The Telangana Appellate Authority for Advance Ruling (AAAR), in the case of Maddi Seetha Devi, In re [Order-in-Appeal No. AAAR/03 of 2025 dated February 20, 2025], has ruled that neither the Advance Ruling Authority (AAR) nor the AAAR possess jurisdiction to determine taxability under the Finance Act, 1994, which governed Service Tax prior to GST. The case involved a landowner who entered a Joint Development Agreement in 2016 and sought clarification on Service Tax/GST liability on the transfer of development rights. The AAR had issued a ruling concerning GST liability under the CGST Act, 2017. Upon appeal, the landowner introduced new grounds, including whether GST applied when consideration was received before the CGST Act and whether GST was required if the developer had already paid GST on the entire construction value. The AAAR held that its jurisdiction, defined under Section 97(2) of the CGST Act, is limited to GST matters. Citing a Supreme Court precedent, the AAAR also determined that it could not entertain new grounds raised for the first time in the appeal, as its power under Section 101(1) of the CGST Act is to confirm or modify the ruling appealed against, not to address entirely new issues.
Facts:
Ms. Maddi Seetha Devi (“the Appellant”), an individual landowner, holding a parcel of land to the extent of 20 acres at Hyderabad and has entered into Development Agreement with M/s PHL, (“Developer”). The Appellant entrusted her land to the Developer by way of Joint Development Agreement (“JDA”) in the year 2016. As per the agreement, Developer will hand over 27% of the developed property, which included 27% of car parking spaces, common areas along with 27% of all other amenities and benefits) to the Appellant.
Hence, the Appellant sought clarity on two issues before AAR:
i. Whether the transfer of land or transfer of development rights (“TDR”) to the Developer by the Appellant was taxable under Notification No. 04/2018-CT dated January 25, 2018 and as per the clarifications introduced issued after GST and prior thereto towards the construction of flats in residential complex to be taken up by the developer for landowner?
ii. Whether the liability to pay GST or service tax as applicable arises on the Developer immediately on receipt of development rights or immediately on conveyance of the flats to be constructed by way of an allotment letter?
The AAR passed a ruling dated July 13, 2022 (“the Impugned Order”) that the TDR by the landowner is consideration received by such developer for supply of construction services and the liability to pay GST by the developer arises at the time of transfer of possession or right in the constructed flats and not at the time of receipt of development rights.
Hene, aggrieved by the Impugned Order, the Appellant filed the present appeal on the two grounds:
i. Whether GST is applicable when consideration for the service was received prior to enactment of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), in the light of clause (b) of Section 142 (11) of CGST Act?
ii. Whether GST is required to be paid when the developer has paid GST on the entire value of construction complex including the cost incurred for construction of flats to the landowner?
Issue:
Whether AAR nor AAAR have jurisdiction to decide on the taxability under Finance Act, 1994?
Held:
The Telangana AAAR, in Order-in-Appeal No. AAAR/03-2025 held as under:
- Observed that, AAR or AAAR are constituted under the CGST/State Goods and Services Tax Act, 2017 (“the SGST Act”) to provide clarification on matters under GST law made thereunder. Section 97(2) of the Chapter XVII of the CGST Act provides for spectrum of issues on which the advance ruling can be sought for. Neither the AAR nor this AAAR have any jurisdiction to decide on the taxability under Finance Act. Therefore, the attempt of the Appellant to seek a ruling to the effect that, in the facts of this case, the supply of TDR attracted Service Tax cannot be countenanced.
- Relied on, the case of Commissioner of Cust & C Ex, Goa vs Dempo Engineering Works Ltd (reported in 2015 (319) ELT 359 (SC)), wherein the Hon’ble Supreme Court held that Tribunal cannot allow an appeal on new grounds when the same were neither raised in reply to the show cause notice nor were argued before the Adjudicating Authority.
- Held that, the Appellant raised an issue which was not raised before the AAR. In terms of Section 101(1) of CGST Act, the AAAR can, after giving the parties to the appeal or reference an opportunity of being heard, pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to. Further, it is not open to the Appellant to introduce new grounds in an appeal when admittedly these grounds were not raised before the original authority.
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