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2019 (12) TMI 1159 - NAPA - GSTProfiteering - purchase of flat - allegation that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price of the flat - contravention of Section 171 of the CGST Act, 2017 - penalty - HELD THAT - The ratio of input tax credit as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2014 to March, 2016 was 1.54% and during the post-GST period from July, 2017 to December, 2018 the same was 5.79% and therefore, during the post-GST period the Respondent has benefited from the additional input tax credit to the extent of 4.25% 5.79% (-) 1.54% of the turnover as is evident from the perusal of Table-E of the Report dated 25.06.2019 submitted by the DGAP. It is also clear from the Table-F submitted by the DGAP that the additional input tax credit of 4.25% of the turnover should have resulted in the commensurate reduction in the base prices as well as cum-tax prices charged by the Respondent from his buyers. Therefore, as per the provisions of Section 171 (1) of the CGST Act, 2017, the Respondent is required to pass on the benefit of such additional input tax credit to the recipients. Computation of profiteered amount has been done in respect of 473 home buyers whereas the Respondent has booked 493 units till 31.12.2018. 20 customers who have booked flats and also paid the booking amounts in the pre-GST period, have not paid any amount during the post-GST period from 01.07.2017 to 31.12.2018 (period under investigation). Therefore, the benefit of input tax credit in respect of these 20 units is required to be calculated when the consideration is received from such buyers taking into account the proportionate input tax credit in respect of such units. The Respondent is directed to commensurately reduce the prices of his units as per the provisions of Rule 133 (3) (a) of the above Rules. He is further directed to pass on the benefit of ITC of ₹ 9,03,44,071/- to the above 473 recipients including the Applicant No. 1 as per the details submitted by the DGAP vide Annexure-18 of his Report alongwith the interest @ 18% PA to be paid from the date when the above amount was collected by the Respondent from them till the amount is paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 as all the buyers are identifiable - Since, the present investigation pertains to the period of 01.07.2018 to 31.12.018 any additional benefit which may accrue to the Respondent in future shall also be passed on by him to the eligible buyers failing which they shall be entitled to approach the Screening Committee on Anti-Profiteering Maharashtra for claiming the above benefit. The concerned Commissioner shall also ensure that the benefit of ITC is passed on to the eligible buyers. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project Godrej City Panvel Phase-I in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has apparently committed an offence under Section 171 (3A) of the above Act and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. This Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioner of CGST/SGST Maharashtra 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 concerned Commissioner through the DGAP within a period of 4 months from the date of issue of this order.
Issues Involved:
1. Whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017. 2. Whether such benefit was passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act, 2017. Issue-wise Detailed Analysis: 1. Benefit of Reduction in Tax Rate or ITC on Supply of Construction Service: The Applicant No. 1 alleged that the Respondent did not pass on the benefit of input tax credit (ITC) by way of commensurate reduction in the price of a flat purchased in the Respondent’s project. The Director General of Anti-Profiteering (DGAP) conducted an investigation and found that the Respondent had indeed availed the benefit of ITC post-GST implementation. The DGAP calculated the ratio of ITC to turnover for both pre-GST and post-GST periods, determining that the Respondent benefited from an additional ITC to the tune of 4.25% of the turnover post-GST. 2. Passing on the Benefit to Recipients: The DGAP's investigation revealed that the Respondent had not passed on the benefit of additional ITC to the recipients. The Respondent claimed to have passed on a benefit of 3.35% to the customers, but failed to substantiate this claim with evidence. The DGAP calculated that the total profiteered amount was ?9,03,44,071/-, which included the benefit not passed on to 473 home buyers. The Respondent was directed to reduce the prices of the units and pass on the benefit of ITC to the buyers along with interest at 18% per annum from the date the amount was collected until the date it is paid. Additional Points: - The Respondent's contention that the DGAP could not investigate beyond the application of the Applicant No. 1 was rejected. The DGAP is authorized to investigate whether the benefits of tax reduction or ITC have been passed on to all eligible recipients. - The Respondent's claim that the methodology used by the DGAP was arbitrary was also rejected. The methodology of comparing the ratio of ITC to turnover for pre-GST and post-GST periods was deemed appropriate. - The Respondent was found to have denied the benefit of ITC to buyers in contravention of Section 171(1) of the CGST Act, 2017, and was liable for penalty under Section 171(3A). Conclusion: The Respondent was directed to pass on the benefit of ITC amounting to ?9,03,44,071/- to the 473 recipients, including the Applicant No. 1, along with interest. The Respondent was also issued a show cause notice for imposition of penalty under Section 171(3A) of the CGST Act, 2017. The DGAP was directed to investigate whether the Respondent had availed ITC benefits in respect of other projects and submit a report. The Commissioner of CGST/SGST Maharashtra was directed to monitor the compliance of this order.
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