2022 (4) TMI 552 - NAPA - GST

Profiteering - benefit of additional input tax credit had not been passed on to the home buyers or not - period from July 2017 to September, 2020 - violation of the provisions of Section 171 (1) of the CGST Act, 2017 or not - time limitation - HELD THAT - The service rendered by the Respondent by way of construction and development of the project was not in existence during the pre-GST regime. Also the Phase III of the project is it yet to be launched and has not been registered with RERA till date - In the present case for Phase II the draw of lots, allotment of units and receipt of payments has taken place in the post-GST era. It is also apparent from the record that the Respondent has received the Environment Clearance from the State Environment Impact Assessment Authority Haryana on 02.05.2019 before which he could not have started the execution of the project. On the basis of the sequence of the events it could be safely concluded that the above project has been started after coming in to force of the GST w.e.f. 01.07.2017. It is also clear that the homebuyers were allotted flats only after coming in to force of the GST w.e.f. 01.07.2017. As project was launched after implementation of the GST w.e.f. 01.07.2017, apparently there was no pre-GST tax rate or input tax credit availability that could be compared with the post-GST tax rate and the input tax credit, to determine whether there was any benefit that was required to be passed on by way of reduced prices. Phase III of the project it is yet to be launched and had not been registered with RERA till date. Thus, it is established that the Respondent has not contravened the provisions of Section 171 (1) of the CGST Act, 2017 and there are no merit in the instant case and the same is accordingly dismissed. Time Limitation - Rule 133(1) of the CGST Rules, 2017 - HELD THAT - The quasi-judicial proceedings in the matter could not be completed by the Authority due to lack of required quorum of members in the Authority during the period 29.04.2021 till 23.02.2022, and that the minimum quorum was restored only w.e.f. 23.02.2022 and hence the matter was taken up for quasi-judicial proceedings vide Order dated 23.03.2022 and the Applicant No. 1 was given one more opportunity to file written submissions against the DGAP's Report. However, the Applicant No. 1 vide his email dated 29.03.2022 reiterated his earlier submissions made via email dated 13.12.2020 - this Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.

Summary

Issues Involved:
1. Whether there is benefit of additional ITC available to the Respondent which has not been passed on by him?
2. Whether there is any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the Respondent?

Issue-wise Detailed Analysis:

I. Benefit of Additional ITC:
The Director General of Anti-Profiteering (DGAP) investigated whether the Respondent had passed on the benefit of input tax credit (ITC) to home buyers for Project Aangan, Phases II and III. The investigation period was from July 2017 to September 2020. The Respondent argued that Phases II and III were launched post-GST implementation, and hence, the provisions of Section 171 of the CGST Act, 2017 did not apply as there was no pre-GST tax rate or ITC structure to compare with the post-GST scenario.

The DGAP confirmed that Phase II was registered with RERA on 22.12.2017, and the draw of lots for allotment of flats took place on 12.06.2018. The environmental clearance for Phase II was issued on 02.05.2019, and construction began thereafter. Since the project activities and financial transactions occurred post-GST, there was no pre-GST ITC to compare, and thus, the provisions of Section 171(1) were not applicable.

Regarding Phase III, the DGAP noted that it had not been launched or registered with RERA, and therefore, the question of profiteering did not arise.

II. Violation of Section 171 (1) of the CGST Act, 2017:
The DGAP's report and subsequent clarifications revealed that the Respondent did not claim any ITC in the pre-GST period as the construction of affordable housing was exempt from Service Tax. The Respondent had not availed any CENVAT credit during the pre-GST era. The DGAP confirmed that two projects, "Project - Aangan Phase-I" and "Project - Aangan Phase-II," were registered under the current HRERA registration, while "Project - Aangan Phase-III" was not launched or registered.

The DGAP's earlier report dated 14.06.2019, regarding Phase I, confirmed profiteering of ?6,24,48,008/-, which was upheld by the Authority. However, for Phase II, since the project was initiated post-GST, there was no pre-GST tax rate or ITC structure to compare. Therefore, the DGAP concluded that the provisions of Section 171(1) were not attracted.

The Authority reviewed the DGAP's findings and confirmed that the Respondent had not contravened the provisions of Section 171(1) of the CGST Act, 2017. The project activities for Phase II occurred entirely in the post-GST period, and Phase III had not been launched. Consequently, there was no basis for profiteering claims, and the case was dismissed.

Conclusion:
The Respondent did not violate Section 171(1) of the CGST Act, 2017, as the projects in question were launched post-GST, and there was no pre-GST ITC benefit to pass on to buyers. The case was dismissed due to the lack of merit.