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2022 (8) TMI 1436 - NAPA - GSTProfiteering - benefit of the input tax credit has been passed on in terms of section 171 of the Central Goods and Services Tax Act 2017 to the recipients in respect of construction service supplied or not - HELD THAT - The Authority has carefully considered the Report of the DGAP and the other material placed on record and finds that the DGAP in pursuance to this Authority s Interim Order dated 21-10-2019 has not investigated the matter pertaining to the project M Ireo Rise which was executed by the Respondent (M/s. Puma Realtors Pvt. Ltd.) in terms of section 171 of the CGST Act 2017 and the Rules made thereunder so as to determine whether there has been any profiteering by the Respondent therein. The DGAP furnished his Report dated 28-10-2021 to this Authority stating that the Respondent had provided some documents/information that were not enough to conclude as to whether the Respondent had benefitted to the additional ITC in post-GST and if yes then the said benefit of ITC has been passed on by him to the recipients by a commensurate reduction in price as per provision of section 171 of the CGST Act 2017 and Rules made thereunder. Further the DGAP had observed that a Corporate Insolvency Resolution Process (CIRP) was initiated against the Respondent under Insolvency and Bankruptcy Code 2016 (IBC) vide Order dated 17-10-2018 by the National Company Law Tribunal (NCLT) New Delhi. The said CIRP had been concluded by NCLT vide its Order dated 1-6-2021 whereby the Resolution Plan filed by the M/s. One City Infrastructure Pvt. Ltd was duly approved and subsequently implemented. This Authority finds that section 171 of the CGST Act 2017 and the Rules made thereunder cast a three fold responsibility on this Authority viz. to ensure that that there shall be no profiteering in case of reduction of tax rates or availability of ITC to suppliers to determine profiteered amount and to ensure that the profiteered amount so determined is returned/passed on along with interest to each recipient of such supply. The order dated 23-3-2020 is restored and in continuation of the subsequent orders dated 8-3-2021 27-4-2021 and 23-9-2021 it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.
Issues Involved:
1. Whether there was a reduction in the rate of tax or benefit of the input tax credit (ITC) on the supply of construction service by the Respondent after the implementation of GST. 2. Whether the Respondent passed on such benefit to the recipients, in terms of section 171 of the Central Goods and Services Tax Act, 2017. 3. Whether the proceedings initiated vide NOI dated 15-1-2021 can be continued once the Corporate Insolvency Resolution Process (CIRP) has been concluded by the NCLT. Issue-wise Detailed Analysis: 1. Reduction in the Rate of Tax or Benefit of ITC: The DGAP observed that there was no reduction in the rate of tax upon the implementation of GST. Before GST, the Respondent could avail of CENVAT credit for Service Tax on input services but not for Central Excise duty on inputs. Post-GST, the Respondent could avail of ITC for GST paid on all inputs and input services, leading to an accrual of ITC benefit. However, the investigation could not conclude whether this benefit was passed on to homebuyers due to the Respondent's failure to provide all required documents, including the homebuyers' list. 2. Passing on the Benefit of ITC: The DGAP's investigation was hindered by the Respondent's non-submission of vital documents needed to determine if the ITC benefit was passed on to the recipients. Despite the potential ITC benefit post-GST, the lack of documentation prevented the DGAP from concluding whether the benefit was appropriately transferred to the homebuyers. 3. Continuation of Proceedings Post-CIRP: The Respondent argued that the CIRP initiated under the Insolvency and Bankruptcy Code, 2016 (IBC) and concluded by the NCLT extinguished all claims and dues, including those related to the CGST Act. The NCLT's approval of the Resolution Plan meant that all claims not part of the plan were permanently extinguished. The Respondent cited legal precedents and section 238 of the IBC, which states that the IBC provisions override other laws. The Supreme Court upheld that claims not included in the Resolution Plan are extinguished post-approval, and no new claims can be initiated. Conclusion: Given the legal framework and the factual position, the claims or benefits that could not be quantified due to the Respondent's non-submission of documents will stand extinguished. The Resolution Applicant cannot be held accountable for the Respondent's failure to pass on the ITC benefit post-GST. Consequently, the proceedings initiated cannot continue against the Respondent. Order: The Authority, considering the DGAP's report and other materials, reiterated its direction to the DGAP to conduct a specific investigation into the "Ireo Rise" project under section 171 of the CGST Act, 2017. The DGAP is required to submit a report on profiteering, if any, by the Respondent. The Authority will take appropriate action based on the DGAP's report in accordance with the CGST Act, 2017, and other relevant laws. The Order falls within the limitation period prescribed under rule 133(1) of the CGST Rules, 2017, considering the Supreme Court's extension of limitation due to the COVID-19 pandemic.
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