2022 (6) TMI 526 - NAPA - GST

Profiteering - purchase of Duplex Row House - it is alleged that the Respondent had not passed on the benefit of ITC although he had charged GST @12% w.e.f. 01.07.2017 from the said Applicant - contravention of section 171(1) of GST Act - penalty - HELD THAT - It is clear from a plain reading of Section 171 (1), that it deals with two situations- one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the said issues, it is apparent from the DGAP's Report and the available record that the Completion Certificate for the project Sahej Valley was issued on 31.03.2016, i.e. prior to the date of introduction of GST through which the provisions of Anti-Profiteering were introduced. In support of the claim, the Respondent has also produced a copy of sale deed for other units sold post completion in October, 2017, to establish that the project was completed in March, 2016 and that no Service Tax/GST was charged on such units sold post completion. Since, the Completion Certificate was obtained for the subject project before the introduction of GST and also there has not been any reduction of GST rate in the instant case, the provisions of Section 171 dealing with Anti-profiteering cannot be made applicable to the said project in the view of the fact that there was no additional ITC which had been utilized by the Respondent, which was relevant for establishing allegation of profiteering. Further, no fresh demand has been raised by the Respondent upon Applicant No.1 in the post-GST regime, only a reminder for previous demand was issued. Launching of the project, Agreement to sell and Completion Certificate of the project had taken place in the pre-GST regime and hence, there was no post-GST tax rate or ITC structure which could be compared with the pre-GST tax rate and ITC and also the anti-profiteering provisions related to Section 171 were not in existence at that time. Accordingly, it is clear that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it does not qualify to be a case of profiteering. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on 31.12.2020 the order was to be passed on or before 30.05.2021 However, due to prevalent pandemic of COVID-19 in the Country this order could not be passed on or before the above date - Hon'ble Supreme Court in Suo Moto Writ Petition (C) no. 3/2020 , vide its Order dated 10.1.2022 2022 (1) TMI 385 - SC ORDER has directed that In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, the longer period shall apply. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Therefore, the allegation that the Respondent has not passed on the benefit of ITC in this case is not found sustainable - Application dismissed.

Issues Involved:
1. Basis of accepting the Completion Certificate issued by a private Architect.
2. Competent Authority to issue the Completion Certificate in the State of Odisha.
3. Whether the Respondent earned ITC on the project during the period from July 2017 till the date of investigation.
4. Utilization of ITC by the Respondent during the period from July 2017 till the date of investigation.
5. Claim of transitional credit through TRAN-1 statements by the Respondent.
6. Availment of additional ITC by the Respondent since July 2017 and liability to pass it on to buyers.
7. Sale of landowners' share of houses and passing on the benefit of ITC to buyers.
8. Entitlement of Applicant No. 1 to the benefit of ITC.
9. Eligibility of the rest of the house buyers for the benefit of ITC.

Detailed Analysis:

1. Basis of Accepting the Completion Certificate Issued by a Private Architect:
The DGAP clarified that under Section 66E(b) of the Finance Act 1994, a completion certificate issued by a registered architect, chartered engineer, or licensed surveyor is valid if there is no local law requirement for such a certificate. The completion certificate issued by Ar. Arijit Sarkar, a registered architect with the Council of Architecture, was deemed valid and accepted.

2. Competent Authority to Issue the Completion Certificate in the State of Odisha:
The DGAP referred to Section 20 of The Orissa Development Authorities Act, 1982, which allows a registered architect to issue a completion certificate. The certificate issued by Ar. Arijit Sarkar was valid under this provision.

3. Whether the Respondent Earned ITC on the Project During the Period from July 2017 till the Date of Investigation:
The DGAP reported that the Respondent earned ITC for repair and maintenance services, not for construction services, during the relevant period. The ITC was irrelevant for profiteering calculations and was not considered.

4. Utilization of ITC by the Respondent During the Period from July 2017 till the Date of Investigation:
The Respondent utilized ITC for discharging GST liability on repair and maintenance services, not on construction services.

5. Claim of Transitional Credit Through TRAN-1 Statements by the Respondent:
The Respondent claimed transitional ITC of Rs. 16,35,851/- through the TRAN-1 statement, which was unrelated to the project "Sahej Valley."

6. Availment of Additional ITC by the Respondent Since July 2017 and Liability to Pass it on to Buyers:
The Respondent did not avail additional ITC for construction services and was not liable to pass any benefit to buyers.

7. Sale of Landowners' Share of Houses and Passing on the Benefit of ITC to Buyers:
The Respondent transferred possession of the landowner's share of units on 05.05.2016 and had no details about their status post-transfer. Since the project was completed before GST implementation, no profiteering occurred.

8. Entitlement of Applicant No. 1 to the Benefit of ITC:
The construction service was completed before GST introduction, and there was no additional accrual of ITC to the Respondent. Therefore, Section 171 (1) of the CGST Act, 2017, was not contravened.

9. Eligibility of the Rest of the House Buyers for the Benefit of ITC:
The Respondent did not charge Service Tax or GST on units sold post-completion. Since the project was completed before GST implementation, no additional ITC was available to be passed on to buyers.

Conclusion:
The Authority concluded that the provisions of Section 171 of the CGST Act, 2017, were not applicable as the project was completed before GST implementation. The Respondent did not benefit from additional ITC nor was there a reduction in the tax rate in the post-GST period. Therefore, the allegation of profiteering was not sustainable, and the application was dismissed.

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