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2020 (9) TMI 160 - NAPA - GSTProfiteering - purchase of apartment - allegation that the benefit of Input Tax Credit (ITC) not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT - The Respondent has benefited from the additional ITC to the tune of 1.99% of the total turnover in respect of the project PARKWEST-EMERALD during the period from July, 2017 to April, 2019 which he was required to pass on to the buyers of the flats of the above project by commensurately reducing the prices of the flats which he has not done and hence he has violated the provisions of Section 171 (1) of the CGST Act, 2017. Accordingly, as per the provisions of Section 171 (2) of the above Act read with Rule 133 (1) of the CGST Rules. 2017 the profiteered amount is determined as ₹ 9,67,330/- which also includes the GST on the base profiteered amount of ₹ 8,63.687/- in respect of the above project. Since, the Respondent has already passed on an amount of ₹ 31,823/- to the Applicant No. 1 which was due to him, hence, no further benefit is to be passed on to the above Applicant. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on an amount of ₹ 9,67,330/- to the flat buyers mentioned in the above Annexure along with the interest 18% per annum in terms of Section 171 (1) read with Rule 133 (3) (b) of the above Rules from the dates from which the above amounts were collected by him from them till the payment is made, within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-21 attached with the Report dated 31.01.2020. The Respondent has also availed benefit of ITC of 3.62% of the total turnover in respect of the project PARKWEST-MAPLE during the period from July, 2017 to April, 2019 which he was required to pass on to the flat buyers of the above project which he has failed to do and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent and thus an amount of ₹ 3,03,94,113/- inclusive of GST @ 12% on the base amount of ₹ 2,71,37,601/- is determined as the profiteered amount as per the provisions of Section 171 (2) and Rule 133 (1) - These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the amounts of ₹ 3,03,19,184/- and ₹ 74,929/- to the other flat buyers and the Applicant No. 2 respectively along with the interest @ 18% per annum in terms of Section 171 (1) read with Rule 133 (3) (c) of the above Rules from the dates from which the above amounts were collected by him from them till the payment is made Within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-22 attached with the Report dated 31.01.2020. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats of the above projects commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 30.04.2019 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. In case the above benefit is not passed on by the Respondent the above Applicants or any other buyer shall be at liberty to approach the Karnataka State Screening Committee to initiate fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above projects in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171 (1) during the period from 01.07.2017 to 30.04.2019 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - However, perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that Section 171 (3A) has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.04.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent.
Issues Involved:
1. Whether the Respondent passed on the benefit of Input Tax Credit (ITC) to the Applicants and other home buyers post-GST implementation. 2. Calculation of profiteering amount by comparing pre-GST and post-GST periods. 3. Methodology for determining the benefit of ITC and its distribution among home buyers. 4. Compliance with Section 171 of the CGST Act, 2017. Issue-Wise Detailed Analysis: 1. Whether the Respondent passed on the benefit of Input Tax Credit (ITC) to the Applicants and other home buyers post-GST implementation: The Applicants alleged that the Respondent did not pass on the benefit of ITC post-GST implementation. The Karnataka State Screening Committee and the Standing Committee on Anti-profiteering forwarded the complaints to the Director General of Anti-Profiteering (DGAP) for investigation. The DGAP found that the Respondent had not reduced the basic prices of flats commensurate with the additional benefit of ITC and had charged GST on pre-GST prices, thus violating Section 171 of the CGST Act, 2017. 2. Calculation of profiteering amount by comparing pre-GST and post-GST periods: The DGAP calculated the ratios of ITC to turnover for both pre-GST and post-GST periods. For the project "PARKWEST-EMERALD," the ratio was 4.70% pre-GST and 6.69% post-GST, indicating an additional benefit of 1.99%. For "PARKWEST-MAPLE," the ratios were 1.97% pre-GST and 5.59% post-GST, indicating an additional benefit of 3.62%. The profiteered amounts were determined as ?9,67,330 for "PARKWEST-EMERALD" and ?3,03,94,113 for "PARKWEST-MAPLE," including GST on the base profiteered amounts. 3. Methodology for determining the benefit of ITC and its distribution among home buyers: The DGAP used a mathematical methodology to compute the ratios of ITC to turnover to determine the additional benefit of ITC. The Respondent's arguments about synchronizing ITC with the work done were rejected, as the benefit has to be computed based on the ITC available and the turnover received. The DGAP's methodology was found to be logical, reasonable, and in accordance with Section 171 (1) of the CGST Act, 2017. The DGAP's calculations were based on the CENVAT/VAT and ITC Registers as well as the Returns filed by the Respondent, ensuring accuracy. 4. Compliance with Section 171 of the CGST Act, 2017: The Respondent was found to have violated Section 171 (1) by not passing on the benefit of ITC to the buyers. The profiteered amounts were ordered to be returned to the eligible recipients along with interest @ 18% per annum. The Respondent was directed to reduce the prices commensurate with the benefit of ITC. The Commissioners of CGST/SGST Karnataka were instructed to monitor compliance and submit a report within four months. Conclusion: The Respondent failed to pass on the benefit of additional ITC to the home buyers, resulting in profiteering. The DGAP's methodology for calculating the benefit was upheld, and the Respondent was directed to refund the profiteered amounts with interest. The Respondent was also instructed to reduce prices in line with the benefit of ITC. The case highlighted the importance of compliance with Section 171 of the CGST Act, 2017, to ensure that the benefits of tax reductions are passed on to consumers.
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