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2019 (10) TMI 1083 - NAPA - GSTProfiteering - purchase of a flat in the Respondent s project ROF Aalayas in Sector-102, Gurgaon, Haryana - benefit of input tax credit not passed by way of commensurate reduction in price at the time of introduction of GST w.e.f. 01.07.2017 - contravention of provisions of Section 171 of the CGST Act, 2017 - Penalty - HELD THAT - The provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has profiteered an amount of ₹ 2,47,48,549/- which includes GST @12% or 8% as applicable on the base profiteered amount of ₹ 2,28,05,373/- from all the 731 residential units for the period w.e.f. 01.07.2017 to 31.09.2018 as per Annexure- 13 of the Report. Accordingly, the above amounts shall be paid to the above Applicants and the other eligible house buyers by the Respondents along with interest @18% from the date from which these amounts were realised from them till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers - it is clear that the Respondent has profiteered an amount of ₹ 2,47,48,549/- for the period of investigation. Therefore, in view of the above facts the Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce/refund the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him As far as the total additional input tax credit that will be available to the Respondent is concerned it cannot be determined at this stage when the construction of the project is yet to be completed and the DGAP is directed to carry out a comprehensive investigation at the time of issue of occupancy certificate. Penalty - HELD THAT - It is evident from the above that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed should not be imposed on him. Application disposed off.
Issues Involved:
1. Whether there was any net additional benefit of ITC to the Respondent? 2. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017, by not passing on the benefit ITC by the Respondent? Issue-wise Detailed Analysis: 1. Net Additional Benefit of ITC to the Respondent: The Director General of Anti-Profiteering (DGAP) conducted a detailed investigation and reported that the Respondent benefited from additional input tax credit (ITC) post-GST implementation. The DGAP's report highlighted that the input tax credit as a percentage of turnover increased from 4.31% in the pre-GST period to 8.15% in the post-GST period. This indicated an additional benefit of 3.84% of the turnover. The DGAP's investigation period covered from 01.07.2017 to 30.09.2018, and it was found that the Respondent did not pass on this benefit to the buyers by way of commensurate reduction in prices, as required under Section 171 of the CGST Act, 2017. 2. Violation of Section 171 of the CGST Act, 2017: The DGAP's report concluded that the Respondent had contravened the provisions of Section 171 by not passing on the benefit of additional ITC to the buyers. The total profiteered amount was calculated to be ?2,47,48,549/-, which included GST @12% or 8% on the base profiteered amount of ?2,28,05,373/-. The Respondent's contention that the calculation methodology was erroneous and that the cost of construction had increased post-GST was rejected. The Authority upheld the DGAP's methodology, stating that the calculation of profiteering is based on the increase in ITC as a percentage of total taxable turnover. Judgment: The Authority determined that the Respondent had indeed profiteered an amount of ?2,47,48,549/- and ordered that this amount be refunded to the eligible buyers along with interest @18% from the date of realization till the date of payment. The Respondent was also directed to reduce/refund the price to be realized from the buyers of the flats commensurate with the benefit of ITC received. The DGAP was instructed to carry out a comprehensive investigation at the time of issue of the occupancy certificate to determine any additional benefit of ITC that should be passed on to the buyers. Furthermore, the DGAP was directed to investigate all other projects of the Respondent for possible profiteering violations. The Authority also ordered the issuance of a Show Cause Notice to the Respondent for the imposition of penalty under Section 171 (3A) of the CGST Act. The Commissioners of CGST/SGST Haryana were directed to monitor the compliance of this order under the supervision of the DGAP and submit a compliance report within three months. Conclusion: The judgment concluded that the Respondent had violated Section 171 by not passing on the benefit of additional ITC to the buyers and ordered the refund of the profiteered amount along with interest. The DGAP was directed to conduct further investigations into the Respondent's other projects, and a Show Cause Notice was to be issued for the imposition of penalty.
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