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2020 (10) TMI 1097 - NAPA - GSTProfiteering - purchase of flats - allegation of Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in prices of the flats - contravention of Section 171 (1) of the CGST Act, 2017 - penalty - HELD THAT - The Respondent is executing his Aangan project in Gurgaon, Haryana which has been approved under the AHP 2013 . The said AHP was notified under Section 9A of the Haryana Development and Regulation of Urban Areas Act, 1975 vide Notification No. PF-27/48921 dated 19.08.2013 issued by the Town and Country Planning Department, Government of Haryana to facilitate creation of affordable housing stock in the urban areas of the State. The above project has three phases out of which the Angan Phase-I project is subject matter of the present proceedings. It has also been revealed that the Applicants No. 1, 2 3 had complained to the Haryana State Screening Committee on Anti-profiteering on 16.10.2018, 24.09.2018 and 31.10.2018 respectively that the above Respondent was not passing on the benefit of ITC to them on the flats which they had purchased from him in the project, as per the provisions of Section 171 of the above Act. The above 3 complaints were examined by the Standing Committee on Anti-profiteering in its meeting held on 27.12.2018 and were forwarded to the DGAP for detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017. This Authority hereby determines the profiteered amount as ₹ 6,24,48,008/- as per the provisions of Section 171 (1) read with Rule 133 (1) of the above Rules which includes GST @ 12% or 8% on the base profiteered amount of ₹ 5,71,81 ,399/-. The above amount shall be paid by the Respondent to the eligible buyers as per the details given in Annexure-17 of the DGAP s Report dated 14.06.2019 within a period of 3 months from the date of passing of this order along with interest @18% per annum from the date from which the above amount was collected by him from the buyers till the payment is made failing which it shall be recovered by the concerned Commissioner CGST/SGST and paid to the eligible buyers. The above amount is also inclusive of an amount of ₹ 4,32,315/- including the GST which is the profiteered amount in respect of the Applicant No. 1 to 5 as per the details given at Sr.No. 78, 119, 329, 341 and 465 of Annexure-17. The ITC for the balance period of the project shall also be passed on by the Respondent otherwise the buyers shall be at liberty to approach the State Screening Committee Haryana for claiming benefit of ITC. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 read with Sub-Section 171 (1) further orders that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his present project 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. However, since the provisions of Section 171 (3A) have come in to force w.e.f. 01.01.2020 whereas the period during which violation has occurred is w.e.f. 01.07.2017 to 31.12.2018, hence the penalty prescribed under the above Section cannot be imposed on the Respondent retrospectively. Accordingly, Show Cause Notice 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 is not required to be issued.
Issues Involved:
1. Non-passing of the benefit of Input Tax Credit (ITC) to buyers. 2. Calculation of profiteered amount. 3. Methodology for determining profiteering. 4. Examination of pre-GST and post-GST ITC benefits. 5. Impact of statutory provisions and notifications on ITC and pricing. 6. Liability for penalty under Section 171 (3A) of the CGST Act, 2017. Detailed Analysis: 1. Non-passing of the Benefit of ITC to Buyers: The applicants alleged that the respondent did not pass on the benefit of ITC by way of a commensurate reduction in prices of flats in the "Aangan" project. The DGAP's investigation confirmed that the respondent had benefited from additional ITC post-GST implementation but did not reduce the basic price of the flats accordingly, thus contravening Section 171 of the CGST Act, 2017. 2. Calculation of Profiteered Amount: The DGAP calculated the profiteered amount as ?6,24,48,008/-, which included GST on the base profiteered amount. The calculation was based on the ratio of ITC to turnover during the pre-GST and post-GST periods. The respondent's contention that the profiteered amount could not exceed the ITC availed was dismissed, as the DGAP's calculation included the excess tax (GST) collected from buyers, which they were not liable to pay. 3. Methodology for Determining Profiteering: The DGAP used a mathematical methodology to compute the ratio of CENVAT credit and ITC to the total turnover for the pre-GST and post-GST periods. This methodology was deemed logical, reasonable, and in consonance with Section 171 (1) of the CGST Act. The respondent's objections to this methodology were not accepted, as the DGAP's approach was consistent with previous cases in the real estate sector. 4. Examination of Pre-GST and Post-GST ITC Benefits: The DGAP found that the respondent had no CENVAT credit available during the pre-GST period due to the exemption from Service Tax for affordable housing projects. Post-GST, the respondent availed ITC on inputs and input services, leading to an additional benefit of ITC that was not passed on to buyers. The respondent's claims of having paid Service Tax and availed CENVAT credit during February 2016 were not substantiated with sufficient evidence. 5. Impact of Statutory Provisions and Notifications on ITC and Pricing: The Haryana Affordable Housing Policy (AHP) fixed the maximum allotment rate for flats, considering the cost of construction materials and input services. The respondent's claim that the pricing was determined based on the availability of CENVAT credit during the pre-GST period was not accepted, as the AHP rate remained unchanged despite the exemption from Service Tax and the subsequent ITC benefits post-GST. 6. Liability for Penalty under Section 171 (3A) of the CGST Act, 2017: The respondent was found to have denied the benefit of ITC to buyers, committing an offence under Section 171 (3A). However, since the provisions of Section 171 (3A) came into force on 01.01.2020, and the violation period was from 01.07.2017 to 31.12.2018, the penalty could not be imposed retrospectively. Conclusion: The respondent is ordered to pay the profiteered amount of ?6,24,48,008/- to the eligible buyers within three months, along with interest at 18% per annum. The respondent is also directed to reduce the prices commensurate with the benefit of ITC. The DGAP is instructed to investigate the other phases of the "Aangan" project to ensure compliance with Section 171 (1) of the CGST Act. The Commissioners of CGST/SGST Haryana are to monitor the implementation of this order and report compliance within four months.
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