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2022 (8) TMI 363 - NAPA - GSTProfiteering - Construction service - it is alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price - contravention of section 171 of CGST Act - interest - penalty - HELD THAT - The Authority determines that the Respondent has profiteered an amount of Rs. 3,48,979/-. Therefore, given the above facts, the Authority under Rule 133 (3)(a) of the CGST Rules orders that the Respondent shall reduce the price to be realized from the buyers of the flats/customers commensurate with the benefit of ITC received by him The details of the recipients and benefit which is required to be passed on to each recipient/homebuyer/customer alongwith the details of the unit are contained in the Annexure-'A to this order. The Authority directs that such profiteered amount as determined shall be passed on/returned by the Respondent to the recipients of supply, if not already passed on, alongwith interest @18% (as prescribed under Rule 133(3)(b) of the CGST Rules, 2017 from the date such amount was profiteered by the Respondent up till the date such amount is passed on. returned to the respective recipient of supply) within a period of three months of the date of receipt of this Order, if not already passed on. This Authority lands that the Respondent has denied the benefit of ITC to the buyers of his flats/customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 31.3.2019, and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has 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 01.07.2017 to 31.03.2019 when the Respondent had committed the above violation. Hence, the said penalty under Section 171 (3A) cannot be imposed on the Respondent retrospectively. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
Issues Involved:
1. Whether there was a benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after the implementation of GST w.e.f. 01.07.2017. 2. Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017. Issue-Wise Detailed Analysis: 1. Benefit of Reduction in Rate of Tax or ITC: The investigation by the DGAP revealed that the Respondent was eligible for ITC on the supply of construction services post-GST implementation. The main issue was to determine if there was a benefit of reduction in the rate of tax or ITC on the supply of construction services by the Respondent after GST implementation. The DGAP's report indicated that the Respondent had benefited from additional ITC to the tune of 1.24% of the turnover post-GST. This was calculated by comparing the ratio of ITC to turnover in the pre-GST and post-GST periods. The ITC as a percentage of turnover increased from 0.44% in the pre-GST period to 1.68% in the post-GST period. Hence, the Respondent had gained an additional benefit of 1.24% ITC post-GST. 2. Passing on the Benefit to Recipients: The second issue was whether the Respondent passed on the benefit of the additional ITC to the recipients by way of commensurate reduction in prices. According to Section 171 of the CGST Act, 2017, any benefit of ITC must be passed on to the recipients. The DGAP's investigation found that the Respondent had not passed on the full benefit of the additional ITC to the homebuyers. The total profiteered amount was calculated to be Rs. 3,48,979/-, which included 12% GST on the base amount of Rs. 3,11,589/-. The Respondent claimed to have passed on the ITC benefit to some homebuyers, but the DGAP verified that the benefit passed on was not commensurate with the additional ITC benefit. The Respondent had passed on Rs. 3,04,088/- to three homebuyers but had not passed on Rs. 2,92,532/- to eight homebuyers. The Respondent contended that there was no prescribed methodology for calculating the profiteering amount and that the calculation method used was arbitrary. However, the Authority clarified that the methodology and procedure for passing on the benefits of ITC were enshrined in Section 171 (1) of the CGST Act, 2017, and the calculation of the profiteered amount was a mathematical exercise based on the benefit of ITC and the existing base price of the supply. Conclusion: The Authority concluded that the Respondent had indeed contravened Section 171 of the CGST Act, 2017, by not passing on the additional benefit of ITC to the recipients. The Respondent was ordered to reduce the prices commensurate with the benefit of ITC and to pass on the profiteered amount of Rs. 3,48,979/- to the homebuyers along with 18% interest from the date the amount was profiteered until the date it is passed on. The Respondent was also directed to ensure compliance with this order within three months and to submit a compliance report to the Authority and the DGAP. The Authority also directed that an advertisement be published to inform the homebuyers about their entitlement to the benefit of ITC. Separate Judgments: No separate judgments were delivered by the judges in this case. The order was a collective decision of the Authority.
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