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2022 (10) TMI 366 - NAPA - GSTProfiteering - purchase of a Flat/supply of construction service - it is alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price - contravention of provisions of section 171 of CGST Act - Penalty - HELD THAT - In the instant case, there is no reduction of rate of tax during the relevant period and the only issue which is required to be decided by the Authority is as to whether Respondent is required to pass on the benefit of input tax credit. As mentioned in earlier paragraphs, the DGAP has carried out investigation in the subject matter and collected relevant information/evidences from the Respondent and after the analysis of the same the DGAP has come to a conclusion that the Respondent has gained 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 to the buyers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act, 2017 during the period 01.07.2017 to 31.05.2020. The Respondent has not been able to provide any methodology whereby such amount of Rs.15,48,92,888/- was passed on whereas the DGAP has calculated amount of Rs. 9,03,74,981/- in scientific manners as mentioned in the Annexure-24 of said Report. Hence, this Authority determines that the Respondent has realized an additional amount of Rs. 9,03,74,981 /- which includes both the profiteered amount @ 5.69% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 395 buyers/recipients including the amount of Rs.2,72,720/- (including GST @12%) from the Applicant No. 1 during the period from 01.07.2017 to 31.05.2020 which was required to be passed on such home buyers/customers/recipients of supply of his impugned project - this Authority agrees with the methodology adopted by the DGAP in its Report to calculate the profiteered amount. This Authority has taken note of claim of the Respondent regarding transfer of benefit of Rs.15,48,92,888/- and also findings of the DGAP in Table D in para 22 supra, that an amount of Rs. 9,03,74,981/- was to be transferred out The Respondent has claimed to pass on excess benefit to some buyers at the expansion of other buyers as mentioned in the said Table D. The Respondent has not been able to provide any methodology whereby such amount of Rs.15,48,92,888/- was passed on whereas the DGAP has calculated amount of Rs. 9,03,74,981/- in scientific manners as mentioned in the Annexure-24 of said Report. The Respondent has denied the benefit of ITC to the buyers of his flats/shops/units 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) and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the Act. As the said provision which has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019, the Respondent is liable to penalty for the amount profiteered by him from 1.01.2020 onwards. Accordingly, notice be issued to the Respondent for such purpose.
Issues:
1. Whether there was a benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent on implementation of GST w.e.f. 01.07.2017. 2. Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. 3. Whether the Respondent is liable to be penalized in terms of Section 171 (3A) of the CGST Act 2017. Issue-wise Detailed Analysis: Issue 1: Benefit of Reduction in Rate of Tax or ITC on Construction Service Post-GST Implementation The DGAP investigated and found that the Respondent had benefited from an additional ITC of 6.56% of the turnover during the period from 01.07.2017 to 31.05.2020. This was determined by comparing the ratio of ITC to turnover in the pre-GST period (0.63%) and the post-GST period (7.19%). The investigation revealed that the Respondent was required to pass on this benefit to the buyers of the "ATS Rhapsody"¯ project by reducing the base prices of the flats/shops. Issue 2: Passing on the Benefit to Recipients The DGAP's report concluded that the Respondent had not reduced the basic prices of his flats/shops by 6.56% due to the additional benefit of ITC, thereby contravening Section 171 of the CGST Act, 2017. The total benefit of Rs. 9,03,74,981/- (including GST @12%) was to be passed on to 395 buyers. However, the Respondent claimed to have passed on the benefit of Rs. 15,48,92,888/- to 380 buyers, which was verified by the DGAP. Despite this, the DGAP found that the benefit passed on was not commensurate for all buyers, leaving an additional amount of Rs. 57,64,875/- still to be passed on to 150 buyers. Issue 3: Liability for Penalty The Authority found that the Respondent had denied the benefit of ITC to the buyers in contravention of Section 171 (1) of the CGST Act, 2017. Consequently, the Respondent is liable for a penalty under Section 171 (3A) of the CGST Act, 2017, for the amount profiteered from 01.01.2020 onwards. The Authority directed the issuance of a notice to the Respondent for the imposition of such a penalty. Conclusion: The Authority agreed with the DGAP's methodology and findings, concluding that the Respondent had realized an additional amount of Rs. 9,03,74,981/- from 395 buyers, which was required to be passed on to them. The Respondent is directed to pass on this amount along with interest @ 18% per annum to the buyers within three months. The Authority also directed the jurisdictional Commissioner, CGST, Noida, and SGST, Lucknow, to monitor compliance and ensure the benefit is passed on to each buyer. Further, the Authority ordered an investigation into other projects executed by the Respondent to check for similar contraventions.
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