2020 (7) TMI 442 - NAPA - GST

Profiteering - purchase of a flat - allegation that the benefit of reduction in the rate of tax not passed on - contravention of section 171 of CGST Act - imposition of penalty - HELD THAT - The amount of benefit of ITC which was required to be passed on by the Respondent or the profiteered amount is determined as ₹ 1,70,28,230/- including the GST @12% on the basic profiteered amount of Rs. as has been mentioned in Annexure-25 of the Report dated 10.12.2019, in terms of Rule 133 (1) of the above Rules. This amount includes an amount of ₹ 488/- including GST @12% on the base amount of ₹ 435/- which has been profiteered by the Respondent from the Applicant No. 1. The Respondent has also realized an additional amount of ₹ 1,70,27,742/- which includes both the profiteered amount @5.38% of the taxable amount (base price) and GST on the said profiteered amount from the other 176 flat buyers who were not party in the present proceedings. It is also clear from the facts of the case that the Respondent has been directed to pass on the benefit of ITC till 30.04.2019 as data only till April, 2019 was available. Any benefit of ITC which may become available to the Respondent post 30.04.2019 would a so be passed on by the Respondent to the eligible buyers, The State Commissioner GST shall ensure that the above benefit is passed on to the eligible buyers and a report is submitted to this Authority through the DGAP within a period of 4 months from the date of this order. Penalty - HELD THAT - It is also evident that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in his Project Sky Terraces 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.

Summary

Issues Involved:
1. Allegation of profiteering by not passing on the benefit of Input Tax Credit (ITC) under GST.
2. Examination of the complaint by the Rajasthan State Screening Committee and subsequent actions.
3. Investigation by the Director General of Anti-Profiteering (DGAP).
4. Non-cooperation by the Respondent during the investigation.
5. Calculation of the profiteered amount.
6. Directions for refund and reduction in prices.
7. Liability for penalty.

Detailed Analysis:

1. Allegation of Profiteering:
The Applicant No. 1 alleged that the Respondent had not passed on the benefit of ITC by way of commensurate reduction in the price of a flat in the project "Sky Terraces" on implementation of GST w.e.f. 01.07.2017.

2. Examination by the Rajasthan State Screening Committee:
The Rajasthan State Screening Committee on Anti-profiteering examined the application on 30.04.2019 and observed that the benefit of ITC had not been passed on by the Respondent. The application was forwarded to the Standing Committee on Anti-profiteering for further action.

3. Investigation by the DGAP:
The Standing Committee recommended a detailed investigation by the DGAP. The DGAP issued a notice to the Respondent to submit a reply regarding the ITC benefit. The investigation covered the period from 01.07.2017 to 30.04.2019. Despite several notices and summons, the Respondent did not cooperate, leading the DGAP to collect information from the Respondent's premises directly.

4. Non-cooperation by the Respondent:
The Respondent did not submit the required documents or appear before the DGAP. The DGAP had to collect the requisite documents from the Respondent's premises with the assistance of local tax officers.

5. Calculation of the Profiteered Amount:
The DGAP calculated the profiteered amount by comparing the ITC available during the pre-GST and post-GST periods. It was established that the ITC as a percentage of turnover increased from 1.41% in the pre-GST period to 6.79% in the post-GST period. This additional ITC of 5.38% should have resulted in a commensurate reduction in the base prices of the flats. The DGAP computed the profiteered amount as ?1,70,28,230/-, including GST.

6. Directions for Refund and Reduction in Prices:
The Respondent was directed to refund the profiteered amount of ?1,70,28,230/- to the flat buyers, including the Applicant No. 1, along with interest. The Respondent was also directed to reduce the prices of the flats commensurately. The refund should be made within three months, failing which the amount would be recovered by the Commissioner SGST and paid to the eligible buyers.

7. Liability for Penalty:
The Respondent denied the benefit of ITC to the buyers, contravening Section 171 (1) of the CGST Act, 2017. Therefore, the Respondent is liable for a penalty under Section 171 (3A) read with Rule 133 (3) (d) of the CGST Act, 2017. A notice was issued to the Respondent to explain why a penalty should not be imposed.

Conclusion:
The judgment concluded that the Respondent had profiteered by not passing on the benefit of ITC to the flat buyers. The Respondent was ordered to refund the profiteered amount with interest and reduce the prices of the flats. The Respondent was also liable for a penalty for contravening the provisions of the CGST Act.