Case Law Details
Kanakia Spaces Reality Pvt. Ltd Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
The recent decision by the CESTAT Mumbai regarding the refund of service tax on cancelled bookings of flats by Kanakia Spaces Reality Pvt. Ltd. has significant implications for the real estate sector.
Kanakia Spaces Reality Pvt. Ltd., engaged in the construction of residential complexes, faced a challenge when several allottees decided to cancel their bookings. The company had collected service tax on these bookings and subsequently refunded both the booking amount and the service tax to the allottees. However, their refund claims were initially rejected by the revenue authorities.
The crux of the matter revolved around whether the cancellation of bookings constituted the non-provision of services under Rule 6(3) of the Service Tax Rules, 1944. Kanakia Spaces argued that since no services were provided due to the cancellations, they should be entitled to a refund of the service tax collected and deposited with the revenue.
The tribunal analyzed the provisions of the CGST Act, 2017, and previous rulings on similar matters. It observed that the refund applications were filed under Section 142(5) of the CGST Act, 2017, which allows for the refund of taxes paid under the erstwhile laws. The tribunal also highlighted the importance of timely filing of refund claims and the non-transfer of duty incidence to any other person.
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