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2022 (10) TMI 461 - NAPA - GSTProfiteering - purchase of Flat - it is alleged that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price - contravention of section 171 of CGST Act - interest - penalty u/s 171 (3A) of the CGST Act, 2017 - HELD THAT - The Authority finds 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 pertaining to 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. Whether there was any net benefit of ITC with the introduction of GST? - HELD THAT - 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-2016 to June-2017) was 3.02% and during the post-GST period (July-2017 to December-2018), it was 6.66% for the project Godrej 24 . This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.64% 6.66% (-) 3.02% of his turnover for the said project and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,89,62,698/- for the project Godrej 24 , the details of which are mentioned in Table- B above. Further as per Table-C of DGAP, the profiteering amount to be passed on to the Applicant No. 1 is nil as no post-GST billing during the investigation period was made to Applicant No. 1. The Authority finds no reason to differ from the above detailed computation of profiteered amount by the DGAP or the methodology adopted by it. The Authority determines that the Respondent has profiteered an amount of Rs. 6,89,62,698/-(Rupees Six Crore Eighty-nine Lacs Sixty-two Thousand Six Hundred Ninety-eight only) during the period under present investigation i.e. 1.07.2017 to 31.12.2018, in the present Project - the Authority under Rule 133 (3)(a) of the CGST Rules orders that the Respondent shall reduce the price to be realized from the customers/flat buyers/recipients in the Project Godrej 24 commensurate with the benefit of additional 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. 6,89,62,698/- for the project Godrej 24 . 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 the provisions of Rule 133 (3) (b) of the CGST Rules, 2017. Penalty - HELD THAT - The Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 31.12.2018, 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 31.12.2018 when the Respondent has committed the above violation and hence the penalty under Section 171 (3A) can not be imposed on the Respondent for such period. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent. Application disposed off.
Issues Involved:
1. Benefit of reduction in the rate of tax or ITC on supply of construction service. 2. Imposition of penalty under Section 171 (3A) of the CGST Act, 2017. 3. Various objections raised by the Respondent regarding the methodology and findings of DGAP. Issue-wise Detailed Analysis: 1. Benefit of Reduction in the Rate of Tax or ITC: - Findings: The ITC as a percentage of turnover available to the Respondent during the pre-GST period was 3.02%, and during the post-GST period, it was 6.66%. This resulted in an additional ITC benefit of 3.64% which was not passed on to the customers. - Profiteering Amount: The DGAP calculated the profiteering amount as Rs. 6,89,62,698/- for the project "Godrej 24". - Conclusion: The Respondent failed to pass on the benefit of additional ITC to the customers, violating Section 171 of the CGST Act, 2017. 2. Imposition of Penalty: - Findings: The Respondent violated Section 171 (1) during the period from 01.07.2017 to 31.12.2018. However, Section 171 (3A) was inserted into the CGST Act, 2017 w.e.f. 01.01.2020. - Conclusion: Penalty under Section 171 (3A) cannot be imposed for the violation period as it was not in effect during that time. 3. Objections Raised by the Respondent: - Profiteering Figures: The Respondent claimed that the benefit passed on was more than the DGAP's calculated amount. However, the Authority found that the benefit was not passed commensurately to all buyers. - Fresh Negotiations/Bookings Post-GST: The Respondent argued that bookings post-GST should be excluded from profiteering calculations. The Authority rejected this, stating that the benefit of additional ITC pertains to the entire project. - Time-Barred Proceedings: The Respondent claimed the proceedings were time-barred. The Authority held that the time limits prescribed under Rule 133 are directory, not mandatory. - Exclusion of Land Value: The Respondent argued for the exclusion of land value from profiteering calculations. The Authority found that the value of land was already excluded as the turnovers considered were taxable turnovers only. - Methodology of ITC Comparison: The Respondent contended that comparing ITC ratios for pre- and post-GST periods was incorrect. The Authority upheld the DGAP's methodology as it was based on factual records. - Inflated Profiteering Amount by Adding GST: The Authority concurred with the DGAP that the GST on the profiteered amount should be passed on to the customers. - Scope of Investigation Beyond Application: The Respondent argued the investigation should not go beyond the applicant's complaint. The Authority found that Section 171 mandates passing on benefits to all recipients, not just the complainant. - Absence of Methodology for Calculation: The Authority stated that the methodology and procedure for determining profiteering were notified under Rule 126 of the CGST Rules, 2017. - Violation of Natural Justice: The Respondent claimed no show cause notice was issued. The Authority noted that notices were issued by both DGAP and NAA, and the Respondent was given ample opportunity to present their case. Orders and Directions: 1. Reduction in Price: The Respondent shall reduce the price commensurate with the benefit of additional ITC. 2. Interest Payment: The Respondent is liable to pay interest at 18% on the profiteered amount from the date of profiteering till the date of payment. 3. Compliance and Reporting: The jurisdictional CGST/SGST Commissioner must ensure compliance and report to the Authority and DGAP within 4 months. 4. Investigation of Other Projects: The DGAP is directed to investigate all other projects of the Respondent under the same GST registration. 5. Publication: An advertisement must be published to inform customers about the profiteered amount and their entitlement. Conclusion: The Authority determined that the Respondent had profiteered an amount of Rs. 6,89,62,698/- by not passing on the benefit of additional ITC to the customers, violating Section 171 of the CGST Act, 2017. The Respondent is ordered to reduce prices, pay the profiteered amount with interest, and ensure compliance through the jurisdictional CGST/SGST Commissioner. The DGAP is also directed to investigate other projects of the Respondent.
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