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2019 (12) TMI 1264 - NAPA - GSTProfiteering - purchase of flat - Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price - contravention of Section 171 of the Central Goods and Services Tax Act, 2017 - penalty - HELD THAT - The provisions of Section 171 (1) of the CGST Act, 2017 are aimed at ensuring that the recipients get the commensurate benefit, in the form of reduction in prices, in case of any tax rate reduction and/or incremental benefit of ITC which has become available to them due to sacrifice made by the State and the Central Govt. from their own tax kitty to provide accommodation to the vulnerable section of society under the Affordable Housing Scheme. The method of interpretation of this provision has been given in the text of Section 171 of the CGST Act, 2017 itself - it is clear that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 4.75% and during the post-GST period from July, 2017 to December, 2018, it was 15.40% as per Table B supra and hence it is established that the Respondent has benefited from the additional ITC to the extent of 10.65% 15.40% (-) 4.75% of the turnover. Since, the above computations made in Table B have been done on the basis of the records, information and returns furnished by the Respondent himself, the same can be relied upon. It is also clear from the records that the Central Government, on the recommendation of the GST Council, had levied 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. Accordingly, the DGAP has computed the profiteering by comparing the applicable tax rate and ITC available in the pre-GST period when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8% - 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 as has been mentioned in detail of the preceding paras of this Order. As per the provisions of Rule 133 (1) (b) of the CGST Rules, 2017 it is further ordered that the Respondent shall refund the above profiteered amount to the flat buyers as per the details given by the DGAP in Annexure-14 without taking in to account the benefit which he has claimed to have passed on. Since, the DGAP has carried out the present investigation till 31.12.2018 only any further benefit of additional ITC which might accrue to the Respondent shall also be passed on by him to the eligible buyers. The Commissioner CGST/SGST shall ensure that the above benefit is passed on by the Respondent to his recipients as per the provisions of Section 171 of the CGST Act, 2017. In case if the above benefit is not passed in future the Applicant No. 1 or any other buyer shall be at liberty to approach the Haryana State Screening, Committee to launch fresh proceedings against the Respondent as per Section 171 of the CGST Act, 2017. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project Andour Heights 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 and therefore, he is liable for imposition of penalty under the provisions of the above Section - Accordingly, a SCN be issued to him directing him to explain as to 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.
Issues Involved:
1. Whether the Respondent failed to pass on the benefit of input tax credit (ITC) to the Applicant No. 1 by way of commensurate reduction in price. 2. Whether the benefit already credited/forwarded to the buyers before initiation of proceedings should be treated as compliance with Section 171 of the CGST Act, 2017. 3. Whether the Applicant No. 1 misled the investigation by not providing complete facts about the receipt of the benefit of input tax credit under GST. Issue-wise Detailed Analysis: 1. Failure to Pass on ITC Benefit: The Applicant No. 1 alleged that the Respondent did not pass on the benefit of input tax credit by way of a commensurate reduction in price as required under Section 171 of the CGST Act, 2017. The Director General of Anti-Profiteering (DGAP) conducted an investigation and found that the Respondent had indeed failed to pass on the benefit of ITC to the buyers of flats in the "Andour Heights" project. The investigation period was from 01.07.2017 to 31.12.2018. The DGAP's report indicated that the Respondent had benefited from additional ITC to the extent of 10.65% of the turnover in the post-GST period compared to the pre-GST period. The total profiteered amount was calculated to be ?9,96,18,637, which included GST on the base profiteered amount of ?9,10,82,950. 2. Compliance with Section 171: The Respondent claimed that he had already passed on the benefit of ITC to the buyers by issuing credit notes and making adjustments in subsequent demand notes. However, the DGAP and the Authority found that there was no evidence in the ledger accounts of the buyers to suggest that the benefit of ?4,08,20,676 claimed to have been passed on was indeed credited on account of ITC. The entries in the ledger accounts did not specifically mention that they were related to the passing on of the ITC benefit. Therefore, the claim of the Respondent was not accepted, and the Authority ordered the Respondent to refund the profiteered amount to the buyers along with interest. 3. Misleading the Investigation: The Respondent contended that the Applicant No. 1 had misled the investigation by not disclosing the fact that he had already received the benefit of ITC. However, the DGAP found that the Applicant No. 1 had filed the application on 24.07.2018, whereas the Respondent had issued letters to the buyers on 18.07.2018, informing them about the passing on of the ITC benefit. At the time of filing the application, the Applicant No. 1 had not actually received the benefit. The Authority held that the Applicant No. 1, as a buyer, was not expected to have an immaculate knowledge of the documentation related to the application and the exact benefit of ITC that ought to be passed on. The inconsistencies in the application or subsequent submissions of the Applicant No. 1 were considered irrelevant to the outcome of the case. Conclusion: The Authority concluded that the Respondent had denied the benefit of ITC to the buyers of flats and shops in the "Andour Heights" project, thereby violating the provisions of Section 171 of the CGST Act, 2017. The Respondent was ordered to refund the profiteered amount along with interest to the buyers. Additionally, a Show Cause Notice was issued to the Respondent for imposition of penalty under Section 171 (3A) of the CGST Act, 2017. The Commissioners of CGST/SGST Haryana were directed to monitor the compliance of this order.
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