2020 (4) TMI 905 - NAPA - GST

Profiteering - construction service - it is alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price of the shop - contravention of provisions of section 171 of CGST Act - HELD THAT - It is revealed that the Respondent is in the Real Estate business and the DGAP's Report is with regard to his project U Faria situated at C-04A, Sector-16B, Greater Noida, Uttar Pradesh under which he has constructed 190 commercial shops out of which he has sold 178 shops. It is also revealed that the Applicant No. 1 had filed a complaint with the Standing Committee on 29.11.2018 alleging that the Respondent had not passed on the benefit of additional ITC which he has availed after coming in to force of the GST w.e.f. 01.07.2017, in respect of Shop No. G-122 which he has purchased from the Respondent. The above complaint was examined by the Standing Committee on Anti-Profiteering in its meeting held on 11.03.2019 and was forwarded to the DGAP for detailed investigation under Rule 129 (I) of the above Rules. It is clear that an amount of Rs. 1,77,50,478/- of ITC has been blocked by the State GST authorities as is evident from Annexure-2 mentioned above. Therefore, the Respondent cannot utilize the above amount for discharging his GST output liability. The Respondent can accordingly, not be said to have obtained the additional benefit of above amount of ITC during the post-GST period. Therefore, the ratio of ITC to the turnover computed by the DGAP during the post-GST period vide Table-B cannot be considered for computation of the profiteered amount until the above amount of ITC is made available to the Respondent for utilization. Therefore, the amount of Rs. 24, 78,383/- computed as the profiteered amount by the DGAP as per Annexure-14 cannot be determined as the profiteered amount in terms of Section 171 (1) of the above Act read with Rule 133 (1) of the CGST Rules, 2017. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on 25.09.2019 the order was to be passed on or before 24.03.2020. However, due to prevalent pandemic of COVI 19 in the Country this order could not be passed on or before the above date due to force majeure. Accordingly, this order is being passed today in terms of the Notification No. 35/2020-Central Tax dated 03.04.2020 issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes Customs under Section 168 A of the CGST Act, 2017

Summary

Issues Involved:

1. Whether the benefit of Input Tax Credit (ITC) was passed on by the Respondent to the Applicant and other recipients.
2. Whether the DGAP exceeded its jurisdiction by including customers other than the Applicant No. 1.
3. Whether the calculation of profiteering should consider ITC availed or ITC utilized.
4. Whether the Respondent's claim of passing on ITC benefits through discounts and credit notes was valid.
5. Whether the blocked ITC by State GST authorities should be considered in the calculation of profiteering.

Issue-wise Detailed Analysis:

1. Benefit of ITC Passed On:
The Director General of Anti-Profiteering (DGAP) conducted an investigation to determine if the Respondent passed on the benefit of ITC post-GST implementation. The investigation covered the period from 01.07.2017 to 31.03.2019. The DGAP found that the Respondent benefited from additional ITC of 1.74% of the turnover, which was not passed on to the recipients. The DGAP calculated that the Respondent profiteered an amount of Rs. 24,78,383/-, including Rs. 37,107/- from Applicant No. 1.

2. Jurisdiction of DGAP:
The Respondent contended that the DGAP exceeded its jurisdiction by calculating profiteering for customers other than Applicant No. 1. The DGAP argued that Section 171 of the CGST Act mandates passing on the benefit of ITC to all recipients, not just the complainant. The DGAP stated that restricting the investigation to the complainant would deny other recipients their due benefit.

3. Calculation of Profiteering (ITC Availed vs. ITC Utilized):
The Respondent argued that the DGAP should consider ITC utilized (Rs. 1.6 Crore) instead of ITC availed (Rs. 3.31 Crore) for calculating profiteering. The DGAP maintained that the amount of credit availed was taken in all investigations, as unutilized credit would be used in the future to offset tax liabilities.

4. ITC Benefits Through Discounts and Credit Notes:
The Respondent claimed to have passed on ITC benefits through discounts and credit notes, amounting to Rs. 9,61,130/-. The DGAP verified the credit notes and found that they were issued after the investigation period. The DGAP stated that the Respondent did not produce these credit notes during the investigation.

5. Blocked ITC by State GST Authorities:
The Respondent argued that the DGAP's calculation of profiteering was erroneous as it included ITC of Rs. 1,77,50,478/- blocked by the State GST authorities. The DGAP acknowledged that the ITC was blocked on 28.03.2019 but stated that it was available to the Respondent during the investigation period. The DGAP could not ascertain the reason for blocking the ITC.

Order:
The Authority directed the DGAP to further investigate the following issues:
1. Verification of the blocked ITC amounting to Rs. 1,77,50,478/-.
2. Consideration of the blocked ITC in the calculation of profiteering.
3. Verification of the Respondent's claim of passing on ITC benefits amounting to Rs. 9,61,130/-.
4. Verification of the Respondent's claim of passing on ITC benefits to Applicant No. 1 amounting to Rs. 95,205/-.

The DGAP was instructed to submit a fresh report within three months. The order was delayed due to the COVID-19 pandemic and was passed under the Notification No. 35/2020-Central Tax dated 03.04.2020. Copies of the order were supplied to the Applicants, the Respondent, and the Deputy Commissioner SGST, Gautam Budh Nagar, Uttar Pradesh for necessary action.