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2022 (5) TMI 973 - NAPA - GSTProfiteering - purchase of flats - benefit of reduction in the rate of GST not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT - The authority finds that the respondent has profiteered by an amount of Rs. 7,23,50,135/-, Rs. 12,94,35,170/- and Rs. 4,91,23,070/- for the projects 'The Camellias','The ultima' respectively during the period of investigation i.e., 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the respondent from his home buyer, in all the three projects shall be refunded by him, alongwith interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133(3)(b) of CGST Rules 2017. It is also evident from the narration of facts that the respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his projects in contravention of section 171 (1) of CGST Act, 2017 and has committed an offence under section 171(3A) of the Act. That section 171 (3A) of the CGST Act, has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 30.11.2020, therefore, he is liable for imposition of penalty under the above section. Application disposed off.
Issues Involved:
1. Allegation of profiteering by the Respondent. 2. Determination of whether the benefit of Input Tax Credit (ITC) was passed to the buyers. 3. Calculation of the profiteered amount. 4. Jurisdiction and powers of the Anti-Profiteering Authority and DGAP. 5. Compliance with principles of natural justice. 6. Constitutionality of the Anti-Profiteering Authority. 7. Methodology for calculating profiteering. Issue-Wise Detailed Analysis: 1. Allegation of Profiteering: The case arose from a complaint alleging that the Respondent charged GST on Preferential Location Charges (PLC) despite the completion certificate being issued, which should exempt such charges from GST. The Haryana State Screening Committee forwarded the complaint for further investigation. 2. Determination of Benefit of ITC: The DGAP's investigation revealed that the Respondent was availing ITC from a common pool for multiple projects. The investigation aimed to determine if the Respondent passed the benefit of additional ITC to buyers in the projects "The Camellias," "The Crest," and "The Ultima." The ITC ratios pre-GST and post-GST were compared to ascertain the benefit. 3. Calculation of Profiteered Amount: - The Camellias: Pre-GST ITC ratio was 0.67%, post-GST was 1.84%, resulting in an additional benefit of 1.18%. The profiteered amount was Rs. 7,23,50,135. - The Crest: Pre-GST ITC ratio was 2.64%, post-GST was 14.40%, resulting in an additional benefit of 11.76%. The profiteered amount was Rs. 12,94,35,170. - The Ultima: Pre-GST ITC ratio was 2.45%, post-GST was 17.46%, resulting in an additional benefit of 15.01%. The profiteered amount was Rs. 4,91,23,070. 4. Jurisdiction and Powers: The Respondent contended that the Anti-Profiteering Authority and DGAP did not have the power to initiate suo moto investigations. However, the Authority clarified that it is empowered under Section 171 (2) of the CGST Act and Rule 129 to examine whether benefits have been passed on, and the investigation was within its jurisdiction. 5. Compliance with Principles of Natural Justice: The Respondent argued that they were not given an opportunity to present their case before the Standing Committee, violating natural justice principles. The Authority found no provision in Rule 128 requiring a hearing at this stage and deemed the process followed as compliant with the rules. 6. Constitutionality of the Anti-Profiteering Authority: The Respondent challenged the constitutionality of the Authority, arguing it lacked a judicial member. The Authority referenced various Supreme Court judgments, concluding that it performs quasi-judicial functions and does not require a judicial member. The Authority's composition and powers were deemed constitutional. 7. Methodology for Calculating Profiteering: The Respondent contended that the methodology for calculating profiteering was arbitrary and lacked statutory backing. The Authority stated that Section 171 (1) of the CGST Act provides a clear methodology, and the comparison of pre-GST and post-GST ITC ratios is a valid approach. The benefit of ITC must be passed on to each buyer, and the calculation method used by the DGAP was upheld. Conclusion: The Respondent was found to have profiteered by not passing on the additional ITC benefits to buyers in the three projects. The total profiteered amount was determined to be Rs. 25,09,08,375, which the Respondent was ordered to refund to the buyers along with interest. The Authority also directed the publication of this order and compliance within three months, with further action to be taken in case of non-compliance.
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