Facts of the Case

The petitioners challenged the appellate order dated 31.03.2021 passed under the CGST Act before the Calcutta High Court.

Two principal issues arose before the Appellate Authority:

  1. Whether the recipient of goods or services is entitled to claim refund of excess GST paid.
  2. Whether GST was payable on the purchase of a building from M/s Eveready Industries Limited.

The Appellate Authority decided the first issue in favour of the petitioners by holding that the recipient could seek refund of excess tax. However, regarding the second issue, it held that the transaction was taxable under GST because the property purchased was a prefabricated building classified under HSN Code 9406 and not a completed building exempt under Schedule III of the CGST Act. The petitioners challenged this finding before the High Court.

Issues Involved

  1. Whether the purchase of a prefabricated building after completion certificate falls outside the ambit of GST under Schedule III of the CGST Act.
  2. Whether GST paid on the purchase of such building was refundable.
  3. Whether the Appellate Authority committed any jurisdictional or procedural error warranting interference under Article 226 of the Constitution.

Petitioner’s Arguments

  • The petitioners contended that the building had been purchased after issuance of the completion certificate.
  • Since the sale of a completed building is covered under Schedule III of the CGST Act, the transaction should neither be treated as supply of goods nor supply of services.
  • Consequently, GST was not legally payable and the tax collected by the supplier was liable to be refunded.
  • The petitioners relied upon Section 7 of the CGST Act read with Schedule III to contend that the transaction was outside the scope of GST.

Respondent’s Arguments

The GST Department submitted that:

  • The petitioners failed to produce the sale agreement and completion certificate before the appellate authority.
  • No documentary evidence was produced to establish that the entire consideration had been paid after issuance of the completion certificate.
  • The purchase invoice clearly described the subject matter as a Prefabricated Building classified under HSN Code 9406.
  • The supplier had supplied goods and not construction services.
  • A prefabricated building is classifiable as goods under GST and therefore does not qualify for exemption under Schedule III.
  • Accordingly, GST was correctly levied and collected.

Court Order / Findings

The Calcutta High Court dismissed the writ petition and upheld the appellate order.

The Court observed that:

  • The Appellate Authority had examined the matter in detail and recorded cogent reasons.
  • The petitioners failed to produce essential documents like the sale agreement and completion certificate.
  • The purchase invoice specifically classified the item as a Prefabricated Building (HSN 9406).
  • A prefabricated building manufactured in factory and assembled at site constitutes supply of goods.
  • Such goods are not covered under Schedule III of the CGST Act.
  • Since the supplier had supplied goods and not completed immovable property or construction services covered under the exemption, GST was correctly leviable.
  • The Court further held that no jurisdictional error, violation of natural justice or procedural irregularity was demonstrated.
  • Therefore, no interference under Article 226 was warranted and the writ petition was dismissed.

Important Clarification

  • Sale of a completed building may fall under Schedule III only if statutory conditions are fulfilled.
  • Merely claiming that consideration was paid after completion certificate is insufficient unless supported by documentary evidence.
  • Purchase of a Prefabricated Building classified under HSN Code 9406 constitutes supply of goods and remains taxable under GST.
  • Proper classification of the transaction and supporting documentation are crucial for claiming exemption under Schedule III.
  • High Courts ordinarily will not interfere with well-reasoned appellate orders in the absence of jurisdictional error or violation of natural justice.

Sections Involved

  • Section 7 of the Central Goods and Services Tax Act, 2017
  • Section 7(2) of the CGST Act
  • Schedule II, Paragraph 5(b)
  • Schedule III, Paragraph 5
  • Article 226 of the Constitution of India
  • HSN Code 9406 (Prefabricated Buildings)

Link to download the order - https://www.mytaxexpert.co.in/uploads/1782896038_110compressed.pdf

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