2022 (8) TMI 271 - NAPA - GST

Profiteering - purchase of flat in Migsun Wynn - allegation of benefit of Input Tax Credit has not be passed on to the recipient by way of commensurate reduction in prices - contravention of section 171 of GST Act - interest and penalty - HELD THAT - The Respondent has benefited from the additional ITC to the extent or 4.25% of the turnover during the period from July 2017 to December 2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the benefit of such additional ITC to his customers. Thus this Authority determines the profiteered amount as Rs.6,87,58,686/- (inclusive of GST@ 12% or 8% as applicable) in terms of Rule 133 (1) of the CGST Rules, 2017 This amount is inclusive of profiteered amount, if any, in respect of the Applicant nos 1 to 12 . The above amount that has been profiteered by the Respondent from his home buyers shall be refunded/returned/passed on by him, if not already passed on, 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. Interest - HELD THAT - The Respondent is also liable to pay interest as applicable on the entire amount profiteered. i.e. Rs.6,87,58.685/-. Hence the Respondent is directed to also pass on interest to the homebuyers/customers/recipients on the entire amount profiteered, starting from the data from which the above amount was profiteered till the date of passing on/ payment, as per the provisions of Rule 133 (3) (b) of the CGST Rules 2017. Penalty - HELD THAT - The Respondent 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. 01.01.2020 and hence, was not in force during the period of investigation i.e, from 01.07.2017 to 31.12.2019, when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) 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.

Summary

Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017 by the Respondent.
2. Whether the Respondent has passed on the benefit of Input Tax Credit (ITC) to his customers.
3. Calculation and determination of the profiteered amount.
4. Compliance and enforcement of the order by the Respondent.

Issue-wise Detailed Analysis:

1. Violation of Section 171 of the CGST Act, 2017 by the Respondent:
The National Anti-Profiteering Authority (NAA) received a report from the Director-General of Anti-Profiteering (DGAP) following a detailed investigation. The investigation was initiated based on allegations that the Respondent did not pass on the benefit of ITC to the buyers of units in the "Migsun Wynn" project in Greater Noida, Uttar Pradesh, as mandated by Section 171 of the CGST Act, 2017. The DGAP's investigation covered the period from 01.07.2017 to 31.12.2019 and concluded that the Respondent had indeed benefited from additional ITC of 4.25% of the turnover but did not pass this benefit to the buyers, thus violating Section 171.

2. Whether the Respondent has passed on the benefit of ITC to his customers:
The Respondent claimed to have passed on the ITC benefit amounting to Rs. 9,77,49,000/- to his customers and provided sample acknowledgment receipts as evidence. However, the DGAP and the NAA found these claims unsubstantiated due to the lack of verifiable records and allegations from buyers that the receipts were fake and signatures forged. The NAA concluded that the Respondent's claim could not be accepted without authentic acknowledgment receipts from each customer.

3. Calculation and determination of the profiteered amount:
The DGAP calculated the ratio of ITC to turnover for both pre-GST and post-GST periods. The pre-GST ratio was 0.87%, and the post-GST ratio was 5.12%, indicating an additional ITC benefit of 4.25%. The total profiteered amount was determined to be Rs. 6,87,58,685/-, inclusive of GST at 12% or 8% as applicable. This amount was calculated based on the turnover and the additional ITC benefit that should have been passed on to the buyers. The NAA affirmed this methodology as appropriate, logical, and reasonable.

4. Compliance and enforcement of the order by the Respondent:
The NAA ordered the Respondent to refund the profiteered amount of Rs. 6,87,58,685/- along with 18% interest from the date the amount was profiteered until the date of payment. The Respondent was also directed to reduce the prices of the units commensurate with the ITC benefit received. The jurisdictional CGST/SGST Commissioner was tasked with ensuring compliance with this order and submitting a compliance report within four months. Additionally, the DGAP was directed to investigate profiteering in other projects undertaken by the Respondent under the same GSTIN.

The NAA also mandated the publication of an advertisement in local newspapers to inform homebuyers about the order and their entitlement to claim the ITC benefit. The Supreme Court's orders extending the period of limitation due to the COVID-19 pandemic were acknowledged, ensuring the order's validity within the prescribed limitation period.