Bombay High Court
Rajesh Real Estate Developers Private ... vs Union Of India on 5 February, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:2926-DB 914 WPL3736-24.DOC
Mohite
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally ORDINARY ORIGINAL CIVIL JURISDICTION
signed by
TRUSHA
TRUSHA TUSHAR
TUSHAR MOHITE
MOHITE Date:
2024.02.23
WRIT PETITION (L)NO.3736 OF 2024
12:42:15
+0530
1. Rajesh Real Estate
Developers Private Limited,
Registered Office: 139, Seksaria Chambers,
2nd Floor, Nagindas Master Road, Fort,
Mumbai - 400023
2. Shri Raghava Reddy
Authorized Signatory,
139, Seksaria Chambers,
2nd Floor, Nagindas Master Road, Fort,
Mumbai - 400 023 ... Petitioners
Versus
1. Union of India,
through the Secretary,
Ministry of Finance, North Block,
New Delhi.
2. State of Maharashtra
Through the Secretary
Ministry of Finance
Department of Revenue
Mantralaya, Mumbai - 400001
3. Assistant Commissioner of State Tax,
MUM-VAT-D-812, Kalbadevi-610,
Nodal Division-01, H-3, 5 Floor,
New Building, GST Bhavan, Mazgaon,
Mumbai - 400 010 ...Respondents
Mr.Vishal Agrawal a/w Mr.Rishabh Jain i/b M/s.TLC Legal LLP for the
Petitioner
Mrs.Jyoti Chavan, Addl.G.P. a/w Mr.Himanshu Takke, A.G.P. for the
State
_______________________
CORAM: G. S. KULKARNI &
FIRDOSH P. POONIWALLA, JJ.
Page 1 of 7
5th February, 2024
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914 WPL3736-24.DOC
DATED: 5th February, 2024
_______________________
ORAL JUDGMENT: (PER FIRDOSH P. POONIWALLA, J.)
1. Rule. Rule made returnable forthwith.
2. Heard finally by consent of the parties.
3. Petitioner No.1 is a Real Estate Developer registered with GST
Department Vide Notification No.3/2019 dated 29th March 2019 a new
scheme was introduced for the real estate sector. Under the new scheme, for
affordable housing properties effective GST rate is 1% without Input Tax
Credit ("ITC) and for residential properties outside affordable segment
effective GST rate is 5% without ITC, as opposed to the old regime (i.e. before
1st April 2019) whereunder the GST rate for affordable and residential
properties other than affordable were 8% and 12% respectively. For under
construction projects, developers were given an option to choose old rates
(effective rate of 8% or 12% with ITC) or new rates without ITC. This option
was only for under construction projects and had to be exercised within a
prescribed time limit. However, in case where a promoter or builder did not
exercise the option in the prescribed form, it would be deemed that the builder
had opted for new rates in respect of ongoing projects. For new projects, only
new rates were applicable and there was no option for availing ITC.
4. With effect from 1st April 2019, the developer paying tax under new
regime, in terms of Notification No.3/2019 dated 29 th March 2019, was
required to reverse ITC pertaining to unsold units as on 31 st March 2019 of
outgoing projects as per Rule 42 of the CGST Rules, 2017 ("CGST Rules"). In
case, the developer had already utilised ITC pertaining to unsold units before
29th March 2019, the developer was required to make payment in cash.
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914 WPL3736-24.DOC
5. The new GST scheme for realtors intended to disallow the developers to
claim ITC on unsold units post 31 st March 2019 or for future projects as under
the new scheme a unit sold post 31 st March 2019 was to be sold at the
concessional rate of GST. Thus, it is the case of Petitioner No.1 that it would
be immaterial as to for which period Petitioner No.1 had reversed the ITC or
made payment of GST for such ITC utilised on unsold units as on 31 st March
2019.
6. Petitioner No.1 had not availed option to pay GST under the old regime.
In the circumstances, Petitioner No.1 was entitled to concessional rate of tax
without ITC for new projects and unsold units of existing projects post 1 st April
2019. Further, Petitioner No.1 was required to reverse ITC, in terms of the
said Notification No.3/2019, pertaining to unsold units as on 31 st March 2019
as per Rule 42 of the CGST Rules. By the following DRC 03 Forms,
Petitioner No.1 had reversed ITC in the following manner.
Sr.No. Date of DRC 03 ARN Amount
1. 02.082022 AD270822001276A 13,482,448/-
2. 26.08.2022 AD270822025540B 30,480,886/-
3. 01.09.2022 AD270922000492B 15,647,968/-
7. With respect to DRC 03 dated 2nd August 2022, Petitioner No.1 had
correctly shown that the reversal was made for Financial Year 2018-19. Further,
for DRC 03 dated 26th August 2022 and 1st September 2022, Petitioner No.1
had inadvertently shown the year as Financial Year 2019-20, instead of
Financial Year 2018-19.
8. It is the case of the Petitioners that this was a bonafide clerical error and
that the narration in the said DRC 03 Forms substantiated that the same was
Financial Year 2018-19. It is further the case of the Petitioners that, in
Financial Year 2019-20, Petitioner No.1 was not entitled to avail of any ITC,
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and had not availed of any ITC, and consequently, there could not be any
question of reversal of ITC for Financial Year 2019-20.
9. It is further the case of the Petitioners that audit was conducted on the
records of Petitioner No.1 for the period 2018-19. During the course of the
audit, Petitioner No.1 was informed that it was liable to reverse ITC of
Rs.29,030,949/- under Rule 42 of the CGST Rules as per the said Notification
No.3/2019. It was further alleged that Petitioner No.1 had short paid liability
under Reverse Charge Mechanism of Rs.4,76,570/-.
10. Petitioner No.1, by a letter dated 18 th October 2022, informed the
Department that it had complied with the conditions laid down in Notification
No.3/2019 and had reversed ITC / made payment of GST pertaining to unsold
units on 31st March 2019 as per Rule 42 of the CGST Rules. Details of Form
DRC 03 were also submitted by Petitioner No.1. It was submitted that all
payments were made for the Financial Year 2018-19, and, accordingly,
requested the Department to consider the same for the said period.
11. Without considering the request of Petitioner No.1, Final Audit Report
dated 7th November 2023 was issued to the Petitioner No.1 demanding
Rs.2,95,07,519/- [Rs.29,030,949/- + Rs.4,76,570/-] along with interest.
12. The Petitioner again, by a letter dated 1 st December 2023, submitted
that it had complied with the conditions laid down in Notification No.3/2019
and had accordingly reversed ITC / made payment of GST pertaining to
unsold units as on 31st March 2019 as per Rule 42 of the CGST Rules. Details
of the payment were again shared with Respondent No.3 and Respondent
No.3 was requested to consider the said payment as pertaining to Financial
Year 2018-19 and, accordingly, drop the demand.
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13. However, without considering the said submissions of Petitioner No.1,
Show Cause Notice dated 20th December 2023 was issued by Respondent
No.3 advising Petitioner No.1 to pay the duty of Rs.2,95,07,519/- along with
interest on or before 29th January 2024, failing which an Order-in-Original
would be issued under section 73 of the CGST Rules. The said Show Cause
Notice acknowledged the payment made by Petitioner No.1 but contended
that the payments made through Form DRC 03 were for financial year 2019-
20 and refused to consider the same for the Financial Year 2018-19.
14. Thereafter, the Petitioner, by a letter dated 22 nd December 2023, which
was emailed on 23rd December 2023, requested Respondent No.3 to allow the
Petitioner No.1 to amend / rectify the bonafide mistake made by it in Form
DRC 03 in mentioning the Financial Year.
15. However, Respondent No.3, by an email dated 10 th January 2024,
refused Petitioner No.1's request to amend Form DRC 03 and informed
Petitioner No.1 that there was no such facility to amend Form DRC 03 on the
GST portal and, accordingly, directed Petitioner No.1 to again pay the dues or
reverse the ITC for the Financial Year 2018-19 and claim refund of ITC
reversed inadvertently for the Financial Year 2019-20.
16. Being aggrieved by the said actions of the Respondents, the Petitioners
have filed the present Petition.
17. In our view, the facts narrated above clearly show that the Petitioner
No.1 has made a bonafide mistake in Form DRC 03 dated 26 th August 2022
and 1st September 2022. Petitioner No.1 had inadvertently shown the year as
Financial Year 2019-20 instead of Financial Year 2018-19. As correctly
submitted by Petitioner No.1, the fact, that the there was a bonafide mistake,
was clear from the narration in the said Form DRC 03. Further, as rightly
submitted by Petitioner No.1, in Financial Year 2019-2020, Petitioner No.1
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was not entitled to avail of any ITC and had not availed of any ITC, and,
consequently, there was no question of ITC for Financial Year 2019-20 being
reversed by Petitioner No.1.
18. The Division Bench of this Court, in Star Engineers (I) Pvt.Ltd. vs.
Union of India and Ors. in Writ Petition No.15368 of 2023 (of which one of
us, G.S.Kulkarni, J., was a member), has held that a bonafide inadvertent error
in furnishing details in a GST return need to be recognised, and ought to be
permitted to be corrected by the Department, when, in such cases, the
Department is aware that there is no loss of revenue to the Government. This
Court further held that such free play in the joints requires an eminent
recognition and that the Department needs to avoid unwarranted litigation on
such issues, and make the system more assessee friendly. Paragraphs 20 to 22
of the said Judgment read as under:
"20. On the interpretation of the provisions as made by us and the
common thread running through the decisions as noted above, it would
lead us to observe that the GST regime as contemplated under the GST
Law unlike the prior regime, has evolved a scheme which is largely
based on the electronic domain. The diversity, in which the traders and
the assessees in our country function, with the limited expertise and
resources they would have, cannot be overlooked, in the expectation
the present regime would have in the traders / assessees complying with
the provisions of the GST Laws. There are likely to be inadvertent and
bonafide human errors, in the assessees adopting themselves to the new
regime. For a system to be understood and operate perfectly, it certainly
takes some time. The provisions of law are required to be alive to such
considerations and it is for such purpose the substantive provisions of
sub-section (3) of Section 37 and sub-section (9) of Section 39 minus
the proviso, have permitted rectification of inadvertent errors.
21. We may also observe that the situation like in the present case, was
also the situation in the proceedings before the different High Courts as
noted by us above, wherein the errors of the assessee were inadvertent
and bonafide. There was not an iota of an illegal gain being derived by
the assessees. In fact, the scheme of the GST laws itself would
contemplate correct data to be available in each and every return of tax,
being filed by the assessees. Any incorrect particulars on the varied
aspects touching the GST returns would have serious cascading effect,
prejudicial not only to the assessee, but also to the third parties.
22. It is considering such object and the ground realities, the law would
be required to be interpreted and applied by the Department. This
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necessarily would mean, that a bonafide, inadvertent error in furnishing
details in a GST return needs to be recognized, and permitted to be
corrected by the department, when in such cases the department is
aware that there is no loss of revenue to the Government. Such freeplay
in the joint requires an eminent recognition. The department needs to
avoid unwarranted litigation on such issues, and make the system more
assessee friendly. Such approach would also foster the interest of
revenue in the collection of taxes."
19. Applying the ratio of the aforesaid judgment, in the present case also,
since the error made by the Petitioner No.1 is a bonafide error, the Department
is required to be directed to permit Petitioner No.1 to rectify the said error. In
these circumstances, we have no doubt that this Petition is required to be
allowed.
20. Accordingly, we pass the following orders:
a .The Respondents are directed to permit Petitioner No.1 to
amend Form No.DRC 03 dated 26th August 2022 and 1st
September 2022 to reflect the year as Financial Year 2018-19
instead of Financial Year 2019-20, either through online or
manual means within a period of four weeks from the date of
intimation of this order.
b. Rule is made absolute in the aforesaid terms.
c. Petition is disposed of.
d. In the facts and circumstances of the case, there will be no
order as to costs.
(FIRDOSH P. POONIWALLA, J.) (G. S. KULKARNI , J.)
5th February, 2024
