2020 (1) TMI 1579 - NAPA - GST

Profiteering - purchase of flat - benefit of Input Tax Credit (ITC) not passed by way of commensurate reduction in the price - Input Tax Credit - clubbing of turnover of two separate projects for the purpose of calculation of profiteering - contravention of section 171 of CGST Act - HELD THAT - It evident from the documents placed that Project 1 and Project 2 are two separate projects in as much as these relate to two distinct RERA registrations, separate approvals issued by the NOIDA Development Authority, distinct sanction plans/ maps and completely distinct construction schedules, project 1 having been launched and initiated in the pre GST period whereas construction of project 2 started only after the receipt of mandatory approval of the relevant authority on 5.11.2018 and the statutory RERA registration in December 2017 - the contention of the DGAP that the two projects are covered under the same GST registration and have a common electronic credit ledger cannot be the ground to club the two projects. It is also pertinent to mention here that the records indicate that the Respondent has apportioned the ITC of the two projects and has thus not utilized the ITC of one project for payment of GST pertaining to other project. The DGAP is directed to investigate afresh by treating the projects separately as has been done in the previous cases which has been quoted by the Respondent by taking merits of the two projects into account so that profiteered amount can be tenably computed. The Respondent is also directed to make available all the documents/proofs/evidences desired by the DGAP. The assessment order clearly states that the Respondent has been collecting VAT from his customers for year 2013-14 to Jun-2017 on pro-rata basis and is also depositing the same in accordance with rules. This documentary evidence being in the form of the VAT assessment order passed by the competent authority is indisputable in its own right. Hence it needs careful consideration without following the rhetorical assertion that similar cases have been decided in the identical manner for the state of Uttar Pradesh as each such case has its own distinct facts and has to be decided upon based on whether the conditions for incorporating credit of VAT paid in the pre GST period in the computation of profiteering are fulfilled or not. This case, including the computation of profiteering in the two projects, need to be revisited by the DGAP through a thorough investigation, keeping in view the above directions of the Authority that project 1 and project 2 are two separate projects and hence the ITC/turnover of the two cannot be clubbed for the purpose of calculation of profiteering.

Issues Involved:
1. Alleged non-passing of Input Tax Credit (ITC) benefits post-GST implementation.
2. Determination of profiteering by the Respondent.
3. Treatment of multiple projects as a single project for investigation.
4. Inclusion of VAT ITC in the computation of profiteering.
5. Compliance with procedural requirements and submission of documents by the Respondent.

Issue-wise Detailed Analysis:

1. Alleged non-passing of Input Tax Credit (ITC) benefits post-GST implementation:
The Applicant No. 1 alleged that the Respondent did not pass on the benefit of ITC by reducing the price of the flat post-GST implementation. The Uttar Pradesh State Screening Committee and the Standing Committee on Anti-Profiteering examined the complaint and forwarded it to the Director General of Anti-Profiteering (DGAP) for investigation. The DGAP issued a notice to the Respondent to reply and provide supporting documents, and both parties were given opportunities to inspect non-confidential evidence and documents.

2. Determination of profiteering by the Respondent:
The DGAP's investigation covered the period from 01.07.2017 to 31.12.2018. The DGAP found that the ITC as a percentage of turnover increased from 1.38% pre-GST to 4.09% post-GST, indicating an additional benefit of 2.71% which should have been passed on to the buyers. The DGAP concluded that the Respondent had profiteered by not reducing the pre-GST basic price by 2.71% and charging GST on the pre-GST price, resulting in a profiteered amount of Rs. 3,93,85,763/-.

3. Treatment of multiple projects as a single project for investigation:
The Respondent claimed that "Project 1" and "Project 2" were distinct projects and should not be clubbed together. The Respondent provided evidence such as separate RERA registrations, revised sanction plans, and a Chartered Accountant's certificate to support this claim. The DGAP, however, treated the projects as a single entity due to common documentation and lack of separate CENVAT Credit Ledger. The Authority directed the DGAP to re-investigate by treating the projects separately.

4. Inclusion of VAT ITC in the computation of profiteering:
The Respondent argued that the DGAP excluded VAT ITC from the computation, which was incorrect as the Respondent had paid VAT on deemed value addition and recovered VAT from home buyers. The Respondent provided VAT assessment orders and certificates from the VAT authorities to support this claim. The Authority directed the DGAP to re-examine the inclusion of VAT ITC in the profiteering computation.

5. Compliance with procedural requirements and submission of documents by the Respondent:
The DGAP reported that the Respondent did not fully cooperate during the investigation by failing to submit necessary documents and providing inconsistent home-buyer data. The Authority directed the Respondent to provide all required data and documents to the DGAP and instructed the DGAP to conduct a fresh investigation.

Conclusion:
The Authority concluded that the case required further investigation to determine profiteering accurately. The DGAP was directed to treat "Project 1" and "Project 2" as separate projects and re-investigate the matter, including the re-evaluation of VAT ITC. The Respondent was instructed to submit all relevant documents to the DGAP. The DGAP was given two months to furnish a fresh report.

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