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2020 (6) TMI 621 - NAPA - GSTProfiteering - purchase of a flat in the Respondent s project Vedantam - allegation that the Respondent had not passed on the benefit of Input Tax Credit which had accrued to him, by commensurate reduction in the price of the flat - penalty - HELD THAT - This Authority hereby determines the profiteered amount as ₹ 40,92,054/- in terms of Rule 133 (1) of the CGST Rules, 2017 and directs the Respondent to pass on the benefit of ₹ 6,982/- 21,496 - 14,514 to the Applicant No. 1 and an amount of ₹ 40,70,558/- to the other buyers as per the details given in Annexure-18 of the DGAP s Report dated 05.12.2018 along with interest @18% per annum to the flat buyers from the dates from which the above amount was collected by him from the buyers till the payment is made as per the provisions of Rule 133 (3) (b) of the above Rules. The Respondent is also directed to reduce the prices of his flats commensurately as per the details mentioned above in terms of Rule 133 (3) (a) of the above Rules - It is also clear from the facts of the case that the Respondent has been directed to pass on the benefit of ITC till 31.08.2018. Any benefit of ITC which may become available to the Respondent post 31.08.2018 would also be passed on by the Respondent to the eligible buyers. The Concerned Commissioner GST shall ensure that the above benefit is passed on to the eligible buyers and report submitted to this Authority. Penalty - HELD THAT - The Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in his Project Vedantam in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. Therefore, he is apparently liable for imposition of penalty as per the provisions of Section 171 (3A) read with Rule 133 (3) (d) of the CGST Act, 2017. Therefore, notice be issued to him to explain why penalty should not be imposed on him. Accordingly, the notice dated 11.12.2018 whereby the Respondent was asked to explain why penalty should not be imposed on him under Section 29, 122-127 of the CGST Act, 2017 read with Rule 21 and 133 of the CGST Rules, 2017 should not be imposed, is partially withdrawn to that extent.
Issues Involved:
1. Alleged profiteering by the Respondent by not passing on the benefit of Input Tax Credit (ITC) post-GST implementation. 2. Determination of the correct amount of ITC benefit to be passed on. 3. Methodology for calculating the profiteered amount. 4. Compliance with Section 171 of the CGST Act, 2017. 5. Imposition of penalty on the Respondent for contravention of Section 171. Detailed Analysis: 1. Alleged Profiteering: The Applicant No. 1 filed a complaint alleging that the Respondent failed to pass on the benefit of ITC after the implementation of GST on 01.07.2017. The complaint was forwarded to the DGAP for investigation, which confirmed that the Respondent had availed ITC but did not reduce the price of the flat commensurately, thus contravening Section 171 of the CGST Act, 2017. 2. Determination of ITC Benefit: The DGAP's report stated that the Respondent had benefited from additional ITC to the extent of 5.28% of the taxable turnover post-GST. The Respondent claimed to have already passed on a 4% benefit to the Applicant No. 1. However, the DGAP found that the Respondent had not provided sufficient evidence to support this claim and had only passed on a partial benefit. 3. Methodology for Calculating Profiteered Amount: The DGAP used a comparative analysis of the ITC ratios pre-GST and post-GST to determine the profiteered amount. The pre-GST ITC ratio was 3.40%, and the post-GST ITC ratio was 8.68%, resulting in an additional ITC benefit of 5.28%. The DGAP calculated the total profiteered amount as ?40,92,054/- including GST. This methodology was deemed appropriate, logical, and reasonable by the Authority. 4. Compliance with Section 171 of the CGST Act, 2017: The DGAP's investigation revealed that the Respondent had not passed on the additional ITC benefit to the flat buyers, violating Section 171 of the CGST Act, 2017. The Respondent's claims of having given discounts for timely payments and waiving possession charges were not considered as passing on the ITC benefit. 5. Imposition of Penalty: The Authority determined that the Respondent's actions warranted a penalty under Section 171 (3A) of the CGST Act, 2017. The Respondent was directed to explain why a penalty should not be imposed for denying the ITC benefit to the flat buyers. Conclusion: The Authority ordered the Respondent to pass on the profiteered amount of ?40,92,054/- to the eligible buyers, including ?6,982/- to the Applicant No. 1, along with interest @18% per annum. The Respondent was also directed to reduce the prices of the flats commensurately and ensure that any future ITC benefits are passed on to the buyers. The Commissioners of CGST/SGST UP were instructed to monitor compliance and submit a report within four months. The order was delayed due to the COVID-19 pandemic and was passed in accordance with the Notification No. 35/2020-Central Tax dated 03.04.2020.
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