9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (8) TMI 1512 - NAPA - GSTProfiteering - construction service supplied by the Respondent Applicant No. 1 - failure to pass on the benefit of ITC by way of commensurate reduction in the price on purchase of Apartment - contravention of Section 171 of the CGST Act 2017 - HELD THAT - It is dear from the plain reading of Section 171(1) that it deals with two situations one relating to the passing on the benefit at reduction in the rate of tax and the second on the passing on the benefit of the ITC. On the issue of reduction in the tax rate it is apparent from the DGAP s Report that there has been no reduction in the rate of tax en the post-GST period hence the only issue to be examined as whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP s Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April 2018 to June 2017) was 1.88% and during the post-GST period (July2017 to November 2020) it was 3.78% for the Project Panchshil Towers . This confirms that post-GST the Respondent has benefited from additional ITC to the tune of 1.90% 3.78% (-) 1.88% or his turnover for the said Project and the same was required to be passed on to the customers/flat buyers/recipients. The Authority finds that the Respondent has profiteered by Rs.1, 96, 69, 483/- for the Project Panchshil Towers during the period of Investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers/customers/recipients in the above said Project shall be refunded by him along with interest @18% thereon from the date when the above amount was profiteered by him till the date of such payment under the provisions of Rule 133(3) (b) of the CGST Rules 2017. Liability of Interest - HELD THAT - The Respondent is also liable to pay Interest as applicable on the entire amount profiteered i.e. Rs.1, 96, 69, 483/- for the Project Panchshil Towers . Hence the Respondent is directed to also pass on Interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered starting from the dale from which the above amount was profiteered till the date of passing on/ payment as per the provisions of Rule 133(3) (b) of the CGST Rules 2017. Penalty - HELD THAT - Section 171 (3A) of the CGST Act 2017 has been inserted in the CGST Act 2017 vide Section 112 of the Finance Act 2019 and the same became operational w.e.f. 01.01.2O20. As the period of Investigation was 01.07.2017 to 30.11.2020 therefore he is liable for imposition of penalty under the provisions of the above Section for the amount profiteered from 01.01.2020 onwards. Accordingly notice be issued to him to explain why penalty should not be imposed on him.
1. ISSUES PRESENTED and CONSIDERED
The core issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Violation of Section 171(1) of the CGST Act, 2017 Relevant Legal Framework and Precedents: Section 171(1) of the CGST Act mandates that any reduction in the rate of tax on any supply of goods or services or the benefit of ITC must be passed on to the recipient by way of commensurate reduction in prices. The explanation attached to Section 171 defines "profiteered" as the amount determined on account of not passing the benefit of reduction in tax rate or ITC to the recipient. Court's Interpretation and Reasoning: The Authority found that the Respondent had not passed on the benefit of ITC to the buyers, which was evident from the investigation conducted by the Director General of Anti-Profiteering (DGAP). The Respondent's claim that no methodology was prescribed for determining profiteering was rejected, as the Authority clarified that the procedure and methodology for passing on benefits were outlined in Section 171(1) itself. Key Evidence and Findings: The DGAP's report indicated that the ITC as a percentage of turnover available to the Respondent increased from 1.88% pre-GST to 3.78% post-GST, confirming an additional benefit of 1.90% that was not passed on to the buyers. Application of Law to Facts: The Respondent was found to have profiteered an amount of Rs. 1,96,69,483/- by not reducing prices commensurately with the ITC benefit received post-GST implementation. Treatment of Competing Arguments: The Respondent argued that no methodology was prescribed for anti-profiteering, and that Section 171 was unconstitutional as it regulated prices. These arguments were dismissed by the Authority, which stated that the legislative intent was clear in requiring the passing on of tax benefits to consumers. Issue 2: Determination of Additional ITC Benefit and Validity of Respondent's Arguments Relevant Legal Framework and Precedents: Section 171(1) of the CGST Act and the corresponding rules under the CGST Rules, 2017 provide the framework for determining the benefit of ITC that must be passed on to recipients. Court's Interpretation and Reasoning: The Authority upheld the DGAP's methodology for calculating the profiteered amount, which was based on the difference in ITC ratios pre- and post-GST. The Authority rejected the Respondent's claim that the absence of a prescribed methodology rendered the investigation arbitrary. Key Evidence and Findings: The DGAP's report detailed the calculation of the profiteered amount, which included both the base price and the GST on the profiteered amount. The Respondent's claim of having passed on ITC benefits to some buyers was only partially verified. Application of Law to Facts: The Respondent was directed to refund the profiteered amount along with interest to the affected buyers, as the methodology used by the DGAP was deemed appropriate. Treatment of Competing Arguments: The Respondent's arguments regarding the lack of a prescribed methodology, the alleged unconstitutionality of Section 171, and the claim that the anti-profiteering provisions could only be triggered by unlawful business practices were all rejected. The Authority emphasized the legislative intent to protect consumers and ensure they receive the benefits of tax reductions and ITC. 3. SIGNIFICANT HOLDINGS The Authority concluded that the Respondent had indeed profiteered by Rs. 1,96,69,483/- by not passing on the benefit of additional ITC to the buyers. The Respondent was ordered to refund this amount along with interest to the affected buyers within three months. The Authority also directed further investigation into the Respondent's other projects to ensure compliance with Section 171 of the CGST Act. Core Principles Established:
Final Determinations on Each Issue:
|
