, pursuant to which, the 3rd respondent issued a Show Cause Notice dated 24.01.2023 proposing to reject the refund claim of the petitioner, who filed a detailed reply countering all the allegations made in the Show Cause Notice. In pursuance of the same, the 3rd respondent passed the impugned order dated 15.02.2023 rejecting the refund claim of the petitioner. Aggrieved by impugned order at Annexure - A dated 15.02.2023 rejecting the refund claim of the petitioner and for consequential directions to the responde....
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....intended for sale to a buyer, wholly or partly except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, is classified as a service. The activity or the transaction covered under Paragraph 5 (b) is the activity of construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer. It was submitted that for the said Paragraph 5 (b) and Section 7 of the Act to get attracted for a transaction, the basic requirement is that there should be a service provider and services receiver and the service provider should undertake construction activity for the service recipient. It was also submitted that there should be performance of a contract for construction of building by the service provider/supplier to the service receiver/recipient and when the same is absent in a case, then the said Paragraph 5 (b) has no applicability. (iii) It was submitted that that no construction can be said to have been undertaken if the agreement for construction is entered after the construction and no con....
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....applicable stamp duty is outside the ambit of GST Act itself as held by the Hon'ble Supreme Court in the case of Union of India Vs. VKC Footsteps India Pvt. Ltd - 2021 (52) GSTL 513 (SC) in which, while analyzing the jurisprudential vision and the economic rationale for GST legislation, the Apex Court held that taxes on alcohol for human consumption and stamp duty paid transactions are outside the ambit of GST and falls completely under the domain of the States under the Constitutional framework. (vii) It was submitted that if the agreement with the buyer is entered after the construction and no element of construction is undertaken after the execution of the agreement, then there is no supply of goods or services between the parties, even if completion certificate is not received for the said building. It was submitted that even for "supply" under Section 7 of the GST Act, it includes supply of goods or services made or agreed to be made for a consideration and thus factum of supply would be initiated only once the agreement is entered into between the supplier and the recipient and such agreement should be for consideration. (viii) Learned Senior Counsel submitt....
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....itioner. 6. Per contra, learned counsel for the respondents- revenue would reiterate the various contentions urged in the statement of objections and support the impugned order and submit that there is no merit in the petition and that the same is liable to be dismissed. 7. I have given my anxious consideration to the rival contentions and perused the material on record. 8. A perusal of the material on record will indicate that M/s. Lotus Shopping Centres Private Limited was constructing a mall named Lotus Shopping Mall, Kukshekara, Mangaluru. During the pendency of the construction of the mall, there were insolvency proceedings initiated against the said company. On 18.06.2019, the NCLT appointed Respondent No. 4 as the Liquidator of the said company and issued directions to him to liquidate the assets of the company in terms of the provisions contained in the Insolvency and Bankruptcy Code, 2016, pursuant to which, Respondent No. 4 issued an invitation for expression of interest for acquisition of the asset i.e., Lotus Shopping Mall on a standalone basis. On the basis of this invitation, the petitioner submitted the expression of interest and participated in the e-auctio....
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....rder petitioner is illegal, arbitrary and without jurisdiction or authority of law apart from being contrary to the provisions of the CGST/KGST Act and the same deserves to be quashed and consequent directions are to be issued to the respondents to sanction/grant and pay refund in favour of the petitioner together with applicable interest for the following reasons: (i) Before adverting to the present case, it would be relevant to state that while examining the issue regarding levy of GST on solatium received by the land loser towards acquisition of lands, this Court in the case of Smt. Asha R Vs. Assistant Commissioner and another - W.P.No.2552/2024 and connected matters - Dated 10.09.2024 held as under: "Section 7 of the CGST Act, reads as under: Scope of supply. 7. (1) For the purposes of this Act, the expression "supply" includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the cour....
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....nd and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. (vii) Section 7 (1) of the CGST/KGST Act provides for the scope of supply; it includes all forms of supply of goods and services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. (viii) Clause (d) of sub-section (1) of Section 7 states that the activities referred to in Schedule II shall be treated as "supply of goods" or "supply of services". This clause was omitted vide CGST Amendment Act, 2018 w.e.f. 01.07.2017. (ix) Simultaneously, Section 7 (1A) was inserted vide CGST Amendment Act, 2018 w.e.f. 1.07.2017. It postulates that only when activities or transactions constitute a supply in accordance with Section 7 (1), then they shall be treated as supply of goods or services as referred to in Schedule II. The effect of this would be that Schedule II will be merely a classification schedule and will not automatically lead to being considered a supply of goods or services or both. (x) Entry No. 5(e) of Schedule II treats agreeing to the o....
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....pplier. Here, the levy of GST would be on the manufacturer/seller. However, the incidence of GST would be on the wholesale supplier. * For the wholesale supplier, the goods procured from the manufacturer/seller becomes "input goods". The wholesale supplier would make value additions thereon and make an "outward supply" of the same to the retailer. In doing so, GST is levied on the wholesale supplier, but the incidence of GST, which was earlier on the wholesale supplier, is further passed on to the retailer. * The goods procured from the wholesale supplier becomes "input goods" for the retail seller. The retail seller would make value additions thereon and make an "outward supply" of the same to the final consumer. In doing the same, GST is levied on the retail seller, but the incidence of GST, which was earlier on the retail seller, is further passed on to the final consumer. * The supply chain having been terminated, the final consumer will not be able to pass the incidence of tax any further and thus bears the final burden of tax. * GST is therefore a destination-based tax on consumption of goods and services. It is levied at all stages right f....
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....one developer or a special economic zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services tax Act, credit of input tax may be availed for making zero rated supplies, notwithstanding that such supply may be an exempt supply. (3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely : (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input-tax credit ; or (b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services tax Act or the rules made there under." Section 54 (3) of the CGST Act, 2017 reads as under : 54. Refund of tax.-(1) Any person claiming refund of any tax. .. (2). .. (3) S....
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....plies in respect of which refund is claimed under sub-rules (4A) or (4B) or both (D) 'Turnover of zero-rated supply of services' means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely : Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period ;" (xiv) It would be relevant to note that the levy of GST is on goods or services or both and the same is defined in the CGST/KGST Act under Section 2 (52) and Section 2 (102) as under: 2. Definitions.- In this Act, unless the context otherwise requires, (52) "goods'' means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming....
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....r human consumption and stamp duties provide a significant part of the revenues of the States. Complex balances have had to be drawn so as to accommodate the concerns of the States before bringing them within the umbrella of GST. These aspects must be borne in mind while assessing the jurisprudential vision and the economic rationale for GST legislation. But abstract doctrine cannot be a ground for the Court to undertake the task of redrawing the text or context of a statutory provision. This is clearly an area of law where judicial interpretation cannot be ahead of policy making. Fiscal policy ought not be dictated through the judgments of the High Courts or this Court. For it is not the function of the Court in the fiscal arena to compel Parliament to go further and to do more by, for instance, expanding the coverage of the legislation (to liquor, stamp duty and petroleum) or to bring in uniformity of rates. This would constitute an impermissible judicial encroachment on legislative power. Likewise, when the first proviso to Section 54 (3) has provided for a restriction on the entitlement to refund it would be impermissible for the Court to redraw the boundaries or to expand the ....
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.... Likewise, services have been defined under the Constitution "as anything other than goods". Goods and services tax have been defined in the Constitution to mean "any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption". Supply has been defined in the model GST law in the broadest possible sense and includes sale. 2.3 What is presently being taxed under service tax law is provision of service in relation to land and buildings. Under the proposed GST, the taxable event is supply of goods or services [Articles 246A & 286 of the Constitution]. However, immovable property has not been included in the definition of goods in the model GST law. As mentioned in paras 1.1 and 1.2, only supply of services in relation to land and building has been proposed to be subjected to GST. 2.4 Thus, supply of immovable property (land and buildings) has been kept outside the purview of GST. It is felt, that this would distort the GST particularly when there is no constitutional or legal impediment to levy GST on supply of land and building to GST due to the following reasons: - (i) Stamp duty, which is levied und....
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....iness and industry, the ITC chain would get liberalized, the tax administration would forever be saddled with non-completion of ITC chain thereby resulting in disincentives to obtain taxable invoices for availing input tax credit. Non inclusion of land and building in GST results in cascading of taxes. (vii) Gains from GST arising out of a comprehensive tax base, would be negated owing to a large hole in the tax base [As per MOSPI data, construction sector constitutes almost 9% of the total gross value added (GVA) in the country]. This is for the reason that levy of GST on supply of land and buildings would be an impediment to the generation, flow and parking of black money. (viii) Land and building are not on the same footing as alcoholic liquor for human consumption as the latter is constitutionally outside the definition of goods and services tax (para 2.2 above). 3. In view of the discussion in the forgoing paras, it is imperative that supply of land and building is subjected to GST. However, certain categories of such supplies may be exempted in public interest. These are listed below: - (I) Supply of vacant land for the purposes of agricult....
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....p" component of the Housing for all (Urban) Mission/ Pradhan Mantri Awas Yojana; ii. any housing scheme of a State Government. (IV) Sale of residential premises other than new residential premises. Note: - 1) A residential premise is new when any of the following apply: 1. it has not previously been sold as residential premises 2. a new building replaces a demolished building on the same land. 4.1 We may prescribe a different rate of GST for supply of land vis-à-vis supply of buildings, with full ITC of both. 4.2 Further, the amount of stamp duty paid on land or buildings, may be allowed to be excluded from the value of land or buildings, for levy of GST on their respective supply. 4.3 Alternatively, the amount of GST payable may be reduced by the amount of stamp duty paid on the land or buildings, subject to the condition that no refund of ITC would be availed under the duty inversion clause of GST law. (xviii) As rightly contended by the learned Senior counsel for the petitioners, this Agenda Item to tax immovable property transactions was not agreed upon and at the GST council meeting held on....
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....he development of a property. The Hon'ble Minister from Uttarakhand stated that the hill States should have special exemption. The Hon'ble Chairperson observed that this would be decided once the main issue was settled. The Hon'ble Minister from Punjab observed that if a developer constructed the property on his own, then the completed project's cost would be higher as the developer would also recover the cost of capital investment. The Hon'ble Deputy Chief Minister of Gujarat did not support the proposal under this agenda item. He observed that in almost 90% cases, an under-construction flat was booked by customers and money was paid by them for construction. He stated that stamp duty was on value addition and the proposal made now would lead to double taxation. The Secretary to the Council stated that another important consideration for introducing this agenda item was that if sale of property was considered as a supply and tax was charged at the rate of 18%, it would complete the ITC chain and there would be greater incentive to buy tax paid inputs like cement, steel, sanitary fittings, tiles, etc. The Hon'ble Deputy Chief Minister of Gujarat stated that ....
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....rnment and that it should be left with the States. The Hon'ble Minister from Tamil Nadu stated that the proposal under this agenda item appeared to be unconstitutional as stamp duty was constitutionally retained. He also added that the definition of goods in the Constitution did not include land and building. The Hon'ble Chairperson summed up the two broad view points namely that incidence of tax was likely to go up and the other that the tax amount would remain the same due to availability of ITC on inputs used as construction material. The Hon'ble Minister from Punjab observed that if GST was imposed on land and building, the cost for the customer would go up. The Chief Economic Advisor stated that if GST was extended to land and building, it would be a transformational GST and would also have a strong anti- corruption, anti-black money signalling. He reminded the House that internationally, GST was charged on supply of property. The Hon'ble Chairperson observed that this idea was transformational but instead of introducing it at this stage, this suggestion could be revisited after a year or so of the GST implementation. The Hon'ble Deputy Ch....
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.... comprehending all things of a permanent nature, and even of an unsubstantial provided they be permanent. Ordinarily, the term is used as descriptive of the subject of ownership and not the ownership. Land is the material of the earth, whatever may be the ingredients of which it is composed, weather, soil, rock, or other substance, and includes free or occupied space for an indefinite distance upwards as well as downwards, subject to limitations upon the use of airspace imposed, and rights in the use of airspace granted by law. 12. According to the Law Lexicon (Reprint edn. 1987) by Ramanatha Iyer p. 701, the word 'land" in the ordinary legal sense comprehends everything of a fixed or permanent nature and, therefore, growing trees, land includes the benefit arise out of the land and things attached to the earth or permanently means everything attached to the earth and also the share in or charges on, the revenue or rent of villages or other defined portions of territory. Land includes the bed of the sea below high water mark. Land shall extend to messuages, and all other hereditaments, whether corporal or incorporeal and whether freehold or of any other tenure and to m....
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....he limitation that the defect in the title of the judge to the office should not be one traceable to the violation of a constitutional provision. The contravention of a constitutional provision may invalidate an appointment but we are not concerned with that. We are concerned with the effect of the invalidation upon the acts done by the judge whose appointment has been invalidated. The de facto doctrine saves such acts. The de facto doctrine is not a stranger to the Constitution or to the Parliament and the legislatures of the States. Article 71(2) of the Constitution provides that acts done by the President or Vice-President of India in the exercise and performance of the powers and duties of his office shall not be invalidated by reason of the election of a person as President or Vice-President being declared void. So also Section 107 (2) of the Representation of the People Act, 1951 (43 of 1951) provides that acts and proceedings in which a person has participated as a member of Parliament or a member of the legislature of a State shall not be invalidated by reason of the election of such person being declared to be void. There are innumerable other Parliamentary and State legis....
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....cial pronouncements to be applicable also to the particular cases. In Chandra Mohan case [AIR 1966 SC 1987 : (1967) 1 SCR 77 : (1967) 1 LLJ 412] this Court had held that appointments of District Judges made otherwise than in accordance with Article 233 of the Constitution were invalid. Such appointments had been made in Uttar Pradesh and a few other States. Doubts had been cast upon the validity of the judgments, decrees etc. pronounced by those District Judges and large litigation had cropped up. It was to clear those doubts and not to alter the law that the twentieth amendment of the Constitution was made. This is clear from the Statement of Objects and Reasons appended to the Bill which was passed as Constitution (20th Amendment) Act, 1966. The statement said: "Appointments of District Judges in Uttar Pradesh and a few other States have been rendered invalid and illegal by a recent judgment of the Supreme Court on the ground that such appointments were not made in accordance with the provisions of Article 233 of the Constitution As a result of these judgments, a serious situation has arisen because doubt has been thrown on the validity of the judgments, decrees, orders ....
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.... Entry 5(e) of Schedule treats "agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act" as a supply of service and would only be a classification entry and the need to prove that an activity or transaction is a supply stems from Section 7 (1)." (ii) Since the facts in the instant petition involve sale of an incomplete building, it would be apposite to examine the history of indirect taxation on building contracts. It is relevant to state that Sales tax laws enacted in pursuance of the Government of India Act, 1935 as also the laws relating to sales tax passed after the coming into force of the Constitution proceeded on the footing that the expression "sale of goods", having regard to the rule as to broad interpretation of entries in the legislative lists, would be given a wider connotation. However, in the case of State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., AIR 1958 SC 560: 1959 SCR 379, the Apex Court held that the expression "sale of goods" as used in the entries in the Seventh Schedule to the Constitution has the same meaning as in the Sale of Goods Act, 1930; this decision related to works contracts. ....
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....r, delivery or supply of any goods' shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made. Hence, a transfer of property in goods under sub-clause (b) of clause (29-A) is deemed to be a sale of the goods involved in the execution of works contract by the person making the transfer and a purchase of those goods by the person to whom such transfer is made. The object of the new definition introduced in clause (29-A) of article 366 of the Constitution is, therefore, to enlarge the scope of 'tax on sale or purchase of goods' wherever it occurs in the Constitution so that it may include within its scope the transfer, delivery or supply of goods that may take place under any of the transactions referred to in sub-clauses (a) to (f) thereof wherever such transfer, delivery or supply becomes subject to levy of sales tax. So construed the expression 'tax on the sale or purchase of goods' in entry 54 of the State List, therefore, includes a tax on the transfer of property in goods (whether as goods or in some other form) involved in the....
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....pecies 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, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgment." (at page 427) 18. Similarly, in Kone Elevator India (P) Ltd. v. State of T.N., (2014) 7 SCC 1, this Court held:- "Coming to the stand and stance of the State of Haryana, as put forth by Mr Mishra, the same suffers from two basic fallacies, first, the supply and ....
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....lter the nature of contract so long as the contract provides for a contract for works and satisfies the primary description of works contract. Once the characteristics or elements of works contract are satisfied in a contract then irrespective of additional obligations, such contract would be covered by the term "works contract". Nothing in Article 366(29-A)(b) limits the term "works contract" to contract for labour and service only. The learned Advocate General for Maharashtra was right in his submission that the term "works contract" cannot be confined to a contract to provide labour and services but is a contract for undertaking or bringing into existence some "works". We are also in agreement with the submission of Mr K.N. Bhat that the term "works contract" in Article 366(29- A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Parliament had all genre of works contract in view when clause (29-A) was inserted in Article 366." (at para 72) 20. We also find that the assessees argument that there is no charge to tax of works contracts in the Finance Act, 1994 is correct in view o....
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....means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:-- (A) architect registered with the Council of Architecture constituted under the Architects Act, 1972; (20 of 1972.) or (B) chartered engineer registered with the Institution of Engineers (India); or (C) licensed surveyor of the respective local body of the city or town or village or development or planning authority; (II) the expression "construction" includes additions, alterations, replacements or remodelling of any existing civil structure; (h) service portion in the execution of a works contract; (x) This was, then, followed in the GST regime in which Entry 5 (b) and 6(a) to the CGST/KGST Act are as under: 5 (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competen....
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....le III comes into the Act as a result of Section 7 (2) of the CGST Act, 2017, which starts with a non obstante clause and excludes activities or transactions specified in Schedule III as neither supply of goods or services. On a careful consideration of the above entry, what is excluded is sale of land in all cases and sale of building except where the building is covered under clause (b) of paragraph 5 of Schedule II. As far as building is concerned, if the said building is covered under clause (b) of Schedule II, it does not come within this entry. It follows therefrom that if two parties entered into a contract for construction of a building where even a portion of the consideration is received before completion of the building, the same gets covered under clause 5 (b) of Schedule II. The Apex Court's judgment in the Larson & Toubro's case supra, clarifies that a construction contract must be for providing construction services. Applying this to the GST regime, the contract should provide for construction services to be rendered to the petitioner by the respondents. There should be a consensus ad idem between the parties that one would provide construction services to the ot....
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....the GST legislation does not arise at all; that is also the reason why the sale deed carries substantial stamp duty. It follows there from that if the agreement or sale deed does not have a goods or service element at all, the question of the respondent authorities stating that service element of completion of a building should get taxed in the hands of the liquidator and be borne by the petitioner flies in the face of the facts itself and is completely contrary to the scope of the tax entries. Insisting on taxation of a building on the grounds that completion certificate is yet to be received will not reflect the true nature of the transaction being undertaken. The respondent authorities were clearly wrong in fastening the liability on the liquidator and the incidence on the petitioner as the said services were never rendered through the agreement nor it was in contemplation. In fact, when the petitioner takes over the building and gets the same completed, that is the point when GST may get attracted towards the completion of the building and in the hands of those who render such services or supply such goods. The charge, therefore, was made on non- existent services which was the....
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....of supply under Section 7 (2) of the said Act. (xviii) As rightly contended by the learned Senior counsel for the petitioner, GST would be applicable for supply of services; Schedule II would indicate that any contract which stipulates for any construction or has the intention to construct either the whole or a part of the building or the structure, GST will be applicable; the sale of building simpliciter will not be subject to levy of GST under Schedule III; the sale of building should have the intent to construct a part or the whole of building which is part of supply of services which is subject to levy of GST. (xix) As stated supra, under Paragraph 5 (b) of Schedule II, the activity of construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, is classified as a service. The activity or the transaction covered under Paragraph 5 (b) is the activity of construction of complex, buildi....
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....struction which was carried out by the developer in accordance with the agreement with the prospective buyer, which was earlier taxable under the Vat/service tax law is now sought to be taxed under the CGST Act and therefore deduction is given for sale of land. "86. Even otherwise "supply" under Section 7 of the CGST Act includes supply of goods or services made or agreed to be made for a consideration. Thus the factum of supply would be initiated only once the agreement is entered into between the supplier and recipient and such agreement is for consideration. This is in consonance with the observation of the Supreme Court in the case of the 1st Larsen and Toubro Ltd. (supra) that there cannot be a sale in respect of construction undertaken prior to agreement with the buyer. 87. Thus the legislative intent is to impose tax on construction activity undertaken by a supplier at the behest of or pursuant to contract with the recipient. There is no intention to impose tax on supply of land in any form and it is for this reason that it is provided in the Schedule III to the GST Acts that the supply of land will be neither supply of goods nor supply of services." ....