Service tax and vat deposit demand by a property developer

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chittaranjan behera (Querist)
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03 January 2012 Hi,
One of the property developer in Bangalore has sent a demand letter for deposit of Service Tax and Vat for an apartment booked in November 2009. Till now the handover is not done. This Service Tax and Vat demand is made on an assumption that there may be a liability towards vat and service tax. The developer wants the money to be deposited in their account and if the liability arises then that will be paid to the Govt. otherwise it will be refunded to the cutomer.
My Question is:
1. The Service tax is Payable within 5th or 6th of the following month immediately after the provision of the service or receipt of advance. How the Developer can charge Service Tax on the basis of assumption and instead of payment to the Govt. we will make the payment to the developer. I Think this is ultra virus to the provisions of Law and this demand should be cancelled/recalled immediately.
2. The Vat is payable at the time of registration or transfer of title to the customer. How the developer can charge a Vat deposit before the transfer of property. I think this is not sustainable in law.

I sought your expert opinion on this issues.

Best Regards,
Chittaranjan