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2022 (9) TMI 726 - NAPA - GSTProfiteering - purchase of flat - it is alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price against payments due to him - contravention of section 171 of CGST Act - Penalty - HELD THAT - The Authority determines that the Respondent has realized an additional amount of Rs. 1,56,77,149/- which includes both the profiteered amount @ 2.44% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 71 home buyers/shop buyers/ recipients of supply including Applicant No. 1 during the period from 01.07.2017 to 30.09.2019 which was required to be passed on the eligible home buyers of his impugned project. The details of eligible home buyers/shop buyers/ recipients of supply to whom supply has been made by Respondent in the impugned Project and from whom additional amount on account of benefit of ITC had been realized by the Respondent during the aforesaid period along with details of such additional amount is given in Annexure- A to this Order. Since, all the home buyers/shop buyers/ recipients of supply are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the profiteered amount along with the interest @ 18% per annum (from the dates from which the said profiteered amount was collected by him from each of them till the date such amount is passed on/returned/refunded), if not already passed on / returned / refunded, within a period of 3 months from the date of passing of this Order as per the details mentioned in Annexure- A , failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017 - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondents shall reduce the prices to be realized from the home buyers/shop buyers/ recipients of supply in the above Project commensurate with the benefit of ITC received by him. Penalty - HELD THAT - The Respondent has denied the benefit of ITC to the buyers of his flats/customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 30.09.2019, and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.09.2019. Hence, the said penalty under Section 171 (3A) cannot be imposed on the Respondent retrospectively i.e. with respect to the period to which this Order relates. The Authority has a reason to believe that since the Respondent has been found to have contravened the provisions of Section 171 of the CGST Act 2017 in respect of the subject project Bhagwati Eminence and hence there is every possibility that similar contravention may has taken place with his other projects. This Authority in terms of Rule 133 (5)(a) of the CGST Rules 2017 also directs the DGAP to investigate profiteering in relation to other Projects executed by the Respondent if any, under the provision of section 171 of the CGST Act 2017. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
Issues Involved:
1. Whether there was a benefit of reduction in the rate of tax or input tax credit (ITC) on the supply of construction service by the Respondent upon implementation of GST w.e.f. 01.07.2017. 2. Whether such benefit was passed on by the Respondent to the recipients in terms of Section 171 of the Central Goods and Services Tax Act, 2017. 3. Whether the Respondent's claim of passing on 3% GST benefit to the Applicant was valid. 4. Whether the denial of CENVAT Credit of Rs. 3,58,20,322/- towards service tax paid to CIDCO was correct. 5. Whether the investigation methodology and period covered by DGAP were appropriate. 6. Whether the Respondent had under-reported the agreement value to lower GST, Stamp Duty, and other tax commitments. Issue-wise Detailed Analysis: 1. Benefit of Reduction in Rate of Tax or ITC: The DGAP's investigation revealed that the Respondent benefited from additional ITC to the tune of 2.44% (2.51% post-GST - 0.07% pre-GST) of the turnover from 01.07.2017 to 30.09.2019. The Respondent was required to pass on this benefit to the flat/shop buyers but failed to reduce the basic prices of his flats/shops by 2.44%. This failure contravened Section 171 of the CGST Act, 2017, which mandates passing on the benefit of ITC to the recipients. 2. Passing on the Benefit to Recipients: The DGAP concluded that the Respondent did not pass on the benefit of ITC to the buyers, resulting in profiteering of Rs. 1,56,77,149/- (including GST @ 12%). The Respondent's claim of passing on Rs. 61,83,525/- to 21 home buyers was unsubstantiated due to lack of documentary evidence. 3. Respondent's Claim of Passing on 3% GST Benefit: The Respondent argued that he passed on a 3% GST benefit by charging 9% instead of 12% GST. However, it was found that the Respondent collected 9% GST from the Applicant but discharged only 8% GST to the Government on the Applicant's flat. The DGAP's investigation showed that the Respondent collected higher amounts of GST from buyers than he paid to the Government, debunking the Respondent's claim. 4. Denial of CENVAT Credit of Rs. 3,58,20,322/-: The DGAP denied the CENVAT credit claimed by the Respondent for the service tax paid to CIDCO on the grounds that leasing of vacant land was covered under the Negative list of services and thus exempt from service tax. The Respondent's claim that the DGAP had no jurisdiction to deny this credit was rejected, and the denial was upheld based on the Finance Act, 1994, and CENVAT Credit Rules, 2004. 5. Investigation Methodology and Period: The DGAP's methodology of comparing the ratio of CENVAT credit to turnover for pre-GST and post-GST periods was approved. The investigation covered the period from 01.07.2017 to 30.09.2019, and any transactions post-September 2019 were outside the scope of the investigation. The Respondent's contention that the investigation should cover the entire project tenure was rejected. 6. Under-reporting of Agreement Value: The allegation of under-reporting the agreement value to lower GST, Stamp Duty, and other tax commitments was outside the scope of Section 171 of the CGST Act, 2017. The DGAP stated that this issue could be examined by the jurisdictional GST authorities. Conclusion: The Authority determined that the Respondent realized an additional amount of Rs. 1,56,77,149/- from 71 home buyers/shop buyers due to non-passing of the ITC benefit. The Respondent was directed to pass on this amount along with 18% interest per annum to the eligible buyers within three months. The Commissioners of CGST/SGST Mumbai, Maharashtra were tasked with ensuring compliance and publicizing the order. The DGAP was also directed to investigate other projects executed by the Respondent for similar contraventions. The penalty under Section 171 (3A) could not be imposed retrospectively for the period under investigation.
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