2019 (12) TMI 586 - NAPA - GST

Profiteering - purchase of Flat in the Respondent s project Bounty Acres - benefit of reduction in the rate of tax not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT - The provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has profiteered an amount of ₹ 97,40,448/- inclusive of GST 18%, 12%, 8%) on the base profiteered amount of ₹ 87,06,553/-. Further, the Respondent has realized an additional amount of ₹ 33,972/- which includes both the profiteered amount @3.47% of the taxable amount (base price) and 18% GST on the said profiteered amount from the Applicant No. 1. Further, he has realized an additional amount of ₹ 97,06,476/- which includes both the profiteered amount @3.47% of the taxable amount (base price) and GST (@ 18%, 12% 8%) on the said profiteered amount from the flat buyers other than the Applicants in the present proceedings as per Annexure-23 of the Report. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of ₹ 97,40,448/along with interest @18% per annum to these flat buyers from the dates from which the above amount was collected by him from these buyers till the payment is made, within a period of 3 months from the date of passing of this order. 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 flats commensurate with the benefit of ITC received by him - Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Bounty Acres project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.

Issues Involved:
1. Allegation of profiteering by not passing on the benefit of Input Tax Credit (ITC).
2. Investigation and findings by the Director General of Anti-Profiteering (DGAP).
3. Respondent's objections and submissions.
4. Calculation of profiteered amount.
5. Directions and orders by the Authority.

Detailed Analysis:

1. Allegation of Profiteering by Not Passing on the Benefit of ITC:
The Applicant No. 1 alleged that the Respondent did not pass on the benefit of ITC availed by him by way of commensurate reduction in the price of a flat purchased in the Respondent’s project, thereby contravening Section 171 of the CGST Act, 2017.

2. Investigation and Findings by the DGAP:
The DGAP conducted a detailed investigation covering the period from 01.07.2017 to 31.08.2018 and found that the ITC as a percentage of the total turnover available to the Respondent during the pre-GST period was 0.42%, and during the post-GST period, it was 3.89%. This indicated that the Respondent benefited from additional ITC to the tune of 3.47% of the turnover, which was not passed on to the flat buyers, thus contravening Section 171 of the CGST Act, 2017.

3. Respondent's Objections and Submissions:
The Respondent raised several objections, including:
- The area sold relevant to turnover was incorrectly taken.
- The DGAP ignored the Tamil Nadu VAT ITC available in the pre-GST period.
- The non-taxable land value was unduly considered during the pre-GST period.
- The Respondent claimed to have passed on the ITC benefit by reducing prices.
The DGAP addressed these objections, maintaining that the calculations and methodology used were correct and in compliance with the law.

4. Calculation of Profiteered Amount:
The DGAP calculated the profiteered amount as ?97,40,448/-, which included GST on the base profiteered amount of ?87,06,553/-. This amount was derived from the additional ITC benefit of 3.47% of the turnover that was not passed on to the buyers. The DGAP provided a detailed unit-wise break-up of the profiteered amount, including ?33,972/- for the Applicant No. 1.

5. Directions and Orders by the Authority:
The Authority directed the Respondent to:
- Pass on the profiteered amount of ?97,40,448/- along with interest @18% per annum to the eligible flat buyers within three months.
- Reduce the prices of the flats commensurate with the benefit of ITC received.
- A Show Cause Notice was to be issued to the Respondent for imposition of penalty under Section 171(3A) of the CGST Act, 2017.
- The Commissioners of CGST/SGST, Tamil Nadu, were directed to monitor compliance and submit a report within four months.

Conclusion:
The Authority concluded that the Respondent had contravened Section 171 of the CGST Act, 2017, by not passing on the benefit of ITC, resulting in a profiteered amount of ?97,40,448/-. The Respondent was ordered to refund this amount with interest to the eligible buyers and faced potential penalties for the contravention.

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