Refund of service tax to flat owners-SLP admitted against recent judgment of Delhi High Court directing Commissioner to make refund within 4 months
ABCAUS Case Law Citation:
ABCAUS 2720 (2019) (01) SC
The Hon’ble Delhi High Court, in 2016, had declared Section 65(105)(zzzh) of the Finance Act 1994 as unconstitutional.
In that case, the contention of the Petitioners was that their agreement with the builder is a composite contract for purchase of immovable property and contend that in absence of specific provisions for ascertaining the service component of the said agreement, the levy would be beyond the legislative competence of the Parliament.
The Hon’ble High Court was called upon to answer the question as to whether the consideration paid by flat buyers to a builder/promoter/developer for acquiring a flat in a complex, which under construction/development, could be subjected to levy of service tax?
In the said judgment the Hon’ble High Court had also directed that the amounts collected from the individual flat owners had to be refunded and passed appropriate directions.
Subsequent to the passing of the above judgment, apart from contesting the same before the Hon’ble Supreme Court, the Central Government, vide Finance Act, 2017 amended the Rule 2A of the Service Tax (Determination of Value) Rules, 2006 with retrospective effect allowing charge if service tax on under-construction apartment booked even before July, 2012.
However, in a recent judgment again, the Hon’ble High Court following its earlier judgment of 2016 (which is pending in appeal before the Apex Court) ordered the Commissioner of Service Tax/GST to ensure refund within 4 months.
In the instant recent case, the petitioners had challenged the amount collected towards service tax for construction of residential flat which was sought to be subjected to service tax levy under Section 65(105)(zzzh) of the Finance Act, 1994 – as well as explanation to Section 65(105)(zzzzu) being ultra vires.
It was urged by the petitioner that she was entitled to identical relief as amount were collected on account of service tax charges under Section 65(105)(zzzh).
However, the Department has again challenged the said order of the High Court before the Hon’ble Supreme Court by way of filing a Special Leave to Appeal (SLP) which has been admitted by a Division Bench headed by Hon’ble the Chief Justice.