Commissioner CGST Vs Skylink Construction Private Limited (CESTAT Delhi)
CESTAT Dismissed Revenue Appeal Holding Refundable Deposits and Sale of Self-Owned Property Not Taxable
The CESTAT Delhi dismissed the Revenue’s appeal and affirmed the Order-in-Original, upholding the dropping of service tax demands on ₹3.61 crore treated by the Department as advances for construction services and ₹68.33 lakh relating to the sale of 300 Meerut Development Authority flats. The Tribunal held that the amounts received were refundable security deposits supported by agreements, customer-wise repayment details, balance sheets, bank statements and other records, and that, since no taxable service had been rendered, the refundable advances did not constitute taxable consideration. It also rejected the Department’s contention that classification of the amounts under “Current Liabilities” in the balance sheet altered their legal character. On the issue of the Meerut Development Authority flats, the Tribunal found that the assessee had acquired ownership before resale and that the subsequent transaction was a sale of its own immovable property, not a taxable service. The Tribunal also upheld the benefit of cum-tax value under Section 67(2) and accepted the completion certificate after noting that the original certificate had been produced, verified and returned during adjudication.
Brief facts:
In a significant judgment affirming foundational principles of indirect tax, CESTAT New Delhi ruled in Commissioner CGST v. M/s Skylink Construction Pvt. Ltd. that balance sheet entries placing receipts under “Current Liabilities” cannot create service tax liability where amounts are refundable security deposits. The Hon’ble Tribunal also held that resale of self-owned property constitutes transfer of immovable property, outside the tax net. This article analyses the ruling’s legal nuances and its practical applicability under GST.
