Munjaal Manishbhai Bhatt VS Union Of India

The court was faced with multiple writ applications addressing similar issues, all of which were heard together for efficiency. The lead matter, Special Civil Application No.1350 of 2021, set the tone for the proceedings.

The writ applicant, invoking Article 226 of the Constitution of India, sought various reliefs:

A. The applicant asked the Hon’ble Court to strike down Entry 3(if) of Notification No. 11/2017-Central Tax (Rate) and Entry 3(if) of Notification No. 11/2017 – State Tax (Rate), along with paragraph 2 of both notifications, as being ultra vires Section 7(2) of the GST Acts read with Entry No. 5 of Schedule III to the GST Acts, and also ultra vires Section 9(1) and Section 15 of the GST Acts.

B.  Alternatively, the applicant requested the Court to strike down the same entries and paragraphs as being manifestly arbitrary, grossly discriminatory, and violating Article 14 of the Constitution of India, as well as being ultra vires Article 246A of the Constitution.

C. The applicant also asked the Court, without prejudice to the above, to declare that the impugned paragraph 2 of Notification No. 11/2017-Central Tax (Rate) and Notification No. 11/2017 – State Tax (Rate) should only apply to the sale of flats/building units where an undivided share in land is transferred along with the constructed flats/units without a separate consideration fixed for the sale of land.

D. Additionally, the applicant requested the Court to declare that tax under the GST Acts cannot be imposed on consideration expressly receivable/payable towards the sale/purchase of land.

These writ applications, though separate in form, raised identical issues. The court therefore decided to hear them analogously and issue a common judgment and order to dispose of the matters efficiently. The case primarily revolved around the legality and constitutionality of certain entries and paragraphs in GST notifications, with the applicant challenging their validity and seeking relief on grounds of discrimination and violation of constitutional provisions.

Several writ applications were filed with similar issues, all of which were heard together for efficiency. The lead case, Special Civil Application No. 1350 of 2021, is used as a reference for this summary.

The main request in these writ applications, filed under Article 226 of the Constitution of India, is to challenge and strike down Entry 3(if) of Notification No. 11/2017-Central Tax (Rate) and Entry 3(if) of Notification No. 11/2017 – State Tax (Rate), along with paragraph no. 2 of both notifications. The applicant argues that these entries are ultra vires (beyond the authority) of various sections of the GST Acts and also violate Article 14 and Article 246A of the Constitution of India.

The specific reliefs sought in the application are:

1. Striking down Entry 3(if) of both notifications as ultra vires of GST Acts and violating certain sections of the Constitution.

2. Declaring the entries as manifestly arbitrary, grossly discriminatory, and violative of Article 14 of the Constitution.

3. Seeking a declaration that the impugned paragraph no. 2 of both notifications applies only to the sale of flats/building units with an undivided share in land, without a separate consideration for the sale of land itself.

4. Declaring that GST cannot be imposed on consideration for the sale/purchase of land.

5. Requesting a writ of mandamus or any appropriate order directing the 4th Respondent not to collect GST on consideration for the sale of land.

6. Seeking permission to deposit the GST amount under protest with the 4th Respondent pending the outcome of the petition.

7. Requesting ex parte ad interim relief as mentioned in point F.

8. Seeking any further relief deemed fit by the court in the interest of justice.

The factual background of the case is as follows:

* The writ applicant, a practicing advocate in the High Court, entered into an agreement on September 29, 2020, with Navratna Organisers & Developers Pvt. Ltd. (respondent No. 4) for the purchase of a plot of land measuring approximately 1021 square meters in Ahmedabad.

* The agreement also included the construction of a bungalow on the purchased land.

* The agreement indicated separate and distinct considerations for the sale of the land and the construction of the bungalow.

* The writ applicant was liable to pay all taxes, including GST, as per the agreement.

* The applicant believed that the inclusion of the clause regarding tax liability meant that they were only responsible for paying GST on the bungalow construction and not on the land purchase itself.

The main contention appears to be the interpretation of the tax liability under GST concerning the sale of land versus the construction of buildings on the land. The applicant argues that GST should not be applicable to the consideration for the sale of land. The case seeks to challenge the legality and constitutionality of certain GST notifications and their application to transactions involving land and construction.

The statement discusses the liability for paying tax under the Central/Gujarat Goods and Services Tax Act, 2017 (referred to as “the GST Acts”) in the context of constructing a bungalow. It asserts that the consideration payable for the construction of a bungalow would be subject to taxation because it is considered a supply of construction service under the GST Acts.

1. Central/Gujarat Goods and Services Tax Act, 2017: This Act, enacted by the Government of India, regulates the levy and collection of Goods and Services Tax (GST) in both the Central and State of Gujarat jurisdictions.

2. Consideration Payable: This refers to the amount of money that is to be paid for the construction of the bungalow. In this case, the consideration payable for the construction is the amount that the owner of the bungalow agrees to pay to the construction service provider.

3. Supply of Construction Service: The statement asserts that the construction of a bungalow falls under the category of “supply of construction service” as defined by the GST Acts. This means that when a bungalow is being constructed, the service provided by the construction company to the bungalow owner is considered a supply of service under the GST framework.

4. Liability to Pay Tax: Based on the classification of the construction of a bungalow as a “supply of construction service” under the GST Acts, the implication is that the bungalow owner (the person receiving the construction service) would be liable to pay tax on the consideration payable for the construction. This tax would be in accordance with the rates and provisions specified under the GST Acts.

5. GST Acts: These Acts lay down the rules, rates, and procedures for the levy and collection of GST on various supplies of goods and services. Since the construction of a bungalow is considered a supply of service, it falls within the purview of these Acts, making the consideration payable for the construction subject to GST.

In summary, the statement clarifies that under the Central/Gujarat Goods and Services Tax Act, 2017, the construction of a bungalow is classified as a “supply of construction service.” Therefore, the owner of the bungalow would be liable to pay tax on the consideration payable for the construction, as per the provisions of the GST Acts. This ensures that the construction activity is taxed in line with the broader GST framework implemented by the government.

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