9911796707
TMI Blog2019 (5) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... above Act had come to the notice of the DGAP he was legally bound to ascertain the truth of the allegation after conducting detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017 as it not only adversely affects the interests of the common buyers but also amounts to wrongful appropration of the concession which has been granted by the Central as well as the State Government by sacrificing their own revenue and hence no illegality has been committed by him by launching the present investigation against the Respondent. The Respondent has also stressed that the computation of the benefit/ loss could not be done before completion of the project. It is apparent from the record that the above project was launched by the Respondent in the year 2013 and was likely to be completed by March, 2019 after a lapse of a period of about 6 years whereas he had been regularly availing the benefit of additional ITC w.e.f. 01.07.2017 to pay his output tax liability by appropriating the benefit of ITC which he was required to pay to the flat buyers. The Respondent can not be allowed to enrich himself at the cost of the buyers and keep them waiting till the project was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed amount of ₹ 89,68,979/-. The Respondent has also realized an additional amount to the tune of ₹ 49,169/- from the Applicant No. 1 which includes both the profiteered amount @1.79% of the taxable amount (base price) and GST on the said profiteered amount - 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 as has been detailed above. Since the present investigation is only up to 30.06.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. It is also evident from the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Anand Vilas Project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than what he was entitled to collect and has also compelled them to pay more GST on the additional realisation than what they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paid in Pre-GST era B 43,65,000 5,23,800 2,63,646 - 51,52,446 Balance to be paid Post GST (C) = (A)-(B) 29,10,000 3,49,200 1,75,773 - 34,34,973 Demanded by the Respondent (D) 29,10,000 3,49,200 - 3,91,104 36,50,304 Excess Demand by the Respondent (E)= (D)-(C) 2,15,331 3. The DGAP has also stated that the above Applicant had claimed that the Respondent had completed approximately 60% of the project work using inputs which were liable to higher GST @18% or 28% due to which additional ITC benefit had accrued to him. The Applicant No. 1 had also furnished an e-mail dated 28.08.2017 through which he had asked the Respondent why he was not being given the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion had been conducted from 01.07.2017 to 30.06.2018 and the period for completing the investigation was extended upto 27.08.2018 by this Authority, vide its order dated 15.05.2018, as per the provisions of Rule 129 (6) of the CGST Rules, 2017. 7. The DGAP has further submitted that the Respondent had filed replies to the Notice vide his letters dated 28.03.2018, 12.04.2018, 27.04.2018, 07.05.2018, 17.05.2018, 29.05.2018, 07.06.2018, 12.06.2018, 20.07.2018, 25.07.2018, 31.07.2018, 03.08.2018, 09.08.2018 and 13.08.2018. The contents of the replies given by the Respondent have been given in brief by the DGAP as under:- I. That the Respondent had intimated his buyers that he intended to compute the benefit of additional ITC at the time of handing over the possession so that correct amount of benefit could be passed on as it was not certain that the customers would take possession or leave the project or transfer the booking after availing benefit of additional ITC or they would pay the construction linked instalments on time or not. II. That no additional benefit of ITC had accrued after coming in to force of the GST to the Respondent and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate of Service Tax Registration) (f) Copies of all demand letters and sale agreement/contract issued in the name of Applicant No 1 (g) Tax rates - pre-GST and post-GST (h) Copy of Cost Audit report for the FY 2016-17 (i) Details of cost indices and cost escalation. (j) Abridged Cost Statement along with pre-GST impact of input tax credit on cost. (k) Copy of Electronic Credit Ledger for 01.07.2017 to 25.07.2018 (l) CENVAT/Input Tax Credit register for April, 2016 to June, 2018 (m) List of home buyers in the project Anand Vilas 9. The DGAP after investigation has stated that the main issues for determination was whether there were benefits of reduction in the rate of tax or additional ITC on the supply of construction service provided by the Respondent after coming in to force of the GST w.e.f. 01.07.2017 and whether the Respondent had passed on the above benefits to the recipients in terms of Section 171 of the CGST Act, 2017. The DGAP has also stated that the Respondent vide his letter dated 12.04.2018, had furnished copy of the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36,666 7,275 - - 8,58,741 6 Booking+311 15.07.2017 10% 7,27,500 87,300 36,666 7,275 - - 8,58,741 7 Booking+375 17.09.2017 10% 7,27,500 87,300 - - 48,888 48,888 9,12,576 8 Booking+420 01.11.2017 10% 7,27,500 87,300 - - 48,888 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price to be paid by the prospective customer. Therefore, the above contention of the Respondent had no bearing on his legal liability of passing on the benefit of ITC to the Applicant No. 1, the DGAP has stated. 11. The DGAP has also intimated that another claim made by the Respondent was that the above Applicant had withdrawn his complaint and hence, the investigation should be closed, however, he has submitted that although the proceedings must flow from an application but there was no legal provision under which it could be withdrawn. He has further intimated that as per the provisions of Rule 129 of the CGST Rules, 2017, he was legally bound to complete the investigation in case of any reference having been received from the Standing Committee on Anti-profiteering and hence withdrawal of an application could legally not be a valid reason for closing the investigation. 12. The DGAP has found that before coming in to force of the GST w.e.f. 01.07.2017, the Respondent was entitled to avail CENVAT credit of Service Tax paid on input services, credit of VAT paid on purchases of the inputs and credit of VAT (WCT) charged by the civil contractor on sub-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 532,51,994 84,12,610 616,64,604 6 Total Taxable Turnover (F) 4243,39,766 1127,06,432 5370,46,198 3843,52,825 657,71,797 4501,24,622 7 Ratio of CENVAT/ Input Tax Credit Pre-GST [(G) = (D)/(F) and Ratio of Input Tax Credit Pre-GST Post-GST [(G) = (E)/(F)] 6.91% 13.70% 13. On the basis of the above Table the DGAP has argued that it was evident that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period was 6.91% and during the post-GST period it was 13.70% and therefore, it was clear that post-GST, the Respondent had benefited from additional ITC to the extent of 6.79% (13.70%-6.91%) of the total turnover. He has further argued that the issue of profiteering had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,750.00 10 Service Tax 4.5% (Rs.) I=H*4.5% 168.75 11 VAT @1% (Rs.) J=H*1% 37.50 12 Total per square feet price pre-GST (Rs.) K=H+I+J 3,956.25 13 Recalibrated Basic Price after considering additional input tax credit of 6.79% in GST (Rs.) L=H*(100-G)/100 3,495.38 14 GST 12% on recalibrated Basic Price (Rs.) M=L*12% 419.45 15 Commensurate price post-GST (Rs.) N=L+M 3,914.82 14. The DGAP has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2017 had been violated by the Respondent as the additional benefit of ITC @6.79% of the basic price received by the Respondent from the above Applicant during the period from 01.07.2017 to 30.06.2018, had not been passed on to him and the Respondent had collected an additional amount of Rs.l,65,975/- from the Applicant No. 1 which included both the profiteered amount @6.79% of the taxable amount and the GST on the said profiteered amount @12%. The DGAP has further stated that the Respondent had also realized an additional amount of ₹ 3,40,65,102/- including profiteered amount @6.79% of the taxable amount and GST on the profiteered amount @12% from the other home buyers who were not applicants in the present investigation. He has also intimated that all such buyers were identifiable as per the documents received form the Respondent in which their names and addresses along with unit nos. allotted to them had been mentioned. 17. The above Report was considered by the Authority in its meeting held on 28.08.2018 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 13.09.2018. Since, the Respondent had asked for adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 5 of Schedule II, sale of building and accordingly, in case the building/ flat was sold post completion, it would be considered neither supply of goods nor supply of services. He has also contended that as per section 17 (2) of the CGST Act in case the goods or services or both were used by the registered person partly for effecting taxable supplies and partly for effecting exempt supplies the amount of credit shall be restricted to so much of the input tax as was attributable to the taxable supplies. He has further contended that the value of the exempt supply included sale of land and subject to clause (b) of paragraph 5 of Schedule II, sale of building and therefore, the sale of building post completion was considered as exempt supply wherein the Respondent would be required to reverse the ITC. He has also stated that the Respondent was constructing flats under the project 'Anand Vilas', the total saleable area of which was 11,54,550 square feet, out of which he had been able to sell only 6,67,065 square feet which accounted for only 58% of the total saleable area. The Respondent has also mentioned that the above project was started in the year 2013 and was likely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iderably since the start of the project till its completion due to various factors which included change in the tax rate and change in the prices of the inputs as construction period extended from 4-5 years and therefore, it was difficult to compute the benefit/ loss merely for the impugned period. 22. The Respondent has further claimed that the rate of GST had been changed on various goods/ services during the last one year of its implementation and the Government had reduced rates on over 200 products on 15th Nov 2017 and about 50 products on 27th Jul 2017 and therefore, in case there was any reduction in the tax rate in future, ITC would also be reduced and hence accurate computation of the benefit would be possible only when the project was completed. 23. The Respondent has also submitted that he was not in agreement with the computation of the profiteered amount of ₹ 3,42,31,077/-calculated by the DGAP as it included the GST of ₹ 36,67,615/- in the above amount which he had already paid to the Government and hence it should be excluded for the purpose of computation of the benefit. The Respondent has further submitted that a mere diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CGST Act, any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit had to be passed on to the recipients by way of commensurate reduction in prices and it was the duty of the supplier to do so and the law did not require the recipient to pass on the benefit and hence the Respondent would be in a position to pass on the benefit only if the same had accrued to him, however, there was no benefit of Excise Duty to the Respondent as he was purchasing goods from the traders and therefore, the benefit which had not accrued to him could not be passed on by him. 25. The Respondent has also pleaded that he was a bonafide and law abiding dealer who was filing his Statutory Returns and he had not violated any provisions of the law and had never denied to pass on the benefit, however the accurate computation of the same was required as he would not be able to recover the wrongly passed on benefit and therefore, he had been requesting to allow him to pass it on the completion of the project. He has further pleaded that in view of his submissions the imposition of penalty was not warranted. The Respondent also prayed that he was in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He has also cited the judgement passed in the case of Assistant Commercial Taxes Officer v. Rishab Special Yarns Limited (2008) 011 VST 0032J, in which the Hon'ble Rajasthan High Court has held as under:- In my considered opinion, mere contravention of provisions of Section 78 (2) of the Act of 1994 cannot authorise the assessing officer to impose penalty under Section 78 (5) of the Act of 1994 unless there is mens rea on the part of the trader. Apart from this, mens rea is an essential ingredient for imposing penalty. The word mens rea does not bear a literal meaning i.e. bad mind or quality mind) because one who breaks the law even with the best of motives still commits a crime. The language is no longer meant to convey the idea of general malevolence characteristic of early common law usage. The true translation is criminal intention or recklessness. Words typically imposing a mens rea requirement include wilfully, maliciously, fraudulently, recklessly, negligently, corruptly: feloniously and wantomly. The fundamental principle pertaining to mens rea is based on the maxim actus non facit reum nisi mens sit rea. (the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, the DGAP had calculated the benefit on the assumption that the whole area would be sold therefore, the calculation of the benefit made by the DGAP was incorrect. He has also contended that as per the RERA guidelines he could not increase the prices of the flats and in case the benefit was passed on at this stage the wrongly passed benefit could not be recovered. He has further contended that he vide the payment schedule (Annexure-4) had stated that all other additional charges and taxes as applicable, in terms of application form, shall be payable along with last instalment therefore, bona-fide intention of the Respondent to pass-on the benefit was clear. The Respondent has also submitted that the reversal of the ITC should be taken in to account while computing the benefit to be passed on and accordingly, he had computed the benefit on the basis of the area sold i.e. 58% of the total saleable area vide Annexure-5. He has also mentioned that the benefit accruing to him was due to the ITC which pertained to all the buyers as the construction was being undertaken in respect of all the units and the inputs were also being used for all of them whether the instalment was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Applicant No. 1 but to all the buyers who had purchased flats. He has also contended that without prejudice to the disagreement on the methodology of computation of the benefit, he had passed on the benefit on account of ITC subject to modification and credited the same to all the buyers and intimation had also been given to them as per Annexure-5. He has further submitted that he had also passed on the benefit accuring to the customers of his other projects also in respect of which OCs had been applied post GST on a non-prejudice basis. He has also pleaded that there was no mens rea or malafide intent in the instant case and imposition of penalty was not sustainable. He has further pleaded that he had never refused to pass on the benefit which was evident from the correspondence made between him and his customers, however it was his contention that the benefit could be passed only at the time of completion of the project as accurate computation of the benefit was required to be done. 33. The Respondent has also argued that the anti-profiteering clause had been recently introduced in the law and in the absence of any mechanism/timeline, the Authority ought to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of Shubh Enterprises v. Union of India; W. P. (C) No. 41 OF 2013 decided on 14.10.2015 which was later on affirmed by the Hon'ble Supreme Court on the grounds of excessive delegation since the parent statute i.e. the Lottery Regulation Act, 1998 did not envisage such a fee. Similarly, the Hon'ble Madras High Court had struck down Rule 3 (ee) of the Gold Control Rules, 1969 since it did not contain any guidelines for the licensing authorities to determine too low a turnover holding that the Rule would work differently for different individuals depending upon the particular officer, as per the law settled in the case of B. Narasimhalu Chettiar v. Government of Tamil Nadu 89 LW 55. He has also contended that in his case even if the profiteering was established maximum penalty of ₹ 25000/- under Section 125 of the CGST/SGST Act could be imposed. 34. The Respondent has also submitted that the Show Cause Notice issued to him had merely mentioned the provisions of Section 122-127 of the CGST Act and Rule 133 of the CGST Rules, without specifying the exact allegations against him and the above Sections were not attracted in his case e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (88) E.L.T. 24]. 35. The Respondent has also cited the judgment passed by the Hon'ble Supreme Court in the case of CCE v. HMM Ltd., 1995 (76) ELT 497 (SC), wherein the Hon'ble Court has ruled as under:- 2. ... There is considerable force in this contention. If the Department proposes to invoke the proviso to Section 11A(1), the show cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the excise department places reliance on the proviso it must be specifically stated in the show cause notice which is the allegation against the assessee falling within the four corners of the said proviso. In the instant case that having not been specifically stated the Additional Collector was not justified in inferring (merely because the assessee had failed to make a declaration in regard to waste or by-product) an intention to evade the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2017 and November, 2017 that the ITC available to him as a percentage of the total value of taxable supplies was between 2.69% to 3% whereas the GST on the outward supply of his product was 5% which was not sufficient to discharge his tax liability. Moreover in this case the rate of tax has been increased from 0% to 5% instead of reduction in the same. Therefore, there appears to be no reason for treating the price fixed by the Respondent as violation of the provisions of the Anti-Profiteering clause. 37. The Respondent has also claimed that there was no nexus between the instalments received and the ITC as the ITC was dependent on the goods and services purchased by the Respondent and the taxable turnover was based on the instalments received from the buyers. He has further claimed that the Respondent might not have received any instalment from the buyers during a specific period however, the construction would have continued and therefore, ITC would be available. He has also contended that in case instalments were due from lesser number of buyers, it would always increase the ratio of ITC to the taxable turnover and vice-versa. He has further contended that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the benefit passed vide Annexure-I, details of compliances in respect of the projects vide Annexures-2A, 2B 2C, sample letter of intimation to buyers vide Annexure-3 and reasons for difference between the area sold of the projects in his submissions dated 11.10.2018 vide Annexure-4. He has also stated that out of the total 11 projects OCs had been received in respect of 8 projects and the buyers had occupied them after registration of the conveyance deeds. He has further stated that sale of land as per Schedule III of the CGST Act and clause 5 (b) of Schedule II was not to be treated as supply of goods or services therefore, ITC would not be available on the sale of the flats of 6 projects after receipt of OCs and hence, the provisions of Section 171 of the CGST Act should not be applicable on these projects. He has also claimed that the difference in the area sold in annexures furnished through his letter dated 11-Oct-2018 was due to inadvertent error while calculating the total area pertaining to the buyers who had paid instalments post GST. 40. The submissions dated 26.11.2018 and 05.11.2018 filed by the Respondent were forwarded to the DGAP for his counter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in prices or not. He has also submitted that this Rule did not stipulate that the Authority should prescribe the methodology and procedure to quantify the amount of profiteering and hence the quantum of profiteering had to be computed on a case to case basis analysis by devising appropriate method as per the nature and facts of each case and no uniform methodology could be prescribed for determination of the quantum of benefit to be passed on. He has further stated that in Rule 126, the word used was 'determine' and not 'prescribe'. c. On the issue of the CGST Act, 2017 that it does not contemplate levy of penalties: The DGAP has submitted that this issue pertained to the proposal of the Authority to impose penalty on the Respondent which was the exclusive domain of the Authority and he being the investigative arm could not file any Report on the same. d. On the issue that the NAA had travelled beyond its scope of investigation: The DGAP has claimed that this issue did not pertain to him hence, no Report was being filed. 41. The DGAP after examination of the documents submitted by the Respondent duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,10,60,283 7 Total Saleable Area (in Sq ft.) as per Submission dated 28.09.2018 to NAA (F) 11,54,550 11,54,550 8 Sold Area (in Sq. ft.) relevant to above turnover as per Home Buyers List (G) 5,78,095 3,75,400 9 Relevant Proportionate input tax credit [(H)= (C*G)/(F)] or [(H)=(D*G)/(F)] 1,18,81,118 2,00,50,143 10 Ratio of CENVAT/Input Tax Credit Pre-GST Post-GST[(I)=(H)/(E)] 2.21% 4.00% 42. The DGAP has also claimed that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 2.21% and during the post-GST period (July, 2017 to June, 2018), was 4.00% which showed that post-GST, the Respondent had benefited from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Basic Price I=F*12% 5,32,53,855 11 GST Collected@ 18% over other than Basic Price J=G*18% 1,03,10,068 12 Total GST Collected K=I+J 6,35,63,923 13 Total Demand collected L=H+K 56,46,24,206 14 Recalibrated Basic Price M= F* (1-E) or 98.21%of F 43,58,38,427 15 GST @ 12% N=M*12% 5,23,00,611 16 Recalibrated other than Basic Price O=G*(1-E) or 98.21% of G 5,62,52,877 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after GST had come in to force, the ITC as a percentage of taxable turnover would be distorted and it would be erroneous and hence, the benefit of ITC in respect of these 148 units should be calculated when the consideration had been received post-GST by taking into account the proportionate taxable turnover in respect of these 148 Units. He has also intimated that in view of the details of outward supplies of the construction service furnished by the Respondent, it was found that the service was supplied in the State of Haryana only. The DGAP has further mentioned that the Respondent vide Annexure-2A attached to his submissions dated 05.11.2018 had submitted before the Authority that he had passed on the benefit of ₹ 1,97,77,419/- to the 303 flat buyers including the units under cancellation and accordingly, a summary of the category wise profiteering the benefit passed on has been furnished by him in the Table-'G' given below:- Table- G (Amount in Rs.) S. No. Category of Customers No. of Units Area (in Sqf) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 8,120 86,78,966 - 2,25,996 (2,25,996) Cancelled Units. List Attached as Annex-26 7 Other Than Applicant 18 41,235 - - 11,47,653 (11,47,653) Disputed Units as per Respondent's Submission dated 18.12.2018. List Attached as Annex-27 8 Other Than Applicant 206 4,38,130 - - - - Unsold Units Total 512 11,54,550 50,97,39,249 1,01,06,773 1,97,77,419 (9670, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear before the Authority on 15.01.2019. Since, the Respondent had asked for adjournment of the hearing scheduled on 15.01.2019, the Authority decided to accord next hearing opportunity on 21.01.2019. During the hearing, the Respondent has filed reply dated 19.01.2019 on the DGAP's revised Investigation Report as follows:- i. The Respondent has submitted that the benefit of ITC pertained to all the buyers on account of the area sold to each of them and on the basis of his understanding of the proceedings before this Authority and the previous report of the DGAP, he had already passed on the benefit of ITC to all the buyers although he had not received consideration from all of them post GST. He has also submitted that the benefit if any, had accrued to him due to ITC which pertained to all the buyers as the construction was under progress in respect of all the units and the inputs were also being used for all of them irrespective of the fact whether the instalment was due/paid by the buyer post introduction of GST or not. He has also attached details of the benefit passed as per Annexure-A. ii. The Respondent has also claimed that vide 'Table ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure-B c. The Respondent has further submitted that he had not sold any unit under the Project Anand Vilas after 30th June, 2018. 48. The submissions of the Respondent were forwarded to the DGAP on 06.02.2019 and the DGAP vide his Report dated 12.02.2019 has stated that:- a. As the OC for the project had already been applied and was expected to be received shortly, it would not be correct to re-quantify the profiteered amount by extending the period of investigation till 31.12.2018 as it would amount to re-investigation of the case, leading to complete reworking of the availability of ITC, area sold, taxable turnover and the profiteered amount. He has also stated that the exact quantum of benefit of ITC to be passed on could be ascertained only after the project was completed when there would be no further accrual of ITC to the Respondent. Therefore, he has suggested that the present proceedings based on his Report dated 27.08.2018 and subsequent Report dated 21.12.2018 should be finalised and the Respondent should be asked to pass on the balance benefit to the flat buyers after completion of the project, based on the area sold after 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. It is also revealed from the record that the above Applicant vide his complaint dated 22.01.2018 had alleged that the Respondent was not passing on the benefit of ITC to him inspite of his request made through email dated 28.08.2017 although he had completed 60% of the work and was availing ITC on the purchase of the inputs at higher rates of GST which had resulted in bebefit of additional ITC to him and was also charging GST from him @12%. The above complaint was examined by the Standing Committee in its meeting held on 09.02.2018 and was forwarded to the DGAP for investigation who vide his Report dated 27.08.2018 had found that the ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 6.91% and during the post-GST period this ratio was 13.70% as per the Table C mentioned above and therefore, the Respondent had benefited from the additional ITC to the tune of 6.79% (13.70%-6.91%) of the total turnover which he was required to pass on to the flat buyers of this project. He has also stated that the additional ITC of 6.79% of the taxable turnover, should result in commensurate reduction of cum-tax price from ₹ 3,956.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly adversely affects the interests of the common buyers but also amounts to wrongful appropration of the concession which has been granted by the Central as well as the State Government by sacrificing their own revenue and hence no illegality has been committed by him by launching the present investigation against the Respondent. 53. The Respondent has also stressed that the computation of the benefit/ loss could not be done before completion of the project. It is apparent from the record that the above project was launched by the Respondent in the year 2013 and was likely to be completed by March, 2019 after a lapse of a period of about 6 years whereas he had been regularly availing the benefit of additional ITC w.e.f. 01.07.2017 to pay his output tax liability by appropriating the benefit of ITC which he was required to pay to the flat buyers. The Respondent can not be allowed to enrich himself at the cost of the buyers and keep them waiting till the project was completed and hence he is legally bound to pass on the benefit periodically to them by computing the same on the basis of the ITC availed as well the instalments paid by them. Any reversal of ITC due to uns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be taken into consideration while computing the benefit. 56. The Respondent has also claimed that the Real Estate Sector had long gestation period and the rates of tax were being changed frequently due to which the benefit of ITC could not be calculated periodically. However, the claim of the Respondent can not be accepted as the buyers can not be compelled to wait till the completion of the project when the Respondent is utilising the additional ITC every month to discharge his output tax liability, the benefit of which he is legally bound to pass on to the flat buyers. Moreover, any change in the rates of tax is duly reflected in the quantum of ITC available to the Respondent and in case there is additional benefit of ITC only then the same is required to be passed. It is apparent from the data supplied by the Respondent that he had got additional benefit of 1.79% ITC which was required to be passed on by him to the flat buyers and hence the argument advanced by the Respondent in this behalf is without any merit. 57. The Respondent has also contended that he was not in agreement with the computation of the profiteered amount by the DGAP as it in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther stated that no malafide intention had been established on his part and he had discharged his obligation as per the provisions of Section 171 (1) of the CGST Act and hence penalty was not attracted in his case. However it is apparent from the record that the Respondent had not released the benefit for a period of about one year and tried to avoid its release on various grounds viz. that it would not be possible to compute the same before the completion of the project and that he would be required to reverse the ITC on the unsold flats. He has passed the benefit only after the present proceedings were initiated against him which shows that he was not willing to comply with the provisions of Section 171 (1) of the above Act and therefore this act of the Respondent falls foul of the provisions of the above Section which makes him liable for penalty as per the provisions of the CGST Act, 2017 and the Rules framed under it. 60. The Respondent has also raised objection on the methodology followed by the DGAP while calculating the profiteered amount however, it is not maintainable as profiteering in each case has to be determined on the basis of the facts of each case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 133 of the CGST Rules, without specifying the exact allegations against him and the above Sections were not attracted in his case except for Section 125 which was general in nature. Perusal of the notice dated 29.08.2018 issued to the Respondent shows that he has been intimated that it was proposed to impose penalty under Section 122127 of the CGST Act, 2017 read with Rule 133 of the CGST Rules, 2017 and also to cancel his registration if the allegation of profiteering was proved against him, however, no specific instances of violation of the above Sections have been mentioned in the above Notice. Therefore, the proposed imposition of penalty under the above Sections and cancellation of his registration is not sustainable unless specific allegations how he had violated the provisions of the above Sections are levelled against him. Therefore, the above notice is ordered to be withdrawn to the extent that it proposes to impose penalty on him as per the provisions of the above Sections and the Rule. However, rest of the contents of the above show cause notice will continue to operate. 62. The Respondent has also cited the following cases in his support on the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une of 1.79% [4.00% (-) 2.21%] of the taxable turnover which was required to be passed on to the buyers by the Respondent. It would be appropriate to mention here that vide his Report dated 27.08.2018 the pre-GST ratio had been computed as 6.19% and the post-GST ratio had been shown as 13.70% as per Table C mentioned above and the Respondent was held to have availed additional ITC to the tune of 6.79%. The revised ratio calculated by the DGAP has not been challenged by the Respondent, moreover the same is based on the information supplied by the Respondent and therefore, the same is being treated to be correct. 65. The DGAP has also re-computed the profiteered amount after taking in to account the CENVAT/ITC availability pre and post-GST and the details of the instalments received by the Respondent from the Applicant No. 1 and the other home buyers during the period from 01.07.2017 to 30.06.2018 and stated that the amount of benefit of ITC which has not been passed on by the Respondent to his customers or the profiteered amount came to ₹ 1,01,06,773/- which included GST (@ 12% or 18%) on the base profiteered amount of ₹ 89,68,979/and which also included a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The DGAP has further mentioned that the Respondent vide Annexure- 2A attached to his submissions dated 05.11.2018 had submitted before the Authority that he had passed on the benefit of ₹ 1,97,77,419/- to the 303 flat buyers including the units under cancellation. The DGAP has also stated that the benefit claimed to have been passed on by the Respondent was less than what he should have passed on in respect of 92 cases (Sr. 2 of the Table G mentioned in para supra) amounting to ₹ 15,90,239/- (Annexure-24 of the Report) and the benefit claimed to have been passed on by the Respondent was higher (Annexure-25 of the Report) compared to what he should have passed on in respect of the 63 recipients of the flats including the Applicant No. 1 (Sr. 1 3 of Table G mentioned above) amounting to ₹ 19,31,599/-. He has further contended that the Respondent has also stated to have passed on the benefit amounting to ₹ 93,29,286/- in respect of 148 buyers of the flats who had not paid any consideration post GST. The above claims made by the DGAP appear to be based on the analysis of the data supplied by the Respondent and after careful perusal of Table G mentioned abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 which includes both the profiteered amount @1.79% of the taxable amount (base price) and GST on the said profiteered amount. The Respondent has also realized an additional amount of ₹ 15,90,239/- which includes both the profiteered amount @1.79% of the taxable amount (base price) and GST on the said profiteered amount from 92 other flat buyers who were not Applicants in the present proceedings as per Annexure-24 of the Report. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of ₹ 15,90,239/- along with interest @18% per annum to these 92 flat buyers from the dates from which the above amount was collected by him from the buyers till the payment is made. 71. In view of the above facts 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 as has been detailed above. Since the present investigation is only up to 30.06.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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