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2022 (6) TMI 1165 - NAPA - GSTProfiteering - purchase of Flats - it is alleged that Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by way of commensurate reduction in the price of the flats - contravention of Section 171 of CGST Act - Interest - Penalty - HELD THAT - Section 171 (1) of the CGST Act, 2017 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 issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 2.34% and during the post-GST period (July-2017 to December-2018), it was 5.65% for the project 'Sports Vile'. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.31% (5.65% - 2.34%) of his turnover for the project 'Sports Ville' and the same was required to be passed on to the customers/ home/shop buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as Rs. 1,42,45,741/- for the project Sports Ville' which was availed by the Respondent. The Respondent has not disputed the findings of the DGAP regarding method of computation of profiteering and the amount worked out by him. As such, the Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP's Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 31.12.2018, in the instant case, as Rs. 1,42,45,741/-, for the project 'Sports Ville'. Interest - HELD THAT - The Authority directs the concerned jurisdictional CGST/SGST Commissioner to ensure that such amounts are returned/passed on/ refunded along with interest as prescribed under Rule 133 (3) (c) of the CGST Rules, 2017 to each customers/ home/shop buyers by the Respondent, if not already paid. As observed by the Authority, the conclusive proof of passing benefits - Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 1,42,45,741/-, for the project 'Sports Ville . Hence the Respondent is directed to also pass on interest @18% to the customers/ home/shop buyers on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ return/refund, as prescribed under Rule 133 (3) (b) of the CGST Rules 2017 - the profiteering amount of Rs. 1,42,45,741/- for the project 'Sports Ville' along with the interest @ 18% from the date of receiving of advance from the customers/ home/shop buyers till the date of passing the benefit of ITC shall be paid/passed on by the Respondent within a period of 3 months from the date of this order failing which it shall be recovered as per the provisions of the CGST Act, 2017. Penalty - HELD THAT - Respondent has denied the benefit of ITC to the customers/ home/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 Act and therefore, he is liable for imposition of penalty under the provisions of the 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 31.12.2018, hence the penalty prescribed under the above Section cannot be imposed on Respondent retrospectively.
Issues Involved:
1. Alleged profiteering by the Respondent. 2. Calculation and verification of Input Tax Credit (ITC) benefits. 3. Compliance with Section 171 of the CGST Act, 2017. 4. Verification of ITC benefit passed on to home buyers. 5. Liability and penalty for not passing on the ITC benefit. Detailed Analysis: 1. Alleged Profiteering by the Respondent: The Applicant No. 1 filed a complaint alleging that the Respondent had not passed on the benefit of ITC availed by him through a commensurate reduction in the price of flats in the “Sports Ville€¯ project. The Director General of Anti-Profiteering (DGAP) conducted an investigation covering the period from 01.07.2017 to 31.12.2018 and found that the Respondent had benefited from additional ITC to the tune of 3.31% of the turnover post-GST. 2. Calculation and Verification of Input Tax Credit (ITC) Benefits: The DGAP's investigation revealed that the ITC as a percentage of the turnover available to the Respondent during the pre-GST period was 2.34%, and during the post-GST period, it was 5.65%. This confirmed that the Respondent benefited from additional ITC of 3.31% of the turnover post-GST. The DGAP calculated the total benefit of ITC to be passed on to all flat buyers as Rs. 1,42,45,741/-. 3. Compliance with Section 171 of the CGST Act, 2017: Section 171 (1) of the CGST Act, 2017 mandates the passing on of the benefit of reduction in the rate of tax or ITC to the recipient by way of commensurate reduction in prices. The DGAP's report confirmed that there was no reduction in the tax rate post-GST, and the only issue was whether there was any net benefit of ITC. The Respondent did not dispute the DGAP's findings regarding the method of computation of profiteering and the amount worked out. 4. Verification of ITC Benefit Passed on to Home Buyers: The Respondent claimed to have passed on the ITC benefit of Rs. 1,42,56,347/- to his customers. However, the DGAP's verification found discrepancies. Out of the 62 home buyers contacted, 26 did not reply, and many others claimed not to have received any benefit. Verification by email was deemed inconclusive, and the Respondent failed to provide conclusive proof such as credit notes, bank account refunds, or invoice reductions. 5. Liability and Penalty for Not Passing on the ITC Benefit: The Authority ordered the Respondent to reduce the prices commensurate with the benefit of ITC received and to return the profiteered amount of Rs. 1,42,45,741/- along with interest to the eligible customers. The Respondent was also directed to pay interest @18% on the entire profiteered amount from the date of receiving the advance till the date of refund. However, the penalty under Section 171 (3A) could not be imposed retrospectively as the violation period was before the section came into force. Conclusion: The Authority concluded that the Respondent had denied the benefit of ITC to the customers in contravention of Section 171 (1) of the CGST Act, 2017, and ordered the Respondent to pass on the benefit along with interest. The concerned jurisdictional CGST/SGST Commissioner was directed to ensure compliance and submit a report within four months.
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