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2019 (4) TMI 1500 - AAAR - GSTCENVAT Credit - Post GST Regime - cancellation of flat which is booked in pre-GST Regime and cancelled in post-GST Regime in two scenarios (i.e. cancelled with some retention amount or without any retention amount.) - Whether the Service Tax/VAT paid earlier can be claimed as credit or allowed as refund to property buyers? - challenge to AAR decision. HELD THAT - If flat was cancelled in pre-GST regime as per the aforesaid rule of Service Tax Rules, 1944 taxpayer allowed to avail credit of such excess service tax paid if an invoice is issued for which service is not provided - However, as transaction is cancelled in GST regime the reference of the transitional provision of GST law can be taken to determine the availability of deduction for taxes which were already paid under GST law. The cancellation of flat shall be equated with the downward revision of price to allow the benefit available to the builder in erstwhile law. Time limit should apply from date of cancellation as that is the trigger point (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). Availability of MVAT Paid in Pre-GST regime - HELD THAT - Section 142(1) of the MSGST Act is applicable in the given scenario to the extent of value of goods cancelled. (i.e. to the extent of VAT paid) - As per section 142(2) of the CGST Act, in case of downward revision of price a registered person can issued the credit note for the contract entered in Pre-GST regime and for the purposes of this Act such credit note shall be deemed to have been issued in respect of an outward supply made under this Act. The substantial benefit should not be denied to the applicant because of new law which assessee was eligible under pre-GST regime - it is settled position in law that procedural aspect should not take away substantial benefits of the assessee. Reading both the above provisions viz.- Clause (63) and (62) together, it is aptly clear that the question enumerated at (d) of Section 97(2), supra does not deal with the admissibility of the credit of taxes paid other than the taxes mentioned in the Clause (62) of Section 2 of the CGST Act, 2017, which has been cited herein above, In other words, Section 97(2), which encompasses the questions, meant for the ruling by the AAR or AAAR, does not deal with the input tax credit of the service tax or VAT paid under the existing laws. Since the Appellant has raised questions on the admissibility of the credit of the service tax and VAT paid under the pre-GST regime, it is held that neither AAR nor AAAR has the jurisdiction to pass any ruling on such matters. The ruling of AAR upheld.
Issues Involved:
1. Whether GST Input Tax Credit of Service Tax and State VAT paid while booking of flat is available to the Developer if cancelled in the GST regime. 2. Methodology to avail the Input Tax Credit on the said taxes paid. Issue 1: Availability of GST Input Tax Credit for Service Tax and State VAT Paid in Pre-GST Regime Analysis: The core issue revolves around whether the GST Input Tax Credit (ITC) is available for Service Tax and State VAT paid during the booking of flats in the pre-GST regime when such bookings are cancelled in the GST regime. The appellant, a developer, argued that the cancellation of flats should be treated as a downward revision of price, which is covered under Section 142(2) of the CGST Act. This section allows for the issuance of a credit note for contracts entered into before the GST regime, and the credit note is deemed to have been issued in respect of an outward supply made under the GST Act. The appellant contended that the cancellation of a flat is akin to a downward revision of price, which should allow for the credit of taxes paid in the pre-GST regime. They argued that the legal interpretation of "downward revision of price" should include cancellations, as the intention behind Section 142(2) is to allow credit for taxes paid when the contract terms are revised. The appellant also referenced Rule 6(3) of the Service Tax Rules, 1944, which allowed for the credit of excess service tax paid if the service was not provided. They argued that this principle should carry over into the GST regime, ensuring that the developer can claim credit for taxes paid on cancelled bookings. Issue 2: Methodology to Avail Input Tax Credit Analysis: The appellant proposed that the methodology for availing ITC should follow the provisions of Section 142(2) of the CGST Act. They argued that the issuance of a credit note for the cancelled bookings should be treated as an outward supply, allowing the developer to reduce their tax liability. The appellant also emphasized that the GST law should not be interpreted to restrict the rights available under the previous tax regime, including the right to claim credit for taxes paid on cancelled contracts. The appellant highlighted that the GST law does not explicitly restrict the inclusion of cancellations within the scope of downward price revisions. They referenced principles of statutory interpretation, arguing that the new law should not curtail the benefits available under the old law. They also cited various judicial precedents to support their position that the time limit for claiming refunds should be considered from the date of cancellation, not the date of tax payment. Discussion and Findings: The appellate authority reviewed the record, facts, and submissions made by both the appellant and the department. The authority noted that the questions raised by the appellant were not covered under the scope of Section 97(2) of the CGST Act, which lists the specific issues on which an advance ruling can be sought. Section 97(2) encompasses questions related to the classification of goods or services, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of tax liability, registration requirements, and whether a particular activity constitutes a supply. The authority concluded that the questions posed by the appellant regarding the admissibility of credit for Service Tax and VAT paid under the pre-GST regime do not fall within the scope of Section 97(2). Consequently, the authority held that neither the Advance Ruling Authority (AAR) nor the Appellate Authority for Advance Ruling (AAAR) has jurisdiction to pass any ruling on such matters. Order: The appellate authority upheld the ruling pronounced by the Advance Ruling Authority, stating that the questions raised by the appellant are not maintainable under the provisions of the CGST Act. The authority reiterated that the issues related to the credit of Service Tax and VAT paid under the pre-GST regime are beyond the jurisdiction of the AAR and AAAR. Conclusion: The appeal was dismissed, and the ruling of the Advance Ruling Authority was upheld, confirming that the questions posed by the appellant regarding the availability of GST Input Tax Credit for Service Tax and State VAT paid in the pre-GST regime are not maintainable under the CGST Act.
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