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2020 (5) TMI 287 - NAPA - GSTProfiteering - purchase of Flat no. A-802 in Respondent s project Azea Botanica - allegation that benefit of reduction in the rate of GST not passed on - contravention of section 171 of CGST Act - Penalty - 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 as to whether there was any net benefit of ITC with the introduction of GST. On the issue of net benefit of ITC, it has been revealed from the DGAP s 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 1.33% and during the post-GST period (July-2017 to December-2018), it was 5.17%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.84% (5.17% - 1.33%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as ₹ 2,72,21,5351- which was availed by the Respondent vide Table- C Supra on the basis of the information supplied by the Respondent, which the Respondent has himself accepted that he was in agreement with the DGAP Report dated 24.09.2019 and hence the amount of profiteering computed by the DGAP is hereby accepted as correct - the Respondent, vide his submissions, has himself admitted that he has resorted to profiteering in as much as the ITC benefit that has accrued to him was not passed on to his customes/ flat buyers/ recipients. by way of commensurate reduction in the prices of the flats/ units. The DGAP has calculated the total profiteered amount as ₹ 2,72,21,5321- for the period from 01.07.2017 to 31.03.2019, out of which, an amount of ₹ 2,04,77,678/- was claimed to be passed on by the Respondent to the home buyers by way of reduction in the demand raised by him on his customers/ flat buyers/ recipients. The DGAP, vide his report dated 02.01.2020, has also reported that the claim of the Respondent that he had passed on the ITC benefit amounting to ₹ 2,04,77,6781- to his customers/ flat buyers by way of reducing the amount from their demand letters, has been duly verified by the DGAP with the data submitted by the Respondent and had been found to be correct as per the calculations made in the table-D para-22 of the DGAP Report dated 24.09.2019. Table-D of the DGAP Report dated 24.09.2020 reveals that the amount of ITC benefit required to be passed on by the Respondent to the customers/flat buyers was ₹ 2,72,21,532/-, out of which an amount of ₹ 2,04,77,678/- had been claimed to have been passed on to his customers by the Respondent. The same has been verified by the DGAP. Hence, only the balance profiteered amount of ₹ 73,61,290/- is still required to be passed on by the Respondent, which was in the process of being passed on by him to his customers/ flat buyers/ recipients. There are no reason to differ from the above-detailed computation of profiteering and hence the profiteered amount for the period from 01.07.2017 to 31.03.2019, in the instant case, is determined as ₹ 2,72,21,532/-. 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/shops commensurate with the benefit of ITC received by him - out of the total profiteered amount of ₹ 2,72,21,532/- (inclusive of GST), the balance amount of benefit of ₹ 73,61,288/- shall be passed on, forthwith, by the Respondent to the customers/ flat buyers/ recipients, including Applicant No. 1, in accordance with Annexure-12 of the DGAP Report dated 24.09.2019. Interest - HELD THAT - The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. ₹ 2,72,21,532/-. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients, including Applicant No. 1, 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 - The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project Azea Botanica in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently 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 notice 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 has availed the benefit of additional ITC during the period between 01.07.2017 to 31.12.2018 which he was liable to pass on to his buyers? 2. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent? 3. If yes, then what was the quantum of profiteering and whether the benefit, if any, has been passed on to the customers/recipients/flat buyers by the Respondent along with interest as applicable. Detailed Analysis: 1. Availment of Additional ITC: The DGAP's report revealed that the ITC as a percentage of turnover available to the Respondent during the pre-GST period (April 2016 to June 2017) was 1.33%, and during the post-GST period (July 2017 to December 2018), it was 5.17%. This confirmed that post-GST, the Respondent benefited from additional ITC to the tune of 3.84% of his turnover. The DGAP calculated the amount of ITC benefit to be passed on to all flat buyers as ?2,72,21,532/-. 2. Violation of Section 171 of the CGST Act, 2017: The DGAP found that the Respondent had not passed on the benefit of additional ITC to the recipients by way of commensurate reduction in prices, thus violating the provisions of Section 171 of the CGST Act, 2017. The Respondent admitted that he had not passed on the ITC benefit and agreed to comply with the DGAP's findings. 3. Quantum of Profiteering and Passing on the Benefit: The DGAP's report detailed that the total profiteered amount was ?2,72,21,532/- for the period from 01.07.2017 to 31.03.2019. Out of this, ?2,04,77,678/- was claimed to have been passed on by the Respondent to the home buyers by reducing the demand raised. This claim was verified and found correct by the DGAP. Therefore, the balance profiteered amount of ?73,61,290/- was still required to be passed on by the Respondent. Order: The Authority ordered the Respondent to reduce the prices commensurate with the benefit of ITC received. The balance amount of ?73,61,288/- was to be passed on to the customers/flat buyers/recipients, including Applicant No. 1. Additionally, the Respondent was directed to pay interest at 18% on the entire profiteered amount starting from the date it was profiteered until the date of payment. The Respondent was given three months to comply, failing which the amount would be recovered by the concerned jurisdictional CGST Commissioner under the supervision of the DGAP. The Authority also noted that the Respondent had committed an offence under Section 171 (3A) of the CGST Act, 2017, and was liable for a penalty. A notice was to be issued to the Respondent to explain why the penalty should not be imposed. Conclusion: The judgment concluded that the Respondent had indeed availed the benefit of additional ITC, violated Section 171 of the CGST Act by not passing on the benefit, and quantified the profiteering amount. The Respondent was ordered to pass on the remaining benefit along with interest and was liable for a penalty. The jurisdictional CGST Commissioners were directed to monitor the compliance of this order.
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