High Court Quashes Refund Rejection for Inverted Tax Structure; Directs Immediate Refund with Interest Relying on Precedent in Assessee’s Own Case

“5. Supply of Services: The following shall be treated

as supply of services namely:-

(a) xxxxxxxxxxxx

(b) Construction of a complex, building, civil structure or a part thereof, including the 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.

6. Composite supply: The following composite supplies shall be treated as supply of services namely:-

(a) Works contract as defined in clause (119) of Section 2 ;

(b) xxxx

Section 2 (119) of the CGST Act defines ‘Works Contract’ as under:

“Works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.”

“24. A close look at the Finance Act, 1994 would show that the five taxable services to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines ” taxable service” as “any service provided”. All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the values of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract.”

G.S.R. 706(E).- In exercise of the powers conferred by clause (xiv) of section 21 of the Union Territory Goods and Services Tax, 2017 (14 of 2017), read with subsection (3) of section 54 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council hereby notifies that no refund of unutilized input tax credit shall be allowed under clause (xiv) of section 21 of the said Union Territory Goods and Services Tax Act, read with sub-section (3) of section 54 of the said Central Goods and Services Tax Act, in case of supply of services 1 [of construction of a complex, building or a part thereof, intended for sale to a buyer, wholly or partly, where the amount charged from the recipient of service includes the value of land or undivided share of land, as the case may be, 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], 2017.

2. This notification shall come into force with effect from the 1st day of July, 2017.

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NOTES:-

1. Substituted vide Notification No.15/2023-Union Territory Tax (Rate) dated 19-10-2023 w.e.f. 20-102023 before it was read as,

“specified in sub-item (b) of item 5 of Schedule II of the Central Goods and Services Tax Act”