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2022 (10) TMI 408 - NAPA - GSTProfiteering - purchase of shops in the Respondent s project - benefit of Input Tax Credit (ITC) not passed on by way of commensurate reduction in prices after implementation of GST w.e.f. 01.07.2017 - contravention of section 171 of CGST Act - penalty - interest - HELD THAT - It is clear from the plain reading of Section 171 (1) that it 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 whether there was any net benefit of ITC with the introduction of GST. It is observed from the 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 0.80% whereas during the GST period (July 2017 to October 2020) it was 7.78% for the project JKG Palm Court . This confirms that during the GST period the Respondent has benefited from additional ITC to the tune of 6.98% (7.78% - 0.80%) of his turnover for the project JKG Palm Court and the same was required to be passed on to the customers/flat buyers/recipients. The Authority finds that neither the Applicant no.1 nor the Respondent has contested the said Report in spite of several opportunities being given to them. They also did not attend the personal hearing on the scheduled date - The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP s Report. Interest - HELD THAT - The Authority finds that the Respondent has profiteered by an amount of Rs. 5, 14, 06, 920/- during the period of investigation i.e. 01.07.2017 to 31.10.2020. The Authority determines an amount of Rs. 5, 14, 06, 920/- (including 12% GST) under section 133 (1) as the amount profiteered by the Respondent from his home buyers/shop buyers/customers/recipients of supply in the impugned Project (as per Annexure-A to this Order) including Applicant No. 1 which shall be refunded by him along with interest @18% thereon as prescribed from the date when the above amount was profiteered by him till the date of such payment as per the provisions of Rule 133 (3) (b) of the GCST Rules 2017. The amount profiteered is Rs. 1, 99, 182/- in respect of Applicant No.1 - Respondent is also liable to pay interest as applicable on the entire amount profiteered i.e. Rs. 5, 14, 06, 920/- for the project JKG Palm Court . Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients of supply 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 - It has also been found that the Respondent has denied the benefit of additional ITC to his customers/buyers/recipients of supply in contravention of 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 COST Act 2017. As the said provision was inserted only with effect from 1.01.2020 therefore the Respondent is liable for the imposition of penalty for the period from 01.01.2020 onwards under the provisions of the said Section. Application disposed off.
Issues Involved:
1. Allegation of profiteering by not passing on the benefit of Input Tax Credit (ITC) post-GST implementation. 2. Investigation and findings by the Director General of Anti-profiteering (DGAP). 3. Calculation of profiteering amount. 4. Respondent's claim of passing on the benefit. 5. Verification of claims and responses from buyers. 6. Legal provisions and compliance under Section 171 of the CGST Act, 2017. 7. Orders and directions by the National Anti-Profiteering Authority (NAA). Issue-wise Detailed Analysis: 1. Allegation of Profiteering: The case revolves around the allegation that the Respondent did not pass on the benefit of ITC to the buyers in the project "JKG Palm Court" after the implementation of GST from 01.07.2017. The complaint was forwarded for a detailed investigation to the DGAP. 2. Investigation and Findings by DGAP: The DGAP conducted a detailed investigation and issued a report on 31.08.2021. It was found that the Respondent was required to pass on the benefit of ITC to the buyers by reducing prices. The investigation covered the period from 01.07.2017 to 31.10.2020. Due to delays caused by the COVID-19 pandemic, the statutory time limit for completing the investigation was extended. 3. Calculation of Profiteering Amount: The DGAP's report detailed the calculation of the ITC benefit. The ITC as a percentage of turnover was 0.80% in the pre-GST period and 7.78% in the post-GST period, resulting in an additional benefit of 6.98%. The total profiteered amount calculated was Rs. 5,14,06,920/-. 4. Respondent's Claim of Passing on the Benefit: The Respondent claimed to have passed on a total benefit of Rs. 6,15,24,106/- to 386 buyers, including Applicant No. 1. However, the Respondent did not provide sufficient documentary evidence to substantiate this claim. 5. Verification of Claims and Responses from Buyers: To verify the Respondent's claim, the DGAP sent emails to 324 buyers. Only 23 buyers denied receiving any benefit, and one buyer confirmed receipt of ITC benefit. The verification was deemed incomplete and inconclusive by the Authority. 6. Legal Provisions and Compliance under Section 171 of the CGST Act, 2017: Section 171 of the CGST Act mandates passing on the benefit of ITC to recipients. The Authority found that the Respondent contravened these provisions by not passing on the additional ITC benefit of 6.98% to the buyers. 7. Orders and Directions by the NAA: The NAA ordered the Respondent to refund the profiteered amount of Rs. 5,14,06,920/- along with 18% interest to the buyers within three months. The Respondent was also directed to reduce prices commensurate with the ITC benefit. Additionally, the DGAP was directed to investigate other projects of the Respondent for potential profiteering. Conclusion: The NAA found the Respondent guilty of profiteering by not passing on the ITC benefit to the buyers in the "JKG Palm Court" project. The Respondent was ordered to refund the profiteered amount with interest and to comply with the provisions of Section 171 of the CGST Act. The DGAP was instructed to monitor compliance and investigate other projects of the Respondent.
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