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2022 (6) TMI 1127 - NAPA - GSTProfiteering - purchase of flats - it is alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in prices and charged full rate of GST on the amount due to him against payments - contravention of Section 171 of CGST Act - Interest and Penalty - HELD THAT - On perusal of the records and the Reports of the DGAP, the Authority finds that the Anti-profiteering provisions do not apply to the project The Serenas , since the draw for the selection of the allottees, the allotments, the Builder-Buyer agreements, and construction activities were executed in the GST period only. The Respondent entered into an agreement with the Contractor for the construction of Residential Units on 31.08.2017 after which construction activities started on 10.091017. Further the Respondent held the draw on 20.07.2017. Post draw, the first Builder-Buyer agreement was entered into on 18.09.2017. Therefore, the Residential project The Serenas was launched in the post-GST regime and there was no price history of the residential units sold in the pre-GST regime which could be compared with the Post-GST base price to establish whether there was any profiteering by the Respondent or not as the Respondent neither availed any ITC nor had any turnover in pre-GST regime on Residential dwelling units. The Authority finds and determines that the Respondent has profiteered by an amount of Rs. 42,21,321/- for the project Signum 36' during the period of investigation i.e. 01.07.2017 to 30.06.2019. The above amount that has been profiteered by the Respondent from his shop buyers/ recipients of supply in the above mentioned project shall be refunded by him, along with 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 the GCST Rules 2017 - 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 shops commensurate with the benefit of ITC received by him. Interest - HELD THAT - The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 42,21,321/-, for the project 'Signurn 36'. Hence the Respondent is directed to also pass on interest @18% to the customers/ shop buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017. Penalty - HELD THAT - It is evident from the above narration of facts that Respondent has denied the benefit of Input Tax Credit (ITC) to the customers/shop buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. However, since the provisions of Section 171 (3A) have come into force w.e.f. 01.01.2020 whereas the period during which violation has occurred is w.e.f. 01.07.2017 to 30.06.2019, hence the penalty prescribed under the above Section cannot be imposed on the Respondent retrospectively - Accordingly, Show Cause Notice directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him, is not required to be issued. Application disposed off.
Issues Involved:
1. Applicability of Anti-Profiteering Provisions to Residential Project "The Serenas." 2. Incorporation of Security Deposit/Application Money in Pre-GST Turnover. 3. Computation of Profiteering in Commercial Project "Signum-36." 4. Compliance with Section 171 of the CGST Act, 2017. Issue-Wise Detailed Analysis: 1. Applicability of Anti-Profiteering Provisions to Residential Project "The Serenas": The Authority found that the Anti-profiteering provisions do not apply to the project "The Serenas" since all relevant activities such as the draw for the selection of allottees, allotments, Builder-Buyer agreements, and construction activities were executed in the GST period only. The Residential project "The Serenas" was launched post-GST regime, and there was no price history of residential units sold in the pre-GST regime, making it impossible to compare with the Post-GST base price to establish profiteering. 2. Incorporation of Security Deposit/Application Money in Pre-GST Turnover: The DGAP and the Authority concluded that the security deposit/application money received by the Respondent cannot be treated as consideration for supply as there was no direct link between the payment and supply. The security deposit was an application money for participation in the draw of lots, which was held post-GST. It was determined that such deposits cannot be incorporated into the turnover for the purpose of Service Tax or GST until an agreement is signed, and the deposit is appropriated as consideration for the supply. 3. Computation of Profiteering in Commercial Project "Signum-36": The DGAP reported that the Respondent had both CENVAT Credit and turnover in the pre-GST period, which could be compared with the post-GST period. The ITC as a percentage of turnover available to the Respondent during the pre-GST period was 2.26%, and during the post-GST period, it was 5.26%. This indicated an additional ITC benefit of 3% post-GST, which was required to be passed on to the recipients. The DGAP calculated the profiteered amount as Rs. 42,21,321/- for the project "Signum-36." 4. Compliance with Section 171 of the CGST Act, 2017: The Authority found that the Respondent had contravened the provisions of Section 171 (1) of the CGST Act, 2017 by not passing on the benefit of additional ITC to the recipients. The Respondent was ordered to refund the profiteered amount of Rs. 42,21,321/- along with interest @18% from the date of profiteering till the date of payment. The Respondent was also directed to reduce the prices commensurate with the benefit of ITC received. Conclusion: The Authority determined that the Respondent had profiteered by Rs. 42,21,321/- in the commercial project "Signum-36" and ordered the refund of this amount along with interest. The Anti-profiteering provisions were found not applicable to the residential project "The Serenas" due to the lack of pre-GST price history. The security deposit/application money was not considered part of the turnover for Service Tax or GST purposes until appropriated as consideration. The Respondent was directed to ensure compliance with the order and pass on the ITC benefit to the recipients.
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