M/S Ashoka Developers And Builders Limited vs. State Of Telangana

This Tax Revision Case is filed under Section 34(1) of the Telangana Value Added Tax Act, 2005, read with Rule 46 of the Telangana Va-lue Added Tax Rules, 2005, challenging the impugned order dated 29.I2.2O23 passed in T.A. No. 71 of 2O2l on the hle of the Telangala Value Added Tax Appeltate Tribunal, Hyderabad (herein referred as, the Tribunal').

The brief facts of the case are that the petitioner is a dealer registered under the provisions of the Telangana Value Added Tax Act, 2OO5 (for short, the TYAT Act\, uide TIN: 36467 145490, on the rolls of the Commercial Tax Offrcer (CTO), Basheerbagh Circle, Hyderabad. The petitioner has been engaged in the business of execution of works contracts i.e., construction and sale of flats and villas and has been paying the applicable taxes regularly in terms of Rule 17(a) (e) and (i) of the TVAT Rules, the petitioner has to pay tax at the time of registration of the flats/villas' PS(, "rd rvNf,, -/ TREVC 5 2025

The petitioner initia_lly objected to the proposa_l to tax the advances receir-ed lrom the prospective purchasers as taxable turnol.er and there was no liability to pay tax on such advances. Subsequently, in view of the introduction of the Goods and Services Tax Act with effect from Ol.O7.2OLT and in order to avoid the cascading effect of taxes, and due to the omission of Rule l7g) (e\ and (i) of the TVAT rules with effect from 01.07.2017, the petitioner opted to pay tax on the advances received from prospective buyers of the flats for the assessnrent period from October,2016 to June, 2017. Accordingly, the Assistant Commissioner, Basheerbagh Circle,, thereafter passed an order, dated 21.03.2018, levying tax of Rs.43,37,094/- on the advances received. As thc petitioner has no grievance and in fact, it came foru,ard to pa1. the tax, as such the petitioner did not chalienge thc same

Thereafter, the Assessing Authority issued a show cause notice dated 24.03.2018 proposing to levy penalty on the ground that there is under declaration of tax to a tune of l Rs. 43,37,09 4/_. The petitioner subn 'ffir\:*i titted a reply stating that though there was no liabiiity to pay tax on the advances received, the pedtioner voluntarily paid the same and further stated that there was no question of suppression/under_declaration of turnover. However, without properly considering the objections raised by the petitioner, the assessing authority passed an order dated 30'05.2019 ler.ying penalty in terms of section s3(I) (ii) of the TVAT Act@ 2S%. ChaJlenging the order of penalty, the petitioner preferred an appeal before the Appellate Deputy Commissioner, Secunderabad, which was dismissed on 15.12.2O2O, against which the petitioner filed further appeal before the learned Tribunal, arrd the same was also dismissed on 29.12.2023. Aggrieved b, present revision is fired. oo-'vvuu uy the same' the 6. Learned counsel for the petitioner filed the present revision on the glound that the learned Tribuna.l ought to have seen that the provisions of Rule 17|i,) (e)and (i) were TREYC 5 2025 omitted u.ith effect from 01.07.2017 and prior to that, tax has to be paid only either at the time of registration of the flats/villas or along with the return hled for the month of sa-le and hence there is no under-declaration of tax. The learned Tribunal came to an erroneous conclusion that without considering the advances received from the prospective purchasers of the flats and the turnover and non-declaration o1' advances cannot be termed as under- declaration of turn.over as the liability to pay tax arises only when the goods are sold/transferred.

Learned counsel for the petitioner submitted that the learned Tribunal ought to have seen that the sale may or may not fructify and if the sa-le is not concluded, the advance has to be returned and hence the taxable event has not yet arisen at the time of taking advances since, there cannot be under declaration of tax when the petitioner itself requested to ler,y tax on the advances received upto June, TREYC 5 2025 2017. Hence, the penalty cannot be levied by the respondent.

Per contra, learned counsel for the respondent submitted that the assessment has been made in a fair and transparent maJlner a-fter affording adequate opportunity of hearing to the petitioner and the tax demand raised is justihed and sustainable in law. Therefore, the learned counsel for the respondent prays this Court to dismiss the present revision f,rled by the petitioner and to uphold the impugned assessment order dated 29.12.2023 as legal, valid and in accordance with law.

After hearing both the counsel, the following substantial question of law which would arise for consideration: "whether on the lacts and circumstances of the case, the leamed Tribunal is right in sustaining the orders of the authorities belorv specially after observing that the government intended to give the benefit ol input tax credit ilthe taxes are paid on advances by omitting the sub-clauses (e) and (i) of section 4 (7) with effect from 30.06.2017?" PS(. "/ d AlVf . "/ TREVC 5 2025 lO. It is pertinent to mention that as per the Rule 17(a)(e) and (i), whe rein it is specihcally mentioned that the dea-ler has the option to pay tax on a composition basis @ 4oh or 5o/o on 25'k of the tota,1 consideration or market value fixed for the stamp dut5,. The said situation would arise only when the transaction culminates or reaches the point of conclusion and the registration of the sale deed of the property. In view ol the same, it is clear that the tax has to be levied only after the conclusion of the saie deed, however, the said clause u,as omitted by way of amendment vide G.O.Ms.No. 124 dated 30.04 .2OlZ, as far as the present case is concerned, the assessment is in respect of the period from October 2016 to June 2017, which is prior to the date of no tifica.tion u,hich has came into effect from Ol.O7.2Ol7. Therefore, the Rule fig)(el and (i) is very much applicable to lhe petitioner,s assessment period.

The main grierrance of the petitioner is that the learned Tribunal has erroneously dismissed the appeai without

Additionalll,. the inrpugncd assessmcnt order suffers lrom the vicc of double nxation and procedural improprict_v. The State Registration Department already collects l% VAT at the time of registratiot.t ol con,r,evance docu ments and levying tax on the same consideration at the advance staqe would result in taring the same transaction trvice rvhich is impermissible under law. The petitioner has also demonstrated that pursLring thc statutory appellate remedv u'ould he f ile and causc undue financial hardship as it requires deposiring 12.5% of rhe disputed amount which the petitioner has not collectcd lrorn buvers atld canrlot reasonably be expected to pay. Moreover, rhere are reasonable grounds to believe that the assessntcnt rYas made at thc bchcst ol higher authorilies rendering thc appellate process bcfbr.e a subordinate authority inellective. I'hc respondent No.l has failed ro substantiate the allegations ol'suppression of transactions or non-maintenance of propcr records u,ith concrete er,idcncc. rrhcreas. the petitioner has maintained thar it has complied \\ith all starutor1,. requirements under the composition schcme.

In light ol the atbremcntioned reasons and considerlng the binding prccedcnr in Ornegir Shelters 1l,y Limitcd (supra), this Court holds thar rhc in.rpugned assessmenr order datcd Ol.l2.Z0O7, passed hy respondent No.l is conrrarr ro rhe larr and the binding Advance RLrlins The respondent \o.2 uas not leuallv justified in Ievying VA'l on advance arnounts rcccivcd by the petitioner from prospecti\c brr-vcrs prror to thc e\cculion and registration of sale deeds in cot'lrlaveution of thc bincling .4.dvancc Ruling dated 30.07.2006 and rhc propcr interprcration ot' Section .l(7xd) oi the APVAT Acr rcarl rvirh Rule l7(4) of thc ApVAT Rules and thus the assessment ordcr date(l ()1.)2.2007. passcd b1, respondent No.2, is herebr set asidc , quashcd.

The facts of the above mentioned judgment are identical with the present case. The levy of tax under the TVAT Act on advances received prior to execution of sale deeds is clearly contrary to the binding Advance Ruling dated 3O.07.2006, as already interpreted by this Court. L4. It has to be seen that in the absence of any sale or tralsfer of property in goods does not arise any liability to pay tax, when there is no taxable event, the question of payment of tax does not arise at all. Consequently, the levy of penalty under Section 53(1) (ii) of the TVAT Acl @ 25"/o rs wholly unsustainable in law and in view of the hndings recorded in the aforesaid judgment and in the judgment of Omega Shelters Private Limited (cited 2od supraf, this Bench is of the considered opinion that the impugned order passed by the learned Tribunal cannot be sustained and is liable to be set aside.

With the aforementioned reasons, this Bench holds that the substantial question o:yLw is answered against the Page 1l of 11 TRLVC 5 2025 respondent and in favour of the petitioner ald consequently, the prr:sent Tax Revision Case deserved to be allowed.

Accordingly, this Tax Revision Case is a,llowed setting aside the impugned ,trder dated 29.12.2023 passed in T.A. No. 71 of 2O2l on the hle of the Telangana Value Added Tax Appellate Tribunal, Flyderabad. There shall be no order as to costs. As a sequel, miscellaneous applications, if any pending, sha-ll stand closed. . B.SATYAVATHI INT REGISTRAR ,// SECTION OFFICER To,

Two CCs to the Government Pleader for State Tax, High Court for the State of Telangana at Hyderabad (OUT) 4 The Assistant Commissioner (ST), Basheerbagh Circle,Abids Division , Hyderabad 5 One CC to Sri J V Rao, Advocate IOPUCI 6 Two CD Copies SrL,l)SI 4;ffe