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2022 (7) TMI 1273 - NAPA - GSTProfiteering - Construction Service supplied by the Respondent - Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price - contravention of section 171 of CGST Act - Penalty - HELD THAT - The Authority finds no reason to differ from the detailed computation of profiteering in the DGAP s Report or the methodology adopted. The Authority finds that the Respondent has profiteered by an amount of Rs. 20,57,207/- during the period of investigation i.e. 01.07.2017 to 30.04.2020. The Authority determines an amount of Rs. 20,57,207/- (including 12% GST) under section 133 (1) as the profiteered amount by the Respondent from his 1061 home buyers (as per Annexure A to this Order), including Applicant Nos. 1 to 4, which shall he 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 accordance with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. This amount profiteered is Rs. 1,581/- (including GST) in respect of the Applicant No.1, Rs 316/- (including GST) in respect of Applicant No. 2, Rs 1,166/- (including GST) in respect of Applicant No. 3, and Rs 1,239/- (including GST) in respect of the Applicant No. 4. Interest - HELD THAT - The Respondent is also liable to pay Interest as applicable on the entire amount profiteered, i.e. Rs. 20,57,207/-, for the project Shriram Summit'. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date or passing ant payment, as per provisions of Rule 133 (3) (b) of the CGST Rules, 2017. Penalty - HELD THAT - t has also been found that the Respondent has denied the benefit of additional ITC to his customers/recipients in contravention or the provisions of Section 171 (1) of the CGST Act. 2017 and resorted to profiteering and hence, committed an offence under section 171 (3A) of the CGST Act, 2017. Therefore, the Respondent is liable for the imposition of penalty for the period 01.01.2020 to 30.04.2020 under the provisions of the above Section. Accordingly, a Notice he issued to him 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. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. Application disposed off.
Issues Involved:
1. Profiteering in respect of Construction Service supplied by the Respondent. 2. Passing on the benefit of Input Tax Credit (ITC) post-GST implementation. 3. Methodology for determining profiteering. 4. Applicability of anti-profiteering measures to flats sold post-GST. 5. Constitutionality and legality of the Notice and Report. 6. Levy of Penalty under Section 171 (3A) read with Rule 133(3)(d). Detailed Analysis: 1. Profiteering in respect of Construction Service supplied by the Respondent: The Applicant alleged that the Respondent had not passed on the benefit of ITC by way of commensurate reduction in the price of a unit purchased in the project "Shriram Summit". The DGAP's investigation confirmed that the Respondent had benefited from additional ITC post-GST to the tune of 0.08% of the turnover but had not passed this benefit to the buyers, amounting to profiteering of Rs. 20,57,207/-. 2. Passing on the benefit of Input Tax Credit (ITC) post-GST implementation: The DGAP's report indicated that the ITC as a percentage of turnover available to the Respondent during the pre-GST period was 6.88%, and during the post-GST period, it was 6.96%. This confirmed that the Respondent had benefited from additional ITC post-GST and was required to pass on this benefit to the customers. The Authority determined that the Respondent had profiteered by Rs. 20,57,207/- and ordered this amount to be refunded to the buyers along with interest. 3. Methodology for determining profiteering: The Respondent contended that the methodology adopted by the DGAP was arbitrary and incorrect. However, the Authority found that the methodology of comparing ITC to turnover ratios in pre and post-GST periods was rational and appropriate. The DGAP consistently adapted a uniform methodology to work out profiteering in the real estate sector, which was based on the documents and data provided by the Respondent. 4. Applicability of anti-profiteering measures to flats sold post-GST: The Respondent argued that anti-profiteering measures should not apply to flats sold post-GST. The Authority rejected this contention, stating that the additional benefit of ITC post-GST pertained to the entire project and should be passed on to all buyers, regardless of whether the flats were sold pre or post-GST. The benefit of ITC had to be specifically passed on to all recipients over and above any negotiated prices. 5. Constitutionality and legality of the Notice and Report: The Respondent challenged the constitutional validity of the Notice and Report. The Authority found that the provisions of Section 171 of the CGST Act, 2017, and the CGST Rules, 2017, were legally valid and constitutional. The Rules had the sanction of the Parliament and State Legislatures, and the methodology for determining profiteering was enshrined in Section 171 itself. 6. Levy of Penalty under Section 171 (3A) read with Rule 133(3)(d): The Respondent argued that the levy of penalty was unwarranted. However, the Authority found that the Respondent was liable for the imposition of penalty for the period 01.01.2020 to 30.04.2020 under the provisions of Section 171 (3A). The Authority noted that the provisions of Section 171 and the Rules made thereunder were clear and unambiguous, and the Respondent's reliance on various case laws was not relevant to anti-profiteering provisions. Conclusion: The Authority ordered the Respondent to refund the profiteered amount of Rs. 20,57,207/- along with interest at 18% to the buyers. The Respondent was also directed to reduce the prices commensurate with the benefit of ITC received. Additionally, the Respondent was found liable for the imposition of penalty under Section 171 (3A) for the period 01.01.2020 to 30.04.2020. The jurisdictional CGST/SGST Commissioner was directed to ensure compliance with the Order and publish an advertisement to inform the home buyers about the benefit of ITC. The DGAP was instructed to monitor compliance and submit a report.
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