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2022 (5) TMI 738 - NAPA - GSTProfiteering - purchase of flat in the Respondent's project Heritage Max - allegation is that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price - contravention of Section 171 of the CGST Act, 2017 - HELD THAT - The Authority finds that the benefit of additional Input Tax Credit of 4.81% of the turnover has accrued to the Respondent for the project Heritage Max . This benefit was required to be passed on to the recipients, however, the same was not done by the Respondent. Thus, Section 171 of the CGST, 2017 has been contravened by the Respondent, in as much as the additional benefit of ITC @4.81% of the base price received by the Respondent during the period 01.07.2017 to 30.06.2019, has not been passed on by the Respondent to 390 recipients including the Applicant no. 1. These recipients were identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit no. allotted to such recipients. Therefore, the total additional amount of Rs. 4,74,54,151/- was required to be returned to the Applicant No. 1 and the other such homebuyers. The Respondent has profiteered an amount of Rs. 4,74,54,151/- during the period of investigation. Therefore, in view of the facts, this Authority under Rule 133(3)(a) of the CGST Rules 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 detailed above. Since, the present investigation is only up to 30.06.2019, any benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondents. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of his flats in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he had thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171 (1) during the period from 01.07.2017 to 30.06.2019 and therefore, appears to be liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, the provisions of Section 171 (3A) have been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.17.2017 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty under Section 171 (3A) cannot be imposed on the Respondent for such period. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent. This Order falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. Application disposed off.
Issues Involved:
1. Allegation of profiteering by not passing on the benefit of Input Tax Credit (ITC) under GST. 2. Compliance with Section 171 of the CGST Act, 2017. 3. Investigation and findings by the Director General of Anti-Profiteering (DGAP). 4. Respondent's defense and submissions. 5. Calculation of profiteered amount and benefit passed on. 6. Imposition of penalty and compliance directives. Detailed Analysis: 1. Allegation of Profiteering: The case began with a complaint from Applicant No. 1, alleging that the Respondent did not pass on the benefit of ITC by reducing the price of a flat purchased in the project "Heritage Max." The complaint was scrutinized by the Haryana State Screening Committee and forwarded to the DGAP for detailed investigation. 2. Compliance with Section 171 of the CGST Act, 2017: The primary issue was whether the Respondent reduced the rate of tax or passed on the benefit of ITC on construction services after GST implementation from 01.07.2017, as mandated by Section 171 of the CGST Act, 2017. 3. Investigation and Findings by DGAP: The DGAP conducted an investigation covering the period from 01.07.2017 to 30.06.2019. The Respondent was asked to provide documents and evidence, which included GSTR-1, GSTR-3B returns, Tran-1 forms, and other relevant financial documents. The DGAP found that the Respondent had benefited from additional ITC post-GST, which was not passed on to the buyers. 4. Respondent's Defense and Submissions: The Respondent argued that: - Most of the expenditure was incurred in the pre-GST regime. - The ITC availed was insufficient to offset the increased costs due to GST. - The benefit of ITC was already considered in the pre-GST pricing. - The Respondent had passed on a substantial amount of ITC benefit to the customers. Despite these claims, the DGAP found discrepancies and concluded that the Respondent did not pass on the full benefit of the additional ITC. 5. Calculation of Profiteered Amount and Benefit Passed On: The DGAP calculated the profiteered amount as Rs. 4,74,54,151/-, including 12% GST on the base profiteered amount of Rs. 4,23,69,778/-. The benefit to be passed on to Applicant No. 1 was Rs. 1,23,225/-. The DGAP verified that the Respondent had passed on Rs. 3,70,88,000/- to 245 home buyers but found that an additional Rs. 1,03,66,151/- was still due to be passed on. 6. Imposition of Penalty and Compliance Directives: The Authority found that the Respondent had contravened Section 171 of the CGST Act, 2017, by not passing on the benefit of ITC. However, since the penalty provisions under Section 171(3A) were effective only from 01.01.2020, no penalty was imposed for the period under investigation (01.07.2017 to 30.06.2019). Compliance Directives: - The Respondent was ordered to pass on the remaining benefit of Rs. 1,03,66,151/- to the eligible recipients within three months, along with interest @18% from the date of profiteering until payment. - The jurisdictional CGST/SGST Commissioner was directed to ensure compliance and submit a report within four months. - An advertisement was to be published to inform the homebuyers about the order and their entitlements. Conclusion: The Authority concluded that the Respondent had profiteered by not passing on the benefit of ITC to the homebuyers in the project "Heritage Max." The Respondent was directed to refund the profiteered amount to the affected buyers, ensuring compliance with the CGST Act, 2017.
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