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2022 (8) TMI 95 - NAPA - GSTProfiteering - Purchase of flat - allegation is that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price - contravention of of Section 171 of the CGST Act, 2017 - penalty - HELD THAT - It Is clear from a 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 about 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 whether there was any benefit of ITC with the introduction of GST. On this issue, 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 201.6 to June 2017) was 3.31% and during the post-GST period (July 2017 to April-2020), It was 5.42% for the Project 'The Peaceful Homes'. This confirms that post-GST, the Respondent has benefited from additional ITC to the tune of 2.11% (5.42% - 3.31%) of his turnover, and the same was required to be passed on to the customers/flat buyers/recipients, The DGAP has calculated the amount of ITC benefit availed by the Respondent which needs to be passed on to all the recipients of supply Including the Applicant No. 1 as Rs. 3,52,59,318/-. The details of such calculations are mentioned in Table- B supra. The above amount is Inclusive of profiteered amount of Rs. 48,952/- In respect of the Applicant No. 1. The Authority finds that the Respondent has profiteered by an amount of Rs. 3,52,59,318/- during the period of investigation i.e. July 2017 to April 2020. The above amount that has been profiteered by the Respondent from his home buyers shall be refunded by him, along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017 - 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. Interest - HELD THAT - The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 3,52,59,318/- Hence the Respondent is directed to also pass on Interest @ 18% to the customers/ flat buyers/ recipients 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 - It Is also evident from the above narration of facts that the Respondent has denied the benefit of ITC to his home buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171. (3A) of above Act. That Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was July 2017 to April 2020, therefore, the Respondent is liable for imposition of penalty under the provisions of the above Section for the amount profiteered from 01.01.2020 onwards. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017. 2. Whether the Respondent passed on the commensurate benefit of reduction in the rate of tax to his customers. Detailed Analysis: Issue 1: Violation of Section 171 of the CGST Act, 2017 The core allegation was that the Respondent did not pass on the benefit of Input Tax Credit (ITC) to the Applicant No. 1 by way of commensurate reduction in the price of the unit purchased. The Director-General of Anti-Profiteering (DGAP) conducted a detailed investigation and found that the ITC as a percentage of turnover increased from 3.31% in the pre-GST period to 5.42% in the post-GST period, resulting in an additional benefit of 2.11% which was not passed on to the buyers. The DGAP calculated that the Respondent had profiteered an amount of Rs. 3,52,59,318/- during the period from 01.07.2017 to 30.04.2020, which included 12% GST on the base amount of Rs. 3,14,81,533/-. Issue 2: Whether the Respondent passed on the commensurate benefit of reduction in the rate of tax to his customers The DGAP's investigation revealed that the Respondent claimed to have passed on the ITC benefit of Rs. 5,15,80,785/- to all buyers, but only 15 out of 150 randomly contacted buyers confirmed receiving the benefit. The Respondent's claim was not accepted due to insufficient confirmations. The DGAP's supplementary report clarified that the benefit of WCT (works contract tax) paid in the pre-GST period was not considered as it was not reflected in VAT returns. The Respondent's argument that profiteering should be limited to the excise portion (CGST on purchase of goods) was rejected, as Section 171 of the CGST Act mandates passing on the benefit of ITC without such bifurcation. Judgment: The Authority found the Respondent guilty of profiteering by an amount of Rs. 3,52,59,318/- and ordered the Respondent to reduce prices commensurate with the benefit of ITC received. The Respondent was directed to refund the profiteered amount along with 18% interest to the buyers within three months. The Authority also ordered a compliance report from the jurisdictional CGST/SGST Commissioner and mandated publication of an advertisement to inform homebuyers about their entitlement to the ITC benefit. The Respondent was found to have contravened Section 171 (1) of the CGST Act and committed an offence under Section 171 (3A) for the period from 01.01.2020 onwards, warranting the issuance of a penalty notice. Conclusion: The judgment concluded that the Respondent had not passed on the benefit of additional ITC to his customers as required under Section 171 of the CGST Act, 2017, and was liable to refund the profiteered amount with interest. The compliance with this order was to be monitored by the CGST/SGST Commissioner.
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