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2022 (8) TMI 145 - NAPA - GSTProfiteering - bookings of the flat to attract new customer - benefit of ITC of GST has been passed by way of commensurate reduction in price or not - contravention of provisions of Section 171 of the CGST Act - HELD THAT - The Authority finds that, the DGAP has given a categorical report based on its verification that, the benefit of ITC has been passed on by the Respondent to all 189 homebuyers/customers who have booked their units on or after 1.07.2017 by way of giving deduction in the demand note itself as per the example reproduced above. The findings at para 10 and 11 of the DGAP's Report dated 30.11.2020 are reproduced at paragraphs 50), 5(J) and 5 (k) above and the DGAP states that it has scrutinized the demand notes and allotment letters issued to these 189 homebuyers/customers by the Respondent - the Authority determines the profiteered amount for the period from 01.07.2017 to 31.12.2018, in the instant case, as 2,26,76,700/- with respect to the other 500 homebuyers/customers i.e. those who have booked their units prior to 1,07.2017 (excluding those from whom no demand was raised/ consideration received from L07.2017 to 31.12.2018) for the Project Himalaya Pride . The Authority finds that the Respondent has profiteered by an amount of Rs. 2,26,76,700/- during the period of investigation i.e. 01.07.2017 to 31.12.2018. The above amount that has been profiteered by the Respondent from his home buyers shall be refunded by him, along with interest 018% 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 CGST Rules 2017. Interest - HELD THAT - 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 Units commensurate with the benefit of ITC received by him - The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 2,26,76,700/-. Hence the Respondent is directed to also pass on interest @ 18% to the homebuyers/customers 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 - The Respondent has denied benefit of ITC to the homebuyers/customers of the Units being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, w.e.f. 01.01.202 and hence, was not in force during the period of investigation i.e. from 01.07.2017 to 31.12.2018, when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (34) cannot be imposed on the Respondent retrospectively. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
Issues Involved:
1. Whether the Respondent's claim of passing on Rs. 9,45,78,855/- benefit of GST ITC to homebuyers/customers by way of reduction in GST rate was correct. 2. Whether the Respondent's claim of charging only 4.5% GST for pre-GST bookings and bearing the remaining 7.5% GST himself was correct. 3. Whether the Respondent had passed on the benefit of ITC of GST of Rs. 2,94,078/- to the Applicant No.1. 4. Whether the Respondent had given an amount of Rs. 3,41,963/- as a discount in addition to the reduction in GST rate of 7.5% to the Applicant No.1. 5. Whether the amounts claimed to have been passed on by the Respondent are in line with the provisions of Section 171 of the CGST Act. 6. The exact amount of profiteering to be passed on by the Respondent to every homebuyer/customer. Issue-Wise Detailed Analysis: 1. Passing on Rs. 9,45,78,855/- benefit of GST ITC: The DGAP verified the Respondent's claim that he had passed on the ITC benefit of Rs. 9,71,44,586/- through demand notes and found it correct. The Respondent passed on Rs. 2,26,26,126/- to pre-GST buyers and Rs. 7,45,18,460/- to post-GST buyers by not collecting GST from them. This was confirmed from the homebuyers' list and demand notes. 2. Charging only 4.5% GST for pre-GST bookings: The Respondent passed on ITC benefit of Rs. 2,26,26,126/- to 478 pre-GST buyers. However, 22 buyers did not receive any benefit, and 29 buyers had no consideration received post-GST. The claim that 7.5% GST benefit was passed on to all pre-GST buyers was not fully correct. For post-GST buyers, the Respondent's claim of giving 100% GST reduction was verified and found correct. 3. Passing on Rs. 2,94,078/- ITC benefit to Applicant No.1: The Respondent claimed to have passed on Rs. 3,44,130/- to Applicant No.1, which was verified from the allotment letter and demand note. The Applicant confirmed via email that the Respondent bore the entire GST, including ITC benefit, making the claim of Rs. 2,94,078/- incorrect. 4. Discount of Rs. 3,41,963/- to Applicant No.1: The Respondent did not give any additional discount of Rs. 3,41,963/-. Instead, the Respondent provided GST ITC benefit of Rs. 3,44,130/- by not collecting GST from the Applicant. 5. Compliance with Section 171 of the CGST Act: The DGAP verified that the benefit of ITC claimed to be passed on by the Respondent was correct and in line with the provisions of Section 171 of the CGST Act, 2017. 6. Exact amount of profiteering to be passed on: The Respondent needed to pass on an additional Rs. 17,86,004/- to 146 buyers (124 buyers with Rs. 9,90,755/- and 22 buyers with Rs. 7,95,249/-). Additional Observations: Violation of Section 171 of the CGST Act: The Respondent violated Section 171 by not passing on the additional ITC benefit of 6.37% of the turnover to 146 recipients, resulting in profiteering of Rs. 2,26,76,700/-. The Respondent was ordered to refund this amount with 18% interest from the date of profiteering till payment. Compliance and Penalty: The Respondent must reduce prices commensurate with the ITC benefit and pay interest on the profiteered amount. The jurisdictional CGST/SGST Commissioner is directed to ensure compliance and report back within four months. The penalty under Section 171(3A) could not be imposed as it was not in force during the investigation period. Supreme Court Orders on Limitation: The Supreme Court extended the limitation period due to the Covid-19 pandemic, making the order within the prescribed limitation. Final Order: The Respondent must refund the profiteered amount of Rs. 2,26,76,700/- along with 18% interest within three months. The jurisdictional CGST/SGST Commissioner must ensure compliance and publish an advertisement for public awareness.
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