The Hon’ble High Court of Tripura vide its order dated 04.04.2023 in the matter of M/s SR Constructions Vs. Union of India And Ors. in W.P. (C) – 399 of 2022, held that the assessee is engaged in providing Works Contract Services under a contract for construction of building of a Hotel wherein transfer of property in goods is involved in the execution of such contract and the services have been provided to owner of the hotel and not for its own. It is clear that the assessee has fulfilled all conditions of Works Contract and thus, would be entitled to take Input Tax Credit on the Goods and Services being utilized for providing the taxable work contract services.
The Petitioner filed the writ petition before the Hon’ble High Court challenging the legality and validity of the order dated 01.02.2022 the Additional Commissioner (Appeals), CGST, Central Excise and Customs, Guwahati. i.e., the appellate authority.
Facts of the Case: –
- That the petitioner is a construction company and had a contract with the M/s Hotel Polo Pvt. Ltd. and constructed a hotel at Agartala. In the process of construction, they procured materials and also took the services of Sub-contractors.
- That the petitioner for the purpose of providing inward output service of works contract service, the petitioner receives inward supply of various goods and services on payment of GST. The taxes were duly paid and returns were filed, which made it entitled to Input Tax Credit (ITC) and accordingly the amounts have been remitted by the Petitioner.
- The Respondents raised a demand of Input Tax Credit against the petitioner and a show cause notice was issued to the petitioner on 30.09.2019. The petitioner filed its explanations and orders have been passed.
- Aggrieved thereby, the petitioner filed an appeal before the appellate authority and vide Order-in-Appeal No.07/GHY (A)/Addl. Commr/CGST-AGT/2022 dated 01.02.2022, the appellate authority confirmed the order dated 13.10.2020 passed by the adjudicating authority.
Petitioner’s Submissions: –
- It is the case of the petitioner that the demand on the ground that such ITC availed on works contract service for supply of construction of an immoveable property was in violation of Section 17(5) of CGST is incorrect and the respondents are not entitled to collect the taxes under the Input Tax Credit since the credit has to be given under the Act.
- That the Appellate Authority in the impugned order nowhere stated any reason so as to hold that the petitioner is not entitled to avail ITC on works contract service. Rather, it has been observed that ‘ITC on works contract service i.e., sub-contractor will charge GST in the tax invoice raised on the main contractor. The main contractor will be entitled to take ITC on the tax invoice raised by his sub-contractor. Therefore, ITC is not applicable to the petitioner in respect of subject works contract services for construction of a hotel building and amenity block.’ Such an observation is devoid of any logic.
- The respondents have proposed to deny ITC amounting to Rs.1,42,33,194/-, availed on works contract services for construction of immovable property, on the ground that such availment is in violation of 17(5)(c) of the CGST Act. Further, it is submitted that a demand notice cannot be confirmed upon the assessee, without specifying the charges and notifying the exact statutory provisions, based on which such demand is proposed.
On the other hand, it was submitted on the behalf of the respondents that there is nothing unlawful in the impugned appellate authority order and the clear reading of the impugned order reveals that in the impugned adjudication order the charges have been specifically put down and provisions have been clearly mentioned. Hence, the contentions of the petitioner are baseless and the action of the respondents Tax authorities is correct and the petitioner is liable to pay the amount demanded under the Input Tax Credit.
- The Hon’ble High Court after considering the submissions made, facts of the case and perusal of Section 17 (Apportionment of credit and blocked credits) of the CGST Act, 2017 and more particularly Section 17(5) (c), found that it is clear that the petitioner has fulfilled all the conditions of work contracts as it is providing work contract services under a contract for construction of building of a Hotel wherein transfer of property in goods is involved in the execution of such contract.
- Further, it was found that Hotel Polo Pvt. Ltd. is an immoveable property and the petitioner has been providing works contract service to the owner of hotel and not for its own. The Petitioner would be entitled to take Input Tax Credit on the Goods and Services being utilized for providing the taxable work contract services.
- Lastly, it was found by the Hon’ble Court that the petitioner does not fall within the definition of Section 17(5) (c) of the CGST Act, 2017. Therefore, the demand raised on 30.09.2019 and the penalty imposed under Section 74(1) of the CGST Act,2017 is ultra vires, contrary to law and thus, the impugned order dated 01.02.2022, passed by the appellate authority affirming the order passed by the adjudicating authority on 13.10.2020, is liable to be set aside and quashed.
The Hon’ble Court with the above findings, allowed the writ petition by setting aside and quashing the impugned order date 01.02.2022.