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Government of India · Ministry of Finance

Office of the Additional Commissioner of Central Tax, Hyderabad

Order-in-Original

OIO / 2026 / 0147 · Ashwattha Enclave Villa Owners Association

1. Preamble

यह प्रतिलिपि उस व्यक्ति के निजी उपयोग के लिए नि:शुल्क प्रदान की जाती है जिसे इसे जारी किया जाता है। This copy is granted free of charge for the private use of the person to whom it is issued.

1.2. In the matter of Ashwattha Enclave Villa Owners Association. Show Cause Notice GEXCOM/ADJ/GST/0917/2025-Commr-CGST-Hyd dated 11.09.2025, DIN 20250911XY0000914C. Period: April 2018 to March 2021.

1.3. Any person aggrieved by this order may prefer an appeal under Section 107(1) of the CGST Act, 2017 read with Rules 108 and 109A of the CGST Rules, 2017, before the Additional Commissioner (Appeals) or the Joint Commissioner (Appeals), within three months from the date of communication of this order.

1.4. The Appellate Authority may, if satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of three months, allow it to be presented within a further period of one month, in terms of Section 107(4) of the CGST Act, 2017.

1.5. An appeal against this order shall lie on payment of the admitted amount and a sum equal to ten per cent of the remaining tax in dispute, subject to a maximum of twenty crore rupees, in terms of Section 107(6) of the CGST Act, 2017. The appeal shall be made in Form GST APL-01, verified in the prescribed manner and accompanied by a copy of this order.

2. Background facts

2.1. The noticee, Ashwattha Enclave Villa Owners Association, is an association of villa owners established to manage, maintain and administer the common areas and facilities of a residential villa project at Kompally, Hyderabad. In the course of these functions the noticee collects regular maintenance charges from its members to meet common expenses, including security, upkeep, electricity for common areas and other shared amenities. Under the Goods and Services Tax law, the collection of maintenance charges from members is a supply of services, and attracts tax once the collections exceed the exemption prescribed for residential welfare associations.

2.2. Scrutiny of the noticee's activities by officers of the Hyderabad Commissionerate showed that the noticee had been collecting substantial amounts towards villa maintenance charges from its members from April 2018 to March 2021. Although these collections exceeded the exemption of Rs. 7,500 per member per month under the relevant notifications, the noticee did not obtain registration under the Act, did not charge or collect tax on the receipts, and deposited no tax with the Government.

2.3. On examination of the association's financial records and receipts it appeared that the noticee had kept its taxable operations entirely outside the tax administration: no application for registration despite crossing the threshold, no tax invoices, and no periodic returns. The department viewed these omissions not as technical lapses but as a deliberate attempt to evade tax on maintenance charges collected over several financial years.

2.4. The department accordingly invoked the extended period of limitation under Section 74 of the CGST Act, 2017, computed the tax on the maintenance charges collected in excess of the exemption for April 2018 to March 2021, and found a substantial unpaid liability.

2.5. Show Cause Notice GEXCOM/ADJ/GST/0917/2025-Commr-CGST-Hyd was issued on 11.09.2025 by the Additional Commissioner of Central Tax, Hyderabad, proposing to demand and recover CGST of Rs. 13,39,200 and SGST of Rs. 13,39,200, in all Rs. 26,78,400, under Section 74 of the Act, together with interest and a penalty equal to the tax, and calling upon the noticee to show cause why the proposals should not be confirmed.

3. Written submissions of the noticee

3.1. The noticee raises a preliminary objection that the notice is procedurally defective because it consolidates demands for three financial years, FY 2018-19 to FY 2020-21, into a single notice. Each financial year, it is submitted, is a distinct period for assessment requiring a separate notice, and consolidation deprives the noticee of the full period for adjudication available in law. Reliance is placed on Tharyil Medicals v. Deputy Commissioner, Audit Division-IV [2025 (29) Centax 395 (Ker.)], Joint Commissioner (Intelligence & Enforcement) v. Lakshmi Mobile Association [2025 (27) Centax 101 (Ker.)] and RA & Co v. Additional Commissioner of Central Tax (18.07.2024).

3.2. The noticee submits that the maintenance charge never exceeded Rs. 7,400 per villa per month, below the Rs. 7,500 threshold under Notification No. 12/2017-Central Tax (Rate), and that the department has produced nothing to controvert its financial statements, balance sheets and Chartered Accountant's certificates, which show the charges to have remained within the exemption.

3.3. The noticee further contends that contributions collected towards the corpus fund are meant exclusively for capital expenditure and are mutual contributions by members; they are not consideration for a taxable supply and must be treated distinctly from operational maintenance charges.

3.4. The noticee denies fraud, suppression of facts or wilful misstatement with intent to evade tax, and submits that the extended period under Section 74 is therefore unavailable, that no penalty can be levied under Section 122(2)(b) and no interest under Section 50. Reliance is placed on Nizam Sugar Factory v. Collector of Central Excise, A.P. [2006 (197) ELT 465 (SC)] and Commissioner of C. Ex., Aurangabad v. Balakrishna Industries [2006 (201) ELT 325 (SC)].

4. Personal hearing

4.1. In terms of Section 75(4) of the CGST Act, 2017, an opportunity of personal hearing is required before any adverse determination. Under CBIC Instruction F.No. 390/Misc/3/2019-JC, hearings are conducted by video conference unless a physical hearing is specifically requested.

4.2. The notice dated 11.09.2025 itself afforded the noticee an opportunity of being heard. The noticee filed its reply in Form GST DRC-06 on 11.11.2025 and sought a hearing, which was held by video conference on 25.11.2025. Shri Raghunandan Velpuri, Secretary of the Association, and the noticee's Chartered Accountant appeared and reiterated the written submissions.

4.3. The noticee's objection that the notice improperly consolidates three financial years goes to the validity of the notice itself and is a matter for the findings. It is taken up and decided at paragraph 5.1.24 below.

5. Discussion and findings

5.1. Non-payment of GST on villa maintenance charges collected from members above the exemption

5.1.1. I have carefully considered the facts and allegations in Show Cause Notice GEXCOM/ADJ/GST/0917/2025-Commr-CGST-Hyd dated 11.09.2025, the charges framed, the proposals for demand of tax, interest and penalty, the written submissions filed in reply, the submissions at the hearing, and the material on record.

5.1.2. The issue is the non-payment of tax on villa maintenance charges collected by Ashwattha Enclave Villa Owners Association from its members between April 2018 and March 2021, without registration and without payment of tax, the collections having exceeded Rs. 7,500 per member per month.

5.1.3. The department relies on the noticee's contemporaneous Balance Sheets for the relevant years. I find that these record all receipts from members under the single, undivided head 'Villa Maintenance Charges', without bifurcation. This primary record reflects the transactions as they occurred and shows that the entire amount was collected towards maintenance services.

5.1.4. The department further relies on the statement of Shri Raghunandan Velpuri, Secretary of the Association, recorded during the investigation, which confirms the collection of these charges from members and corroborates the Balance Sheets: a taxable service was provided for consideration.

5.1.5. The department also relies on Circular No. 109/28/2019-GST, which clarifies that where the monthly contribution per member exceeds Rs. 7,500 the exemption is lost altogether and the entire contribution is taxable, not merely the amount above the threshold.

5.1.6. The noticee, for its part, has produced a Chartered Accountant's certificate and a statement of accounts to show that part of the collections went to a non-taxable corpus fund and that the maintenance charge proper stayed below Rs. 7,500. I find that the certificate is a post-hoc reconstruction which contradicts the noticee's own contemporaneous Balance Sheets, which contain no such split.

5.1.7. The noticee's contentions are, in sum: that the charges were always below Rs. 7,500 per villa per month; that a significant part of the collections was corpus contribution outside the tax; that a single notice for three years is bad in law; that there was no fraud, suppression or wilful misstatement, so the extended period and penalty are unavailable; that its documents prove its case; and that the department has not controverted them.

5.1.8. The governing provisions are these. Section 7 of the CGST Act, 2017 defines 'supply' inclusively and specifically covers facilities or benefits provided by an association to its members for consideration. Section 9 levies tax on intra-State supplies. Section 22 requires registration once aggregate turnover in a financial year exceeds Rs. 20,00,000. Under Sl. No. 77 of Notification No. 12/2017-Central Tax (Rate), services by an unincorporated body or non-profit entity to its own members are exempt only up to Rs. 7,500 per month per member.

5.1.9. On the claim of exemption the position is settled. Section 155 places the burden of proving entitlement to an exemption on the person claiming it. The Constitution Bench in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company [2018 (361) ELT 577 (SC)] held that exemption notifications are to be strictly construed, that ambiguity is resolved in favour of the revenue, and that the burden lies on the taxpayer. The contemporaneous Balance Sheets record all receipts as maintenance charges without any split; a later certificate cannot displace the primary record. The noticee has not discharged its burden.

5.1.10. On the extended period under Section 74, the department must establish a deliberate act with intent to evade tax. The noticee did not register although its aggregate turnover exceeded Rs. 20,00,000 in FY 2018-19, and declared its receipts in no return. Explanation 2 to Section 74 defines suppression as the non-declaration of facts which a taxable person is required to declare in a return or other document. This was not oversight: the noticee knew its collections. Pushpam Pharmaceuticals Co. v. Collector of Central Excise, Bombay [1995 (78) ELT 401 (SC)], Cosmic Dye Chemical v. Collector of Central Excise, Bombay [1995 (75) ELT 721 (SC)] and Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur [2013 (288) ELT 161 (SC)] treat suppression as deliberate non-disclosure of what was required to be stated. Wholesale non-declaration of known receipts until detected meets that standard. The extended period is available.

5.1.11. Tharyil Medicals [2025 (29) Centax 395 (Ker.)] is relied upon for the proposition that a consolidated notice for several financial years is impermissible. The reliance is misplaced. The Act contains no bar on consolidating demands for more than one financial year in one notice, provided the limitation for each year is respected and no prejudice is caused.

5.1.12. Lakshmi Mobile Association [2025 (27) Centax 101 (Ker.)] does not assist the noticee for the same reason: a single notice covering several tax periods is competent so long as it issues within the period prescribed for each of them, as it did here.

5.1.13. RA & Co (18.07.2024) is distinguishable on its facts. The noticee here had full opportunity to answer the allegations for each year, and the limitation under Section 74(10) for FY 2018-19, FY 2019-20 and FY 2020-21 has been strictly observed. No procedural prejudice arises.

5.1.14. Nizam Sugar Factory [2006 (197) ELT 465 (SC)] concerned successive notices on facts already disclosed. It has no application to a complete failure to register and a total non-declaration of receipts unearthed only on investigation. Balakrishna Industries [2006 (201) ELT 325 (SC)] likewise does not assist: the record here shows deliberate suppression of taxable receipts through non-registration and non-filing.

5.1.15. The arithmetic. Collections under 'Villa Maintenance Charges' for FY 2018-19 to FY 2020-21 are Rs. 43,90,000, Rs. 30,000, Rs. 54,85,000 and Rs. 49,75,000, in all Rs. 1,48,80,000. At the applicable rate the tax is CGST Rs. 13,39,200 and SGST Rs. 13,39,200, in all Rs. 26,78,400. With an equal penalty of Rs. 26,78,400 under Section 74, the total demand is Rs. 53,56,800.

5.1.16. The contention that the charges stayed below Rs. 7,500 per villa per month, supported by the Chartered Accountant's certificate, is not sustainable. The contemporaneous Balance Sheets book every receipt under 'Villa Maintenance Charges' without a split, and a post-hoc certificate cannot override the primary record. The whole collection is taxable. The contention is rejected. The contention that the charges stayed below Rs. 7,500 per villa per month is rejected: the contemporaneous Balance Sheets for FY 2018-19 to FY 2020-21 book every receipt under 'Villa Maintenance Charges' without a split, and a post-hoc Chartered Accountant's certificate cannot displace the primary record.

5.1.17. The contention that corpus contributions are non-taxable mutual contributions is also not acceptable. The Balance Sheets show no separate corpus fund; the claim is a reconstruction unsupported by the primary books. It is rejected.

5.1.18. The objection to consolidation is not tenable. There is no statutory bar. The limitation for each year has been respected: for FY 2018-19 the order is due by 31.12.2025; for FY 2019-20 by 31.03.2026; for FY 2020-21 by 28.02.2027. The notice is within time for every period and no prejudice is shown.

5.1.19. The contention that there was no fraud, suppression or wilful misstatement is not sustainable. Failure to register despite exceeding the threshold, and failure to declare taxable receipts in any return while recording them in the association's own Balance Sheets, is suppression within Explanation 2 to Section 74. The extended period is rightly invoked and penalty is imposable.

5.1.20. The contention that the department has not controverted the noticee's evidence is incorrect. The taxable event and the suppression are established from the noticee's own Balance Sheets and the Secretary's statement, which displace the defence.

5.1.21. In view of the foregoing, I confirm the demand of tax of Rs. 26,78,400 (CGST Rs. 13,39,200; SGST Rs. 13,39,200) under Section 74(9) of the CGST Act, 2017. Interest is payable under Section 50. A penalty of Rs. 26,78,400 is imposed under Section 74(9) of the Act.

5.2. Jurisdiction and maintainability

5.2.1. The proceedings lawfully continue under Section 74 of the CGST Act, 2017 and the corresponding provisions of the State Goods and Services Tax Act, 2017. Officers appointed under the CGST Act are, by Section 6 of the State Act, proper officers for that Act, and this order is passed under both enactments. In terms of Rule 142(1A) of the CGST Rules, 2017, the noticee was apprised of the tax ascertained in Form GST DRC-01A dated 21.07.2025 before issue of the notice, and responded to it.

6. Order

6.1. I confirm the demand of tax amounting to Rs. 26,78,400 (CGST Rs. 13,39,200; SGST Rs. 13,39,200), being the liability in respect of non-payment of GST on villa maintenance charges collected from members above the exemption, under Section 74(9) of the CGST Act, 2017 and the corresponding provisions of the State Goods and Services Tax Act, 2017.

6.2. I demand interest on the tax confirmed above at the applicable rate under Section 50 of the CGST Act, 2017 and the corresponding provisions of the State Act, from the due date of payment to the date of actual payment.

6.3. I impose a penalty of Rs. 26,78,400 on the tax confirmed above under Section 74(9) of the CGST Act, 2017 and the corresponding provisions of the State Act.

6.4. The amounts confirmed by this order shall be paid within three months from the date of its communication, failing which recovery shall follow in accordance with law.

6.5. The proceedings initiated by Show Cause Notice GEXCOM/ADJ/GST/0917/2025-Commr-CGST-Hyd dated 11.09.2025 issued to Ashwattha Enclave Villa Owners Association are disposed of in terms of this order.

6.6. Any person aggrieved by this order may prefer an appeal under Section 107(1) of the CGST Act, 2017 read with Rules 108 and 109A of the CGST Rules, 2017, before the Additional Commissioner (Appeals) or the Joint Commissioner (Appeals), within three months from the date of communication of this order.

(Shalini Rao)
Additional Commissioner of Central Tax
Hyderabad