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2022 (8) TMI 687 - NAPA - GSTProfiteering - Construction services - allegation is that the benefit of ITC not passed to customers/flat buyers/recipients, by way of commensurate reduction in the price - contravention of provisions of Section 171 of CGST Act - penalty - HELD THAT - The Authority finds that the Respondent has gained the benefit of ITC on the supply of Construction Services after the implementation of GST w.e.f 01.07.2017 and the Respondent was required to pass on such benefit of ITC to the homebuyers/customers by way of commensurate reduction in prices in tents of Section 171 of the CGST Act, 2017. However, it is observed that the benefit was not commensurately passed on by the Respondent to his recipients. The Authority finds that, provisions of law i.e. Section 171 of the CGST Act, 2017 mentioned herein provide that benefit of the ITC needs to be provided to each and every supply in the commensurate manner. As such, the excess of the ITC benefit provided to some of the homebuyers/customers cannot be offset against others to whom less ITC benefit has been provided or no benefit have been provided at all. The Authority finds that the verification as done by the DGAP in terms of this Authority s Order No. 01/2021 dated 16.03.2021 does not substantiate the submissions and contentions of the Respondent that they have passed on the profiteered amount along with interest to each recipient of supply. The Authority finds that, the DGAP has made all efforts towards verification in terms of the said Order No. 01/2021 dated 16.03.2021 of the Authority, but, the Respondent was unable to provide the requisite evidence which was directed in the said Order. Hence, the Authority determines that the Respondent has profiteered an amount of Rs. 7,90,95,475/- (i.e. Rs. 7,06,20,959/- Rs. 84,74,515/- i.e. GST thereon). The details of all eligible homebuyers/customers and the amount of the benefit to be passed on to each of them is enclosed as the Annexure-A to this Order. Penalty - HELD THAT - The Respondent has denied the benefit of ITC to the buyers of his flats 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 30.09.2019, 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 30.09.2019, 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. Verification of ITC benefit passed on to homebuyers. 2. Payment of applicable interest on the profiteered amount. 3. Methodology and procedure for computation of profiteering amount. 4. Time periods for comparison of ITC in pre-GST and post-GST periods. 5. Compliance with Section 171 of the CGST Act, 2017. 6. Penalty under Section 171(3A) of the CGST Act, 2017. 7. Investigation of other projects under the same GST registration. Issue-wise Detailed Analysis: 1. Verification of ITC Benefit Passed on to Homebuyers: The Director General of Anti-Profiteering (DGAP) submitted an Investigation Report dated 28.08.2020, which calculated the total profiteered amount as Rs. 7,90,95,474/-. The Respondent claimed to have passed on the benefit of ITC amounting to Rs. 8,28,91,520/- to homebuyers. The Authority directed the DGAP to verify this claim by obtaining written acknowledgment receipts from homebuyers. Despite efforts, the Respondent failed to provide acknowledgments from all homebuyers. The DGAP verified the benefit passed on to 31 homebuyers, confirming Rs. 36,84,259/-. The Respondent was found to have not passed on the benefit of Rs. 7,54,50,978/- to 450 homebuyers. 2. Payment of Applicable Interest on the Profiteered Amount: The Respondent claimed to have passed on the ITC benefit along with applicable interest at 18% per annum. However, the Respondent did not provide details required for computation of interest, such as amounts raised and received from homebuyers along with dates. Consequently, the DGAP could not verify the payment of interest. 3. Methodology and Procedure for Computation of Profiteering Amount: The Respondent contended that the methodology adopted by the DGAP was incorrect. The Authority clarified that the "Methodology and Procedure" had been notified under Rule 126 of the CGST Rules, 2017, and no fixed mathematical methodology could be prescribed due to varying facts and circumstances of each case. The computation of profiteering was based on the ratio of ITC to taxable turnover in pre and post-GST periods. 4. Time Periods for Comparison of ITC in Pre-GST and Post-GST Periods: The Respondent argued that the time periods taken for comparison were incorrect. The DGAP compared the percentage of ITC to taxable turnover for 15 months in the pre-GST period and 30 months in the post-GST period. The Authority found this approach reasonable and clarified that the period of investigation was determined based on the date of reference received by the DGAP. 5. Compliance with Section 171 of the CGST Act, 2017: The Authority determined that the Respondent had not commensurately passed on the benefit of ITC to homebuyers as required under Section 171 of the CGST Act, 2017. The Respondent was ordered to reduce prices commensurate with the ITC benefit and pass on the profiteered amount along with interest at 18% to the homebuyers within three months. 6. Penalty under Section 171(3A) of the CGST Act, 2017: The Authority held that the Respondent violated Section 171 (1) during the period from 01.07.2017 to 30.09.2019. However, Section 171 (3A) was inserted w.e.f. 01.01.2020 and could not be applied retrospectively. Therefore, no penalty under Section 171 (3A) was imposed. 7. Investigation of Other Projects under the Same GST Registration: The Authority noted that the Respondent might be executing other projects under the same GST registration. The DGAP was directed to investigate other projects to determine if the Respondent was liable to pass on the ITC benefit in those projects as well. Conclusion: The Respondent was found to have profiteered an amount of Rs. 7,90,95,475/-. The Respondent was directed to pass on the profiteered amount along with interest at 18% to the homebuyers within three months. The DGAP was also directed to investigate other projects under the same GST registration. The jurisdictional CGST/SGST Commissioner was instructed to ensure compliance and submit a report within four months.
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