Karnataka High Court
B G Parameshwara vs Bengaluru Development Authority on 25 February, 2025
Author: M.G.S. Kamal
Bench: M.G.S. Kamal
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25th DAY OF FEBRUARY, 2025
BEFORE
THE HON'BLE Mr. JUSTICE M.G.S. KAMAL
WRIT PETITION No.51001 OF 2019 (BDA)
C/W
WRIT PETITION No.7028 OF 2022 (BDA)
IN WRIT PETITION NO.51001/2019
BETWEEN:
SRI. B G PARAMESHWARA
S/O LATE C GOPAL
AGED ABOUT 47 YEARS
R/AT NO.74, CHANNABASAVA NILAYA
III MAIN ROAD, II CROSS,
MPM LAYOUT, MALLATHAHALLI,
BENGALURU-560 056.
...PETITIONER
(BY SRI. MONESH KUMAR.,ADVOCATE)
AND:
1. BENGALURU DEVELOPMENT AUTHORITY
T CHOWDAIAH ROAD
KUMARAPARK WEST,
BENGALURU-560 020
REP BY ITS COMMISSIONER.
2. THE GST CENTRAL TAX
BASAVESHWARA BUILDING
CRESCENT ROAD
BENGALURU - 560 001.
(REP BY ITS COMMISSIONER)
3. THE GOVERNMENT OF KARNATAKA
2
COMMERCIAL TAXES DEPARTMENT GST
VANIJA THERIGE KARYALAYA
I MAIN ROAD, GANDHI NAGAR
BENGALURU - 560 009
(REP BY ITS COMMISSIONER)
...RESPONDENTS
(BY SRI. G.S. KANNAN SENIOR COUNSEL FOR
SRI. BASAVARAJA H.T., ADVOCATE FOR R1;
SRI. AKASH B. SHETTY., ADVOCATE FOR R2
SMT. B. SUKANYA BALIGA., AGA ROR R3)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE ENDORSEMENT ISSUED BY THE RESPONDENT DATED
23.08.2019 INDICATING THAT AS PER SL.NO.10 TO THE
ENDORSEMENT THE PETITIONER HAS TO MAKE GOOD A SUM
OF RS.5,28,000/- TOWARDS BALANCE GST FEE AND PRODUCE
THE CHALLAN FOR PROOF OF PAYMENT, COPY OF THE SAME IS
PRODUCED AS ANNEXURE-N AND ETC.
IN WRIT PETITION NO.7028/2022
BETWEEN:
1 . SRI K.S. KUNAL
S/O K R SHSIVANANDASWAMY
AGED ABOUT 28 YEARS,
RESIDING AT NO B-18-171 TYPE III
PHASE II, ALUR BDA LAYOUT
HUSKURU MAIN ROAD
OPP GOLDEN PALM RESORT
DASANAPURA,
BENGALURU - 562 123.
2 . SMT SUSHEELA A G
S/O K R SHIVANANDASWAMY
3
AGED ABOUT 61 YEARS,
RESIDING AT NO B-18-171, TYPE III
PHASE II, ALUR BDA LAYOUT
HUSKURU MAIN ROAD, OPP.
GOLDEN PALM RESORT
DASANAPURA,
BENGALURU - 562 123.
3 . SRI SHEKHARAPPA G. DODDAMANI
S/O GUDDAPPA DODDAMANI
AGED ABOUT 57 YEARS,
RESIDING AT NO C-37,
KPWD QUARTERS
NEAR SNEHA SADANA TRUST
JEEVAN BHIMA NAGAR
BANGALORE - 560 075.
4 . SMT SUNITHA D K
W/O SHEKHARAPPA G DODDAMANI
AGED ABOUT 47 YEARS,
RESIDING AT NO C-37,
KPWD QUARTERS
NEAR SNEHA SADANA TRUST
JEEVAN BHIMA NAGAR
BANGALORE - 560 075.
5 . SMT JAYASHREE BADRINARAYANA
W/O K V BADRINARAYANA,
AGED ABOUT 50 YEARS,
RESIDING AT NO 85, 3RD CROSS
P AND T COLONY, R T NAGAR
BANGALORE - 560 032.
6 . SMT K V VARALAKSHMI
W/O HARESHA BABU
AGED ABOUT 51 YEARS,
RESIDING AT NO 301,
ANJANADRI DUPLEX ROW HOUSE
NO 36/B2, 2ND MAIN, 2ND STAGE
INDUSTRIAL SUBURB,
4
YESHWANTHAPUR
BANGALORE - 560 022.
7 . SRI SRINIVASA MURTHY
S/O PAPANNA M,
AGED ABOUT 60 YEARS,
RESIDING AT FLAT NO 6 C 304,
LIC OFFICERS QUARTERS
JEEVAN BHIMA NAGAR
NEAR WATER TANK
BANGALORE - 560 078.
8 . SRI. PRASHANTH A GANGANAGOUDAR
S/O A B GANGANAGOUDAR
AGED ABOUT 40 YEARS,
RESIDING AT HOUSE #832,
3RD MAIN ROAD, E BLOCK, 2ND STAGE,
RAJAJINAGAR,
BANGALORE -560 010.
...PETITIONERS
(BY SRI. RAGHAVENDRA G GAYATRI, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA
REPRESENTED BY ITS
PRINCIPAL SECRETARY
URBAN DEVELOPMENT DEPARTMENT
VIKASA SOUDHA,
BANGALORE - 560 001.
2. BANGALORE DEVELOPMENT AUTHORITY
REPRESENTED BY ITS COMMISSIONER
T. CHOWDAIAH ROAD,
KUMARA PARK WEST,
BANGALORE - 560 020.
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3. GST CENTRAL TAX
REPRESENTED BY ITS COMMISSIONER
BASAVESHWARA BUILDING
CRESCENT ROAD,
BANGALORE - 560 001.
4. THE COMMERCIAL TAXES DEPARTMENT
GST, REPRESENTED BY ITS COMMISSIONER
VINIJYA THERIGE KARYALAYA
1ST MAIN ROAD, GANDHI NAGAR
BANGALORE - 560 009.
...RESPONDENTS
(BY SRI. G.S. KANNAN SENIOR COUNSEL FOR
SRI. BASAVARAJA H.T., ADVOCATE FOR R1;
SRI. AKASH B. SHETTY., ADVOCATE FOR R2
SMT. B. SUKANYA BALIGA., AGA ROR R3)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE ENDORSEMENTS ISSUED BY THE 2ND RESPONDENT - BDA
DATED 27.02.2020, 03.07.2021, 29.02.2020, 23.07.2020,
17.02.2021, 23.02.2022 AND 05.02.2022 INDICATING THAT
THE PETITIONERS HAVE TO MAKE GOOD A SUM OF
RS.4,34,175/- RS.5,04,000/-, RS.4,34,175/- RS.5,30,925/-,
RS.5,04,000/-, RS.5,04,000/- AND RS.5,30,938/-
RESPECTIVELY TOWARDS BALANCE GST FEE AND PRODUCE
THE CHALLAN FOR PROOF OF PAYMENT, COPIES OF THE SAME
ARE PRODUCED AS ANNEXURE-A TO G AND ETC.
THESE WRIT PETITIONS HAVING BEEN RESERVED FOR
ORDERS, COMING ON FOR PRONOUNCEMENT THIS DAY, MADE
THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE M.G.S. KAMAL
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CAV ORDER
Petitioner in W.P.No.51001/2019 is before this Court
seeking following reliefs;
a) issue a writ order or direction in the nature of
Certiorari to quash the endorsement issued by the
Respondent dated 23.08.2019 vide
No.BDA/AC/RR/BI-FOR/VGC-F/2BHC/19-20
indicating that as per Sl.No.10 to the endorsement,
the Petitioner has to make good a sum of
Rs.5,28,000/- towards balance GST fee and produce
the challan for proof of payment, copy of the same
is produced as ANNEXURE-N.
b) issue a writ order or direction in the nature of
mandamus to the respondent to give effect to the
representation of the petitioner to the respondent,
copy of the representation of the Petitioner to the
Respondent dated 05.09.2019 is produced as
ANNEXURE-P.
(b1) Issue a writ order or direction in the nature of
mandamus to the Respondent No.1 to refund the
Car Park sale proceeds illegally received from the
Petitioner being an amount of Rs.2.00 Lakhs in view
of the law laid down by the Hon'ble Apex Court.
(b2) Issue a Writ Order or direction to the
Respondent- BDA in the nature of Mandamus to
execute the Lease Cum Sale deed and put the
Petitioner in physical possession of the Flat allotted
in his favor by providing all modern amenities within
15 days at the same price sold to identical
purchasers as per the sale deed produced as
ANNEXURE-Q from today to serve the ends of
justice.
(b3) To impose exemplary costs on the Respondent
BDA for all illegal actions contained in the petition
being statutory lapses and volition of rule of law.
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(c) pass such other orders/directions that this
Honb'le Court may deem it fit and proper
considering the facts and circumstances of the case
together as to an order as to costs.
2. Petitioners in W.P.No.7028/2022 are before this
Court seeking following reliefs;
(a) Issue a writ or order in the nature of certiorari
and to quash the endorsements issued by the 2nd
Respondent-B.D.A. dated 27.02.2020,
03.07.2021, 29.02.2020, 23.07.2020,
17.02.2021, 23.02.2022 and 05.02.2022
indicating that the Petitioners have to make good
Rs.5,04,000/-, sum of Rs.4,34,175/-, of
Rs.4,34,175/-, Rs.5,30,925/-, Rs.5,04,000/-,
Rs.5,04,000/- and Rs.5,30,938/-respectively
towards balance GST fee and produce the challan
for proof of payment, copies of the same are
produced as ANNEXURES-A to G.
(b) Issue a writ, order or direction in the nature
of mandamus to the 2nd Respondent to give
effect to the representations of the Petitioners to
the 2nd Respondent. Copies of the
representations of the Petitioners to the 2nd
Respondent dated 00.05.2020 and 08.11.2021
are produced as ANNEXURES P & Q.
(c) Issue a Writ, Order or direction to the 2nd
Respondent-B.D.A. in the nature of Mandamus to
execute the Absolute Sale Deed and put the
Petitioners in physical possession of the Duplex
row houses allotted in their favour by providing
all modern amenities within 15 days at the same
price as sold to identical purchasers in terms of
the sale deed to serve the ends of justice.
(d) To impose exemplary costs on the 2nd
Respondent-B.D.A. for all illegal actions contained
in the Petition being statutory lapses and violation
of rule of law.
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(e) Pass such other orders/directions that this
Hon'ble Court may deem it fit and proper in the
facts and circumstances of the case.
(f) To issue a writ of mandamus or direction
directing the Respondent-B.D.A. to register the
Sale Deeds by mentioning the extent of the land
area to be sold to the petitioners."
3. Facts in brief involved in W.P.No.51001/2019 are as
under;
(a) That by a notification dated 09.08.2017 the
respondent- BDA had announced a scheme for residential
apartments consisting of various sizes. Petitioner had
applied for an allotment of two bedroom apartment in the
said residential project of the respondent- BDA at
Valagerahalli Phase 6. That petitioner was provisionally
allotted an apartment bearing Flat No.B1-501 in terms of
an Allotment Certificate dated 09.04.2018 and the
petitioner had paid the entire sale consideration in a total
sum of Rs.44,91,250/-. as indicated by the respondent-
BDA as per the payment schedule. In addition petitioner
had also paid Rs.2,00,000/- towards the car parking
space as per the advertisement. That petitioner had
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requested the respondent-BDA to inform the date of
registration of the apartment allotted in his favour.
(b) When things stood thus, respondent- BDA had
issued an endorsement to the petitioner on 23.08.2019
calling upon the petitioner to pay a sum of Rs.5,28,000/-
towards the service Tax (GST) under the provisions of the
Central Goods and Services Tax Act, 2017 (for short Act
2017) fee and to produce challan as a proof for having
made the said payment. Petitioner in response had made
a representation as per Annexure-P informing the
respondent-BDA that, what was offered to him was a full
completed apartment and there was no pre-construction
agreement between the petitioner and respondent-BDA.
As such, there was no question of payment of any service
tax. It is contended when there was no supply or
exchange of any service between the petitioner and the
respondent- BDA, the imposition of tax towards the GST
was unjustified as the services tax is
inapplicable in respect of a complete and ready
apartment. And had consequently called upon the
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respondent-BDA to withdraw the aforesaid endorsement
and to arrange for registration of the apartment in his
name at the earliest. Non-consideration of the same and
the demand made by the respondent- BDA for payment of
₹5,28,000/- gave rise to the writ petition.
(c) Statement of objections had been filed by the
respondent-BDA to the aforesaid W.P No.51001/2009
contending that the petitioner had filed an application for
allotment of apartment on 28.03.2018 and the
construction of the said apartment was completed on
31.12.2018. That the cost of the apartment was
Rs.44,00,000/-. In addition the petitioner was required to
pay Rs.91,250/- towards electricity and water charges
and Rs.5,28,000/- towards 12% of GST. That the said
payment of GST is as per Section 7 and Schedule II of
CGST Act, 2017. Since the petitioner agreed to purchase
the apartment and made the payment of part of
consideration prior to completion of construction, he is
liable to pay the GST. Hence, sought for dismissal of the
petition.
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4. Facts involved in the W.P.No.7028/2022 are as
under;
(a) A notification was issued by the respondent-BDA on
19.11.2016 calling upon the general public to get
affordable ready built duplex row houses on first come
first served basis. That as per the notification the project
had to be completed by the tenderer/contractor within 24
months. Totally 452 houses were to be constructed by the
tenderer/ contractor consisting of 3 types of row houses.
The agreement that was entered into between the
tenderer /contractor and the respondent-BDA had clearly
provided that the price quoted by the tenderer/ contractor
for the whole work as detailed in the schedule included all
taxes, namely, sales taxes, service taxes, municipal
taxes, local taxes etc., and other duties and levies.
(b) That in furtherance to the aforesaid notification
issued by the respondent -BDA petitioners had applied for
allotment of 2 BHK, Type 3 duplex row houses. The
respondent- BDA had allotted the said houses to the
petitioners in terms of the letters of allotment produced at
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Annexure-M series. The respondent-BDA had also issued
no objection certificates to the petitioners enabling them
to avail loan from the nationalised bank or any other
financial institutions. That petitioners had initially paid the
sale consideration as quoted in the letters of allotment.
That inspite of the payments of the sale consideration, the
respondent- BDA failed to register the houses by
executing absolute deeds of sale, instead issued
endorsement calling upon the petitioners to pay the GST
contending the construction of their duplex row houses
was completed on and after 30.06.2017.
(c) Some of the petitioners had submitted
representations requesting the respondent -BDA not to
insist for payment of GST, inasmuch as, in the initial
notification issued by the respondent-BDA all taxes had
been included. As such, respondent-BDA was not justified
in collecting the additional tax towards the GST, is their
claim.
(d) It is also contended the rate at which the GST is
demanded is not uniform. Different amounts have been
13
demanded for different duplex row houses. It is
contended that the respondent- BDA in its note sheet had
noted no GST was liable to be paid in respect of the row
houses that were completed before 30.06.2017. However,
in respect to the houses purchased by the petitioners, the
respondent-BDA had sought payment of GST. It is these
demands which have led the petitioners to approach this
Court on the ground of discrimination and disparity as
contended in the writ petition.
(e) Objection statements have been filed to the said
W.P.No.7028/2022 contending inter alia that the
petitioners who had made applications for allotment of
row houses at Alur Phase 2, Type 3 had made initial
deposits as against which they were allotted row houses
as per letters of allotment produced at Annexure-M series.
That the petitioners had not paid balance sale
consideration which was required to be paid in
instalments, as such the respondent-BDA had called upon
the petitioners to pay the balance amount, which was
deposited by the petitioners on different dates. The
14
respondent-BDA had issued communications calling upon
the petitioners to pay the GST amounts payable in respect
of the houses allotted to them as required to be paid
under the provisions of CGST Act, 2017.
(f) It is further contended that liability to pay the GST
separately was made known to the applicants/allottees in
the notifications published inviting applications. The
petitioners had applied for allotment of houses being
aware of their responsibility to make payment and as
such they cannot contend to the contrary. That the GST
amount is calculated based on the instalment amounts
paid by the allottees. As such, there is variation in the
rate of payment of GST. Some of the petitioners had
approached the Consumer Disputes Redressal Forum
wherein they had admitted to pay the GST amount at the
time of registration of the houses and would seek refund
of the same subject to result of the writ petition.
(g) That the construction of houses in Block Nos.1 to 5
were completed before 30.06.2017. The houses subject
matter of the present petition that were allotted to the
15
petitioners are in Block Nos. 9, 13, 18 and 22 and the
construction of these houses was completed on
31.01.2019 and the completion certificates was issued on
21.02.2019. Therefore, the GST was not applicable in
respect of Blocks which were constructed prior to
30.06.2017. As such, there is no discrimination as
alleged. Hence, sought for dismissal of the petition.
5. Sri.K.B.Monesh Kumar, learned counsel appearing
for the petitioner in W.P.No.51001/2019 taking this Court
through the averments made in the writ petition and the
grounds urged therein and also the documents enclosed with
the writ petition, vehemently submitted that;
(a) the petitioner had been provisionally allotted
apartment bearing Flat No.B1-501 of Valagerahalli Phase
6. That by the very notification/advertisement which was
published by the respondent- BDA, General Public was
called upon representing "pick a flat of your choice by
submitting applications across the counter", as such it
has to be presumed that the apartment offered by the
16
respondent-BDA to the petitioner was completed in all
respects.
(b) He also referred to Clause 5 of the said notification
to submit that the same had indicated successful
applicants would have the options of choosing apartment
of their choice.
(c) He also referred to the Allotment Letter dated
09.04.2018 to contend that even on the date when the
letter of allotment was issued the apartment was fully
completed. As such, the total value of the apartment was
indicated in the said letter as Rs.44,00,000/-.
(d) Referring to the aforesaid documents, learned
counsel submitted that since what was given to the
petitioner was a complete apartment, and there was no
construction agreement, as such the respondent- BDA
was not justified in demanding the service tax.
(e) That the apartment allotment certificate issued by
the respondent-BDA and the payments made by the
petitioner are not linked to the stage of construction. That
17
the petitioner made the final payment on 21.03.2019
while even according to the respondent -BDA the
completion certification had been obtained on
31.12.2018. Thus, the payment made by the petitioner is
subsequent to construction of apartment. As such,
Section 5 of Schedule II of GST is not applicable to the
case of the petitioner.
(f) He referred to Bangalore Development Authority
(Allotment of Sites) Rules, to contend that the allotment
of apartment is governed under the said Rules and the
said Rules contemplate that until site is conveyed to the
allottee, the amount paid by the allottee for purchase of
the site shall be held by the authority as a security
deposit for due performance of terms and condition of
lease-cum-sale agreement entered into between the
authority and the allottee. As such, payment made by the
petitioner are not towards the agreement with
respondent-BDA or linked to the stage of construction but
was towards allotment of fully constructed apartment.
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(g) That the respondent-BDA has not entered into any
construction agreement, agreement to sell with the
petitioner and no property /service is passed under such
agreements. As such, GST is not applicable. Mere delay in
obtaining the occupancy certificate by the respondent-
BDA shall not be the reason for imposing tax on the
petitioner. He also contended as regards the affordable
housing GST payable is 5% and not 12% as claimed by
the respondent-BDA.
(h) Learned counsel in support of his submission relied
upon the judgment of the Apex Court in the case of
LARSEN AND TOUBRO LIMITED AND ANOTHER vs.
STATE OF KARNATAKA AND ANOTHER reported in
(2014) 1 SCC 708 and also the judgement of the Apex
Court in the case of M/S. TOTAL ENVIRONMENT
BUILDINGS SYSTEMS PRIVATE LIMITED VS.
DEPUTY COMMISSIONER OF COMMERCIAL AND
OTHERS TAXES reported in (2022) 16 SCC 219.
(j) Referring to the judgment of the Apex Court in the
case of Larsen and Toubro Limited at paragraphs 88,
19
89, 90, 91, 92, 97,100, 101 and 102 learned counsel
contended that since the law is well settled that if an
agreement is entered into after the apartment or unit is
already constructed, then there would be no work
contract. As such, the demand made by the respondent-
BDA was one against the law laid down by the Apex
Court.
(k) He submitted that the law laid down by the Apex
Court in the aforesaid judgments holds the field and the
same is applicable to the facts of the instant case as well.
Hence, seeks for allowing of the writ petition.
6. Sri Raghavendra G. Gayatri, learned counsel
appearing for the petitioners in W.P.No.7028/2022
supplementing the submission made by Sri K.B. Monesh Kumar
taking this Court through the records submitted that;
(a) the very tender document in terms of which the
respondent-BDA had allotted the construction contract to
the tenderer/contractor provided that all taxes and duties
including the taxes, duties and levies towards sales tax,
service tax, municipal taxes, local taxes, octroi, work
20
welfare cess etc., are required to be paid by the
tenderer/contractor.
(b) He referred to Clause 17 of the said tender
document to point out that it was the responsibility of the
tenderer/contractor to have completed the construction
within the time stipulated thereunder. He submitted even
if there was any delay in completing the construction by
the tenderer/contractor, the liability of payment of tax
which was otherwise undertaken to be paid by the
tenderer/contractor cannot be fastened on the petitioners.
(c) He referred to the Office Notings of the respondent-
BDA produced at page 240 and 241 of the writ petition to
contend that construction of some of the houses had been
completed as on 30.06.2017 even then the respondent-
BDA had not collected the GST in respect of the said
projects. As such, there was discrimination in the case of
petitioners.
(d) He further referred to the rejoinder filed by the
petitioners to the statement of objection and to a
calculation provided at para 12 of the said re-joinder to
21
contend that the GST which is being collected by the
respondent- BDA is discriminatory and the same is
contrary to the provisions provided under the Act, 2017.
(e) He submitted that the respondent-BDA has adopted
discriminatory means as regards the petitioners requiring
intervention at the hands of this Court .
7. Per contra, Sri.G.S.Kannur, learned Senior counsel
appearing for the respondent- BDA submitted that;
(a) the very contention urged by the petitioners that
the project was completed even when the apartment was
allotted to them is incorrect and contrary to the records.
(b) He submitted what was advertised and the
petitioners responded to was at a stage when the project
was still under construction. He submitted that the said
fact has been clearly depicted in the very notification
which was issued by the respondent- BDA calling upon
the general public to apply for the apartments and the
row houses.
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(c) He submitted even the payment schedule produced
by the petitioner in W.P.No.51001/2019 at Annexure -K
page No.46 would indicate that the petitioner had paid
sum of Rs.44,91,250/- in 6 instalments spanning between
20.03.2018 to 16.03.2019. He submitted out of these
payments, four of the payments were made prior to the
date of completion of the project, which indicates the
petitioners had entered into agreement at the time when
the project was still under the construction. Similar is the
situation as regards the petitioners in W.P.No.7028/2022
is his submission. He submitted that the petitioners had
paid the consideration in instalments as evident from the
records.
8. Sri K. Krishna, learned counsel appearing for the
respondent-BDA in W.P.No.7028/2022 referring to the Office
Notes at page 240 at Annexure-Z submitted that the Office
Notes referred to in the said proceedings was in respect of a
different project and not the project concerning the petitioners.
He submitted that the project in which the petitioners have
purchased the row houses pertain to Block Nos. 9, 13 ,18 and
23
22 constructed in the land bearing Sy.No.114 and 115 of Alur
Village, Phase-2, construction of which was completed on
31.01.2019, while the project in respect of which the payment
of tax was exempted was in respect of project in Blocks 1 to 5
construction of which was completed 30.06.2017. Hence, he
submitted that there was no discrimination.
9. Learned Senior counsel appearing for the
respondent -BDA as well as Sri. K.Krishna, learned counsel for
the respondent -BDA also referred to Section 7 of the Act, 2017
and item 5 of Schedule II thereunder which according to them
would provide that if an agreement is entered into prior to
completion of construction the liability to pay the GST would be
on the purchasers. Thus, they submitted the law laid by the
Apex Court in the case of Larsen and Toubro Limited (supra)
is applicable with full force to the facts and circumstance of the
case at hand. Hence, seek for dismissal of the writ petitions.
10. Heard. Perused the records.
11. Before adverting to the rival contentions necessary
at this juncture to refer to the provisions of Section 7 of CGST
Act, 2017 which is read as under;
24
LEVY AND COLLECTION OF TAX
7. Scope of supply. (1) For the purposes of this
Act, the expression "supply" includes-
(a) all forms of supply of goods or services or
both such as sale, transfer, barter, exchange,
licence, rental, lease or disposal made or agreed
to be made for a consideration by a person in
the course or furtherance of business;
[(aa) the activities or transactions, by a person,
other than an individual, to its members or
constituents or vice-versa, for cash, deferred
payment or other valuable consideration.
Explanation. For the purposes of this
clause, it is hereby clarified that,
notwithstanding anything contained in any
other law for the time being in force or any
judgment, decree or order of any Court,
tribunal or authority, the person and its
members or constituents shall be deemed to
be two separate persons and the supply of
activities or transactions inter se shall be
deemed to take place from one such person
to another;]
(b) import of services for a consideration
whether or not in the course or furtherance of
business; 2[and]
(c) the activities specified in Schedule I, made
or agreed to be made without a consideration;
[***]
[***]
* 5[(1A) where certain activities or transactions
constitute a supply in accordance with the
provisions of sub-section (1), they shall be
treated either as supply of goods or supply of
services as referred to in Schedule II.]"
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12. Also necessary to refer to relevant portion of
Schedule II referred to in the aforesaid Section;
SCHEDULE II
[See section 7]
ACTIVITIES 1[OR TRANSACTIONS] TO BE TREATED AS SUPPLY
OF GOODS OR SUPPLY OF SERVICES
"1. Transfer.....
2. Land and Building ....
3. Treatment or process ....
4. Transfer of business assets ....
5. Supply of services
The following shall be treated as supply of services,
namely:-
(a).....
(b) construction of a complex, building civil
structure or a part thereof, including a
complex or building intended for sale to a
buyer, wholly or partly, except where the
entire consideration has been received after
issuance of completion certificate, where
required, by the competent authority or after
its first occupation, whichever is earlier.
Explanation. For the purposes of this clause-
(1) the expression "competent
authority" means the Government or any
authority authorised to issue completion
certificate under any law for the time being in
force and in case of non-requirement of such
certificate from such authority, from any of
the following, namely:-
(i) an architect registered with the
Council of Architecture constituted
26
under the Architects Act, 1972 (20 of
1972); or
(ii) a chartered engineer registered with
the Institution of Engineers (India); or
(iii) a licensed surveyor of the
respective local body of the city or town
or village or development or planning
authority;
(2) the expression "construction" includes
additions, alterations, replacements or remodelling
of any existing civil structure;
(c) temporary transfer or permitting the use
or enjoyment of any intellectual property
right;
(d) development, design, programming,
customisation, adaptation, upgradation,
enhancement, implementation of information
technology software;
(e) agreeing to the obligation to refrain from
an act, or to tolerate an act or a situation, or
to do an act; and
(f) transfer of the right to use any goods for
any purpose (whether or not for a specified
period) for cash, deferred payment or other
valuable consideration."
13. Apex court in the case of LARSEN AND TOUBRO
LIMITED AND ANOTHER vs. STATE OF KARNATAKA AND
ANOTHER reported in (2014) 1 SCC 708 at paragraphs 88,
89, 90, 91, 92, 97,100, 101 and 102 held as under;
27
"88. The question is: whether taxing sale of
goods in an agreement for sale of flat which is to
be constructed by the developer/promoter is
permissible under the Constitution? When the
agreement between the promoter/developer and
the flat purchaser is to construct a flat and
eventually sell the flat with the fraction of land, it is
obvious that such transaction involves the activity
of construction inasmuch as it is only when the flat
is constructed then it can be conveyed. We,
therefore, think that there is no reason why such
activity of construction is not covered by the term
"works contract". After all, the term "works
contract" is nothing but a contract in which one of
the parties is obliged to undertake or to execute
works. Such activity of construction has all the
characteristics or elements of works contract. The
ultimate transaction between the parties may be
sale of flat but it cannot be said that the
characteristics of works contract are not involved in
that transaction. When the transaction involves the
activity of construction, the factors such as, the flat
purchaser has no control over the type and
standard of the material to be used in the
construction of the building or he does not get any
right to monitor or supervise the construction
activity or he has no say in the designing or layout
of the building, in our view, are not of much
significance and in any case these factors do not
detract the contract being works contract insofar as
construction part is concerned.
89. For sustaining the levy of tax on the goods
deemed to have been sold in execution of a works
contract, in our opinion, three conditions must be
fulfilled: (i) there must be a works contract, (ii) the
goods should have been involved in the execution
of a works contract, and (iii) the property in those
goods must be transferred to a third party either as
goods or in some other form. In a building contract
or any contract to do construction, the above three
things are fully met. In a contract to build a flat
there will necessarily be a sale of goods element.
Works contracts also include building contracts and
therefore without any fear of contradiction it can be
28
stated that building contracts are species of the
works contract.
90. Ordinarily in the case of a works contract the
property in the goods used in the construction of
the building passes to the owner of the land on
which the building is constructed when the goods
and materials used are incorporated in the building.
But there may be contract to the contrary or a
statute may provide otherwise. Therefore, it cannot
be said to be an absolute proposition in law that
the ownership of the goods must pass by way of
accretion or exertion to the owner of the
immovable property to which they are affixed or
upon which the building is built.
91. Value addition as a concept after the Forty-
sixth Amendment to the Constitution has been
accepted by this Court in P.N.C. Construction
[State of U.P. v. P.N.C. Construction Co. Ltd.,
(2007) 7 SCC 320] . While dealing with this
concept, the Court said that value addition was an
important concept which had arisen after the Forty-
sixth Amendment by insertion of sub-clause (b) of
clause (29-A) in Article 366. It has now become
possible for the States to levy sales tax on the
value of the goods involved in a works contract in
the same way in which the sales tax was leviable
on the price of the goods in a building contract. On
account of the Forty-sixth Amendment in the
Constitution the State Governments are
empowered to levy sales tax on the contract value
which earlier was not possible.
92. Where a contract comprises of both a works
contract and a transfer of immovable property,
such contract does not denude it of its character as
works contract. Article 366(29-A)(b) does
contemplate a situation where the goods may not
be transferred in the form of goods but may be
transferred in some other form which may even be
in the form of immovable property. The decision of
the Australian High Court in M.R. Hornibrook [M.R.
Hornibrook (Pty) Ltd. v. Federal Commr. of
Taxation, (1939) 62 CLR 272 (Aust)] is worth
noticing in this regard. Section 3(4) of the
29
Australian Sales Tax Assessment Act, 1930 was
brought in by way of amendment by the legislature
in 1932 which reads:
"3. (4) For the purposes of this Act, a person
shall be deemed to have sold goods if, in the
performance of any contract under which he has
received, or is entitled to receive, valuable
consideration, he supplies goods the property in
which (whether as goods or in some other form)
passes, under the terms of the contract, to
some other person."
The question for consideration before the
Australian High Court in light of the above
provision was whether the contractor was liable
to pay sales tax on the transfer of goods
involved in a works contract. The majority
judgment held as follows:
"In my opinion the Commissioner is right
in his contention that this provision
applies to the present case. The appellant
company, in the performance of a
contract for building a bridge under which
contract it was entitled to receive and
doubtless has received valuable
consideration, has supplied goods,
namely, reinforced concrete piles. Such
piles are plainly manufactured articles.
They are chattels. They were intended to
be incorporated in a structure and were
so incorporated. They lost their identity
as goods in that structure. But this fact
does not prevent the piles from being
goods any more than it prevents bricks or
stones or nuts and bolts from being
goods. The fact that the goods were
specially manufactured and designed for
a particular purpose cannot be held to
deprive them of the character of goods."
97. In light of the above discussion, we may
summarise the legal position, as follows:
30
97.1. For sustaining the levy of tax on the goods
deemed to have been sold in execution of a works
contract, three conditions must be fulfilled: (i)
there must be a works contract, (ii) the goods
should have been involved in the execution of a
works contract, and (iii) the property in those
goods must be transferred to a third party either as
goods or in some other form.
97.2. For the purposes of Article 366(29-A)(b), in
a building contract or any contract to do
construction, if the developer has received or is
entitled to receive valuable consideration, the
above three things are fully met. It is so because in
the performance of a contract for construction of
building, the goods (chattels) like cement,
concrete, steel, bricks, etc. are intended to be
incorporated in the structure and even though they
lost their identity as goods but this factor does not
prevent them from being goods.
97.3. Where a contract comprises of both a works
contract does not denude it of its character as
works contract. The term "works contract" in Article
366(29-A)(b) takes within its fold all genre of
works contract and is not restricted to one specie
of contract to provide for labour and services alone.
Nothing in Article 366(29-A)(b) limits the term
"works contract".
97.4. Building contracts are a species of the works
contract.
97.5. A contract may involve both a contract of
work and labour and a contract for sale. In such
composite contract, the distinction between
contract for sale of goods and contract for work (or
service) is virtually diminished.
97.6. The dominant nature test has no application
and the traditional decisions which have held that
the substance of the contract must be seen have
lost their significance where transactions are of the
nature contemplated in Article 366(29-A). Even if
31
the dominant intention of the contract is not to
transfer the property in goods and rather it is
rendering of service or the ultimate transaction is
transfer of immovable property, then also it is open
to the States to levy sales tax on the materials
used in such contract if such contract otherwise has
elements of works contract. The enforceability test
is also not determinative.
97.7. A transfer of property in goods under clause
(29-A)(b) of Article 366 is deemed to be a sale of
the goods involved in the execution of a works
contract by the person making the transfer and the
purchase of those goods by the person to whom
such transfer is made.
97.8. Even in a single and indivisible works
contract, by virtue of the legal fiction introduced by
Article 366(29-A)(b), there is a deemed sale of
goods which are involved in the execution of the
works contract. Such a deemed sale has all the
incidents of the sale of goods involved in the
execution of a works contract where the contract is
divisible into one for the sale of goods and the
other for supply of labour and services. In other
words, the single and indivisible contract, now by
the Forty-sixth Amendment has been brought on a
par with a contract containing two separate
agreements and the States now have power to levy
sales tax on the value of the material in the
execution of works contract.
97.9. The expression "tax on the sale or purchase
of goods" in Schedule VII List II Entry 54 when
read with the definition clause (29-A) of Article 366
includes a tax on the transfer of property in goods
whether as goods or in the form other than goods
involved in the execution of works contract.
97.10. Article 366(29-A)(b) serves to bring
transactions where essential ingredients of "sale"
defined in the Sale of Goods Act, 1930 are absent
within the ambit of sale or purchase for the
purposes of levy of sales tax. In other words,
32
transfer of movable property in a works contract is
deemed to be sale even though it may not be sale
within the meaning of the Sale of Goods Act.
97.11. Taxing the sale of goods element in a works
contract under Article 366(29-A)(b) read with Entry
54 List II is permissible even after incorporation of
goods provided tax is directed to the value of
goods and does not purport to tax the transfer of
immovable property. The value of the goods which
can constitute the measure for the levy of the tax
has to be the value of the goods at the time of
incorporation of the goods in works even though
property passes as between the developer and the
flat purchaser after incorporation of goods.
101. Section 5-B of the KST Act provides for levy
of tax on transfer of property in goods (whether as
goods or in some other form) involved in the
execution of works contract.
102. On consideration of the arguments that were
put forth by the parties, the Court in Raheja
Development [K. Raheja Development Corpn. v.
State of Karnataka, (2005) 5 SCC 162] held as
under:
102.1. The definition of the term "works contract"
in the Act is an inclusive definition.
102.2. It is a wide definition which includes "any
agreement" for carrying out building or
construction activity for cash, deferred payment or
other valuable consideration.
102.3. The definition of works contract does not
make a distinction based on who carries on the
construction activity. Even an owner of the
property may be said to be carrying on a works
contract if he enters into an agreement to
construct for cash, deferred payment or other
valuable consideration.
102.4. The developers had undertaken to build for
the prospective purchaser.
33
102.5. Such construction/development was to be
on payment of a price in various instalments set
out in the agreement.
102.6. The developers were not the owners. They
claimed lien on the property. They had right to
terminate the agreement and dispose of the unit if
a breach was committed by the purchaser. A
clause like this does not mean that the agreement
ceases to be "works contract". So long as there is
no termination, the construction is for and on
behalf of the purchaser and it remains a "works
contract".
102.7. If there is a termination and a particular
unit is not resold but retained by the developer,
there would be no works contract to that extent.
102.8. If the agreement is entered into after the
flat or unit is already constructed then there would
be no works contract. But, so long as the
agreement is entered into before the construction
is complete it would be works contract.
(emphasis supplied by this Court)
14. Perusal of the provisions of Central Goods and
Services Tax Act, 2017 extracted hereinabove and in the light of
the judgement of the Apex Court extracted hereinabove, makes
it abundantly clear that if an agreement is entered into after the
apartment/flat or unit is already constructed, then there would
be no works contract. But so long as the agreement is entered
into before the construction is complete, it would be a work
34
contract, which would invariably attract payment of service tax
at the given rate.
15. Question therefore arises in the these cases is
whether the petitioners had entered into agreement with
respondent-BDA at the time prior to completion of the
construction?.
16. Relevant to refer the very notification dated
09.08.2017 issued by the respondent -BDA produced at
Annexure-A. Under the heading "Note" below the table of
payment, following is mentioned;
"Note: 1. Final price of the flat may vary depending
upon the revision, if any,
2. BWSSB and BESCOM deposits are not included in
the price of the flat. These deposits are to be
paid separately as per the zone where the flats
are being constructed.
3. applicable GST to be paid separately by the
allottees.
4. available covered parking space will be
separately allotted to the allottees on first come
first serve basis at additional price Rs.2 lakhs per
covered car parking flat."
35
Thus when the advertisement/notification was issued the
construction was still in progress.
17. The acknowledgement slip at Annexure-A relied
upon by the petitioner in WP No.51001/2019 reads as under;
"It is also informed that you have been provisionally
allotted flat No.B1-501 of Valagerahalli phase 6. The
project allotment letter will follow the date of the said
acknowledgement is 09.08.2017."
Thus that allotment was only provisional.
18. Further the payment schedule as found at
Annexure-K, a letter which was issued by the petitioner himself
would indicate the following;
Date Amount Mode of payment
20.03.2018 5,50,000.00 Initial payment By way of pay order
favouring BDA, deposited Canara Bank,
BDA Complex. Copy enclosed.
29.06.2018 9,62,500.00 Vide DD No. 466125 dated 25.06.2018
payable at Union Ban India, Bengaluru
27.12.2018 9,62,500.00 RTGS from Union Bank of India
27.12.2018 9,62,500.00 RTGS from Union Bank of India
16.03.2019 9,62,500.00 RTGS from Union Bank of India,
16.03.2019 91,250.00 RTGS from Union Bank of India,
Total 44,91,250.00
36
19. The completion certificate as produced by the
respondent- BDA at Annexure-R2 would indicate that the
project has been completed on 31.12.2018.
20. Reading of the above with the payment schedule
and the completion certificate produced at Annexure-R2 would
indicate that the project was completed only in the month of
December, 2018, by which time, the petitioner had paid 4
instalments towards the cost of the construction, clearly
indicating that the petitioner having paid the part of
consideration during the process of construction. In other
words, payments were made even before the completion of
construction in terms of an agreement that had been entered
into between the petitioner and the respondent -BDA.
21. In the case of the petitioners in W.P.No.7028/2022
the respondent-BDA in the statement of objection has given the
details of the dates of application and the amounts paid by the
petitioners thereunder, which is extracted hereunder;
Allotment
Allottees Date Instalments
Letter dated
Petitioner 26.10.2017 2,10,000.00 07.11.2017
37
No.1
03.01.2020 91.250.00
03.01.2020 39,90,000
20.09.2017 2,10,000.00
Petitioner 18.11.2017 10,05,000.00
28.09.2017
No.2
19.03.2018 10,00,000.00
02.01.2021 20,31,250.00
24.09.2018 2,10,000.00
Petitioner
17.09.2019 7,68,564.00 24.09.2018
Nos.3 & 4
21.10.2019 33,12,686.00
16.08.2017 5,25,000.00
19.10.2017 9,18,750.00
Petitioner
24.08.2017
No.5
13.12.2017 9,18,750.00
20.12.2018 9,18,750.00
Petitioner 30.09.2020 37,66,250.00
21.11.2017
No.6
13.11.2017 21,00,000.00
20.04.2018 20,00,000.00
16.05.2019 10,00,000.00
Petitioner
21.11.2017
No.7
17.09.2019 6,33,000.00
11.08.2020 3,50,000.00
16.12.2020 98,250.00
Petitioner 30.01.2018 5,25,000.00
No.8
07.04.2018 9,18,750.00
13.06.2018 9,18,750.00 08.02.2018
09.08.2018 9,18,750.00
04.10.2018 9,18,750.00
38
22. Perusal of which would indicate that the petitioners
therein had made applications for allotment of houses pursuant
to the notification that was issued during the years 2017 and
2018. That payments were made partly and there were certain
balance amounts which warranted respondent-BDA to issue
notices calling upon the petitioners therein to pay the balance
amount along with the applicable GST. This had apparently
constraints some of the petitioners to approach the Consumer
Dispute Redressal Forum. It appears some of the petitioners
had even voluntarily agreed to pay the GST amount without
prejudice to seek refund subject to outcome of the present writ
petition.
23. In the statement of objection of the respondent-
BDA, it is contended that the project was completed only on
31.01.2019 and a certificate in this regard had been issued. The
project in respect of which the petitioners had purchased the
houses were in Block Nos.9, 13, 18 and 22 constructed in the
land bearing Sy.Nos.114 and 115 of Alur village, Phase-II of
Dasanapura Hobli, Bangalore North Taluk. Since the petitioners
who had applied for allotment of flats between the years 2017
39
and 2018 and the project was completed on 31.01.2019, it is
contended that the petitioners had entered into contracts during
the construction period. As such, they are liable to pay the GST
as provided under sub-section(b) of Section 5 of Schedule II of
GST Act.
24. As regards the contention of discrimination in
respondent-authorities collecting the taxes concerned, it is
contended that exemption of payment of GST tax was only in
respect of houses forming part of Block Nos.1 to 5 construction
of which had been completed before 30.06.2017 and the
persons therein had purchased the houses in their completed
form. As such, it was under those circumstances the respondent
-BDA had stated in its office notings that the GST was not liable
to be collected in those cases. The petitioners without
distinguishing this factual aspects of the matter, had sought to
allege discrimination in the amounts being collected by the
respondent -authorities. The same cannot be countenanced.
25. From the aforesaid legal and factual aspect of the
matter, it is clear that the petitioners in these writ petitions had
applied for allotment of apartment/houses, which even as seen
40
in the notification calling upon for application by the
respondent-BDA, were still under construction. The said
notification also specifically points out that applicable GST to be
paid separately by allottees. The payment schedule referred to
above would indicate that the part of the sale consideration was
paid during the process of construction and much prior to
issuance of completion certificate. It may be that there is no
separate work contract entered into between the petitioners
and the respondent- BDA, but what is the essence of law as
found at Section 7 and Schedule II to the Central Goods and
Services Tax Act, 2017 extracted above as well as the law laid
by the Apex Court in the case of Larsen and Toubro Limited
(supra), is that if the transaction is entered into before the
completion of construction and the consideration was paid
(partly or fully) before issuance of completion certificate, the
same would amount to supply of services requiring payment of
the service tax.
26. In light of the aforesaid undisputed factual aspect of
the matter and in view of the settled position of law as noted
41
above, this Court do not see any ground to interfere with the
matter and do find any ground to allow the petitions.
27. Hence, the following;
ORDER
(a) Writ petitions are dismissed.
(b) Notwithstanding the dismissal of the petitions the petitioners would be entitled for completion of the transactions including execution of deeds of conveyance, delivery of possession, if not already executed and delivered, as the case may be, after the payment of GST as demanded by the respondent -BDA at the applicable rate in accordance with law.
Sd/-
(M.G.S. KAMAL) JUDGE RU