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2025 (1) TMI 776 - HC - GSTMethodology adopted by the National Anti-Profiteering Authority (NAA) and the Director General of Anti Profiteering (DGAP) to determine profiteering in the real estate industry - HELD THAT - The Hon ble Delhi High Court in the case of Reckitt Benckiser India Pvt. Ltd. 2024 (1) TMI 1248 - DELHI HIGH COURT has held ' As it is an admitted position that neither the advances received nor the construction activity is uniform throughout the life cycle of the project, the accrual of Input Tax Credit is not related to the amount collected from the buyers. This Court is in agreement with learned counsel of the petitioners that one needs to calculate the total savings on account of introduction of Goods and Services and Tax for each project and then divide the same by total area to arrive at the per square feet benefit to be passed on to each flat buyer. This would ensure that flat-buyers with equal square feet area received equal benefit.' The impugned orders passed by the National Anti-profiteering Authority are quashed and set aside, so as to enable the Competition Commission of India to pass appropriate order in accordance with law. Petitions are accordingly disposed off. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Methodology of NAA and DGAP Relevant legal framework and precedents: The relevant legal framework involves the assessment of profiteering under the Goods and Services Tax (GST) regime. The precedent considered is the decision of the Delhi High Court in the case of "Reckitt Benckiser India Pvt. Ltd. Vs. Union of India" and related matters, which addressed the methodology used by NAA and DGAP. Court's interpretation and reasoning: The court agreed with the Delhi High Court's finding that the methodology used by NAA and DGAP was flawed. The methodology was based on comparing the ratio of Input Tax Credit (ITC) to turnover before and after the implementation of GST. The court noted that this approach did not account for the non-uniform nature of expenses and ITC accrual in real estate projects. Key evidence and findings: The court relied on the findings of the Delhi High Court, which highlighted the lack of a direct correlation between turnover and ITC in the real estate sector. The court found that the methodology did not consider the varying nature of construction activities and their impact on ITC accrual. Application of law to facts: The court applied the legal principles established by the Delhi High Court to the facts of the current cases, concluding that the methodology used by NAA and DGAP was inappropriate for determining profiteering in the real estate industry. Treatment of competing arguments: The court acknowledged the arguments of the petitioners, who contended that the methodology failed to accurately reflect the benefits of GST to flat buyers. The court agreed with the petitioners' suggestion that a project-specific calculation of savings and benefits should be used instead. Conclusions: The court concluded that the methodology adopted by NAA and DGAP was flawed and that the matters should be remanded to the Competition Commission of India for reconsideration in line with the Delhi High Court's decision. Issue 2: Remanding the Cases Relevant legal framework and precedents: The legal framework involves the powers of the court to quash orders and remand cases for reconsideration. The precedent is the Delhi High Court's decision, which remanded similar matters to the Competition Commission of India. Court's interpretation and reasoning: The court found that the Delhi High Court's decision was directly applicable to the present cases. The court reasoned that remanding the cases would allow for a reconsideration of the methodology in line with the correct legal principles. Key evidence and findings: The key finding was the Delhi High Court's determination that the NAA's methodology was flawed and required reconsideration. Application of law to facts: The court applied the legal principles from the Delhi High Court's decision to the facts of the current cases, finding that remanding the cases was necessary for a fair determination. Treatment of competing arguments: The court considered the joint submission by the parties to remand the cases, indicating agreement on this course of action. Conclusions: The court concluded that the cases should be remanded to the Competition Commission of India for adjudication in accordance with the Delhi High Court's decision. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The court quoted the Delhi High Court's reasoning: "This Court is in agreement with the contention of the learned counsel for the petitioners representing the real estate companies that the methodology adopted by NAA is flawed as in the real estate sector, there is no direct correlation between the turnover and the Input Tax Credit availed for a particular period." Core principles established:
Final determinations on each issue:
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