2019 (5) TMI 1448 - NAPA - GST

Profiteering - sale of a built up house located in Eldeco Country project launched by the Respondent in Sonipat, Haryana - benefit of input tax credit was not passed on - contravention of section 171 of CGST Act, 2017 - HELD THAT - From the perusal of the facts of the DGAP's Report it is revealed that the ratio of ITC to the taxable turnover during the pre GST period was to the extent of 0.61% as compared to post GST period of 3.45% thus, there was net benefit of 2.84% of ITC to the Respondent. Based on this net benefit and the amounts collected from the home buyers during the post GST period, an amount of ₹ 41 82,198/- has been computed as the profiteered amount as per Annexure-15. The Respondent has raised no objection against the computation of the above amount made by the DGAP vide Annexure-15 and hence it can be relied upon - as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, the profiteered amount is determined as ₹ 41,82,198/- which includes ₹ 2,83,026/- in respect of the Applicant No. 1. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 directs that the Respondent shall reduce the prices to be realised from the buyers of the flats commensurate with the benefit of ITC received by him as has been discussed above. The profiteered amount of ₹ 41,82,198/- paid along with interest is for the period July 2017 to August 2018, and in case any benefit of ITC which accrues subsequently shall also be passed by the Respondent to all the buyers failing which the Applicant No. 1 will be at liberty to file fresh application for grant of ITC benefit which may accrue to him. Though the Respondent did not deny that the benefit of ITC had accrued to him and he had to necessarily pass on the same to the home buyers as per the provisions of Section 171 of the CGST Act, 2017, the benefit of ITC was passed on by him only in the month of February 2019. He had not only collected extra amount from the buyers but also compelled them to pay more GST on the additional amount realised. The above act of the Respondent appears to be deliberate and conscious violation of the provisions of Section 171 of the CGST Act, 2017. Hence he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017 and therefore he is liable for imposition of penalty under the provisions of the above section. The Authority as per Rule 136 of the CGST Rules, 2017 directs the Commissioner of CGST/SGST, Haryana to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible buyers. A Report in compliance of this order shall be submitted to this Authority by the Commissioners CGST/SGST, Haryana within a period of 4 months from the date of receipt of this order.

Summary

Issues Involved:
1. Alleged illegal charging of GST and Service Tax.
2. Non-passing of Input Tax Credit (ITC) benefit.
3. Investigation and findings by the Directorate General of Anti-Profiteering (DGAP).
4. Computation and acceptance of profiteered amount.
5. Penalty and compliance monitoring.

Detailed Analysis:

1. Alleged Illegal Charging of GST and Service Tax:
The Applicant No. 1 alleged that the Respondent charged ?10,61,460 as GST on 90% of the basic sale price and ?44,227 as Service Tax on 10% of the basic sale price for a built-up house in the "Eldeco Country" project. The house was sold at a base price of ?98,28,312, and it was alleged that the benefit of ITC was not passed on to the Applicant post-GST implementation on 01.07.2017.

2. Non-passing of Input Tax Credit (ITC) Benefit:
The DGAP's investigation revealed that the Respondent did not pass on the benefit of additional ITC accrued post-GST implementation, which was required under Section 171 of the CGST Act, 2017. The ITC as a percentage of the total turnover during the pre-GST period was 0.61%, compared to 3.45% during the post-GST period, resulting in a net benefit of 2.84% of ITC to the Respondent.

3. Investigation and Findings by the Directorate General of Anti-Profiteering (DGAP):
The DGAP issued a notice to the Respondent, who claimed that the project was almost completed in the pre-GST regime and there was nominal procurement during the GST regime. The Respondent also argued that the sale of the building post-completion certificate was not liable to Service Tax/GST. However, the DGAP found that the Respondent had received booking amounts before the GST regime and completion certificate post-GST, justifying the charging of Service Tax and GST on demands raised.

4. Computation and Acceptance of Profiteered Amount:
The DGAP computed the profiteered amount as ?41,82,198, which included ?2,83,026 from Applicant No. 1 and ?38,99,172 from 124 other recipients. The Respondent accepted the DGAP's computation and provided details of refunds made to customers, including interest, totaling ?59,57,306. The Respondent also provided detailed submissions and evidence of passing on the ITC benefit to customers.

5. Penalty and Compliance Monitoring:
The Authority found that the Respondent's failure to pass on the ITC benefit until February 2019 constituted a deliberate violation of Section 171 of the CGST Act, 2017. The Respondent was issued a notice to explain why a penalty under Section 122 of the CGST Act should not be imposed. The Authority directed the Commissioner of CGST/SGST, Haryana, to monitor the order's compliance and submit a report within four months.

Conclusion:
The Respondent was directed to reduce prices commensurate with the ITC benefit and ensure any future ITC benefits are passed to buyers. The Authority emphasized the deliberate nature of the Respondent's actions and the necessity for penalty imposition. Compliance monitoring by the Commissioner of CGST/SGST, Haryana, was mandated to ensure the order's execution.