2024 (8) TMI 232 - AAR - GST

Rectification of mistake - error apparent on the face of record or not - Classification of other charges received by the company from the customers of the flats - to be treated as consideration for the construction services, and will be classified under the HSN Code 9954 along with the main residential construction services or whether the same will he treated as consideration for independent services under the respective heads? - Rate of GST on such other charges . HELD THAT - Since, the Appellant have filed this application for rectification or. 28.06.2023, i.e., within the stipulated period of 6 months from the date of the Order. i.e.. 30.03.2023, we, at the outset, proceed to decide whether the error. being pointed out by the Appellant in the impugned order, is actually apparent on the face of the record, or not. The mistake to be rectified must be one that is apparent from the record, A decision on a debatable point of law or on a disputed question of fact is not a mistake apparent from the record. The plain meaning of the word apparent is that it must be something which appears to be so ex-facie that there cannot be any argument or debate in that regard. Thus, rectification of mistake does not envisage the rectification of an alleged error of judgment or a different interpretation. Since, it is not in dispute that the Appellant have collected execs tax from their customers, therefore, the Appellate Authority deemed it completely proper and legal that the said excess GST amount be refunded back to the customers from whom such excess amount have been collected by the Appellant. Such a ruling was made by the Appellate Authority in the interest of equity and justice of such customers from whom the Appellant had collected the said excess GST amount, thereby, seek to restore uniformity and parity among the flat buyers, irrespective of the residential projects and time. in which and during which, they are buying a or hate bought the residential apartments - it is crystal clear that there is no such error which is apparent from the face of record, which would warrant rectification under section 102 of the CGST Act, 2017. The Appellant will have to first refund the excess GST amount under question to their customers before they could file the refund claim to the tax authority so as to establish that the incidence of the tax claimed as refund had not been passed to any other person, thereby, ensuring the absence of the unjust enrichment in the refund claim. In view of the foregoing, the aforesaid proposal put forth by the Appellant is not legally viable, and hence, the same is not tenable.

Summary

Issues Involved:
1. Classification of "other charges" collected by the Appellant.
2. Rate of GST applicable on "other charges".
3. Direction to refund excess GST collected to customers.
4. Jurisdiction of the Appellate Authority in directing the refund.

Detailed Analysis:

1. Classification of "Other Charges":
The Appellant, engaged in the construction and sale of residential apartments, collects various additional charges such as electric meter installation, water connection charges, and legal fees, collectively referred to as "other charges". The initial ruling by MAAR on 27.08.2021 determined that these "other charges" would not be considered part of the construction services (SAC 9954) but as consideration for independent services under their respective heads.

2. Rate of GST on "Other Charges":
MAAR ruled that the "other charges" would attract an 18% GST rate as per Notification No. 11/2017-C.T. (Rate) dated 28.06.2017. However, upon appeal, MAAAR partially set aside this ruling. MAAAR determined that charges like water connection, electric meter installation, development charges, and legal fees, which are inextricably linked to the construction services, would attract a 12% GST rate, the same as the principal construction services. Other charges such as club house maintenance and advance maintenance were to be taxed independently at 18%.

3. Direction to Refund Excess GST Collected to Customers:
The Appellant was directed by MAAAR to refund the excess GST collected from customers. The Appellant contested this directive, arguing that they had collected and paid the GST to the exchequer as per the earlier binding advance ruling. They claimed that the directive to refund was beyond the jurisdiction of MAAAR under Section 97 of the CGST Act, 2017.

4. Jurisdiction of the Appellate Authority in Directing the Refund:
The Appellant argued that the directive to refund excess tax was outside the scope of Section 97 of the CGST Act, which outlines the questions on which an advance ruling can be sought. They also contended that the ruling exceeded the issues referred to MAAAR. However, the Appellate Authority held that the directive was within their discretionary power under Section 101 of the CGST Act, which allows them to pass orders as they deem fit based on the case's facts and circumstances.

Findings and Conclusion:
The Appellate Authority reviewed the application for rectification under Section 102 of the CGST Act, which allows rectification of any error apparent on the face of the record. They cited Supreme Court and Appellate Tribunal rulings, emphasizing that a mistake must be obvious and not debatable. The Authority found no apparent error in the original order directing the refund of excess GST to customers. They concluded that the directive was legally sound and within their jurisdiction, aiming to ensure equity and justice for the customers.

Moreover, the Authority rejected the Appellant's proposal to refund the excess GST to customers only after receiving a refund from the tax authorities, stating it was not legally viable under Section 54 (4) (b) of the CGST Act. The Appellant must first refund the excess GST to customers to establish that the tax incidence had not been passed on, thereby avoiding unjust enrichment.

Order:
The application for rectification of the error in the impugned MAAAR Order dated 30.03.2023 was rejected, affirming that there was no error apparent on the face of the record.