The Hon’ble High Court of Madras vide its order dated 24.04.2023 in the matter of M/s Avigna Properties Pvt. Ltd., Rep. By Its Managing Director S. Rajsekaran Vs. State Tax Officer, Chennai in W.P.Nos.6431, 6434, 6458, 6463, 6465, 6495, 6500, 6502, 6503 & 6507 of 2020 & 2708 of 2023 And WMP.Nos.7600, 7601, 7604, 7606, 7631, 7635, 7637, 7640, 7643, 7645, 7702, 7703, 7712, 7718, 7719, 7721, 7723, 7725 & 7726 of 2020 and 2809 & 2810 of 2023, held that the Notification dated 28.06.2017 would be applicable only in cases where the assessee is unable to supply the bifurcation of the construction as relatable to construction services or sale of land.  Further, the deeming fiction would not apply in cases where the assessee is in a position to supply the actual amount of the consideration received towards construction services and land cost.

The writ petitions have been filed before the Hon’ble High Court by the Company (Petitioner) which is engaged in property development and is a regular assessee under the provisions of the Tamil Nadu Goods and Services Act, 2017.

Facts of the Case: –

• That the business of the Company (petitioner) relates to supply of construction services as well as works contract relating to immovable property. It had launched a residential township project called ‘Avigna Properties' in Mahindra World City.
• That the petitioner was issued show cause notices for the periods 2017 to March, 2019 mentioning various points identified by the assessing authority as necessitated discussion and finalization. One of the issues, in common, related to alleged short payment of output tax qua supply of construction services.
• That the assessing authority referring to paragraph 2 of Notification 11/2017-Central Tax (Rate) dated 28.06.2017, held that in the case of supply of construction services involving the transfer of property in land or undivided interest in land, as the case may be, the value of supply services and goods shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land. And the value of land or undivided share of land shall, in such circumstances be deemed to be the development charges.
• The assessing authority also referred to paragraph 2 of the aforesaid Notification, wherein ‘total amount’ has been defined to mean the sum payable to consider the charge for services as well as transfer of land or undivided share of land. Thus, he directs the assessee to show-cause why output tax to the extent of the differential tax liability as per aforesaid Notification not be imposed along with interest under Section 50(1) and applicable penalty.
• The petitioner responding to the show cause notice, submitted that levy of GST on the sale value of land under the proportionate of 70:30 is unlawful and illegal. In this regard registration department is authority to levy stamp duty on the sale value of land. It is therefore submitted levy of GST on the proportionate of 70:30 of the total value of construction is unlawful.  That we have mentioned actual sale consideration of land and paid necessary stamp duty under the provisions of stamp duty act. Therefore, it is submitted that levy of GST as proposed by you is illegal and double levy i.e., GST to be levied as per 70:30 proportionate double time levy. One is Stamp duty for the same value, another is GST. This is totally against the provision of law of GST.
• However, the assessing authority concluded that the Notification does not permit distinguishing of sale of land and supply of construction services and in cases of composite construction 70:30 formula is liable to be adopted. The payment of stamp duty, according to him, is of no relevance in such circumstances.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the perusal of the entry 3 & paragraph 2 of notification 11/2017, was of the view that the Notification dated 28.06.2017 would be applicable only in cases where the assessee is unable to supply the bifurcation of the construction as relatable to construction services or sale of land.
• It was found by the Hon’ble Court that the methodology set out under the Notification as relatable to construction services, is for bifurcation of the total consideration by way of a deeming fiction, to arrive at the deemed amount pertaining to construction services and land costs. The deeming fiction would not apply in cases where the assessee is in a position to supply the actual amount of the consideration received towards construction services and land cost.
• That in the present case, it is its consistent stand that such evidences are available with it, though, as stated on the behalf of the respondent, such particulars do not appear to have been actually produced before the authority. The officer could well have sought such particulars instead of proceeding on the basis that the Notification would be applicable in all cases of property development.
• Further, in an event where the officer is of the view that the methodology adopted by an assessee is unsupported by hard evidences or the documents produced do not satisfies him and has not been made in an appropriate manner, which corresponds with business practices and costs, then he is at liberty to seek more particulars or to apply the deeming fiction as per the Notification, rejecting the method adopted by the assessee. He may not however proceed on the basis that the formula as per deeming fiction is the only method of assessment in such cases.
• In view of the aforesaid discussion, it was found by the Hon’ble Court that the view taken by the authority is not the correct view. Thus, the assessments under challenge in Nos.6431 and 6434 of 2020 are set aside.
• With respect to assessments in other writ petitions, all assessments have been made under Section 62 of the Act on the ground that the petitioner was a non-filer. There is nothing unexpected that at the time the assessments were made, the petitioner had not filed returns of income.  Though, during the pendency of the writ petitions, the returns have been filed by the petitioners.
• Thereafter the Hon’ble Court referring to Notification No. 6 of 2023, found that if the returns were filed on or before 30.06.2023, orders of assessment passed under Section 62(1) shall be deemed to have been withdrawn. Thus, orders impugned in W.P.Nos.6458, 6463, 6465, 6495, 6500, 6502, 6503 & 6507 of 2020 stand withdrawn and these writ petitions are allowed.

The Hon’ble Court with the above findings, set aside the assessments impugned in WP.Nos.6431 and 6434 of 2020 and allowed the other writ petitions as the order of assessments deemed to be withdrawn.  Further, it was directed that the petitioner would appear before the respondent on 05.05.2023 at 10.30 a.m. with all records in support of its turnover.  The orders of Assessment would be passed after hearing the petitioner and considering the material submitted, for all period in question and in accordance with law.