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.
In its deliberation, the tribunal emphasized that service tax is levied only on taxable services, and in the absence of services provided, no tax can be imposed. The cancellation of bookings and subsequent refunding of amounts, including service tax, indicated the non-provision of services by Kanakia Spaces. Therefore, the tribunal ruled in favor of the appellant, allowing the refund of the excess service tax paid.
The decision by the CESTAT Mumbai to allow the refund of service tax on cancelled flat bookings provides clarity on the treatment of such transactions under the GST regime. It reaffirms the principle that tax should be levied only on services actually provided, offering relief to real estate developers facing similar situations.
FULL TEXT OF THE CESTAT MUMBAI ORDER
All these 03 (three) appeals have been filed assailing a common order impugned before me being Order-In-Appeal No. NA/GST/A-III/MUM/273-275/2019-20 Dated 11.03.2020 passed by the Commissioner (Appeals-III), GST & CX, Mumbai. Hence, all the three appeals are taken up together for hearing and disposal.
2. Facts of the case in brief are that the Appellant is in the business of providing construction of residential complex service. The Appellant have received booking in respect of the apartments being constructed by it. The Appellant had accordingly collected the booking amount and had discharged the applicable Service Tax in respect of such booking amount so collected. Subsequently, due to various reasons, 29 allottees decided to cancel their respective bookings with the Appellant. Accordingly, the Appellant refunded the advance amount/booking amount so paid by such allottees alongwith the service tax amount collected and deposited by the Appellant with the Revenue. Details of which are mentioned below:-
Refund filed on 06.03.2018
