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TMI Blog2019 (11) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent during the pre-GST period (April-2016 to June-2017) was 0.14% and during the post-GST period (July-2017 to December-2018), it was 4.08% This confirms that, post-GST. the Respondent has been benefited from additional ITC to the tune of 3 94% (4.08%-0.14%) of his turnover and the same was required to be passed on to the Applicant and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as ₹ 5,83,593/- which was availed by the Respondent vide Table- C Supra on the basis of the information supplied by the Respondent, which the Respondent has not challenged and hence the amount of profiteering computed by the DGAP is hereby accepted as correct - Therefore, we take the view that the provisions of Section 171 (1) of the CGST Act, 2017 have been contravened in the present case as the Respondent had been benefited from additional IT in the post-GST regime. Further, it has been revealed from the record that the Respondent has profiteered an amount of ₹ 5,83,593/- for the period of investigation. Therefore, in view of the above facts this Authority under Rule 133(3)(a) of the CGST Rules, 2017 orders that the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the apartment purchased by him, on implementation of GST w.e.f. 01. 07.2017,The aforesaid application was examined by Maharashtra State Screening Committee in its meeting and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 of the CGST Act 2017 forwarded the same with its recommendation to the Standing Committee on Anti-Profiteering for further action in terms of Rule 128 of the CGST Rules, 2017 on 16.08.2018. The said application was examined by the Standing Committee on Anti-Profiteering in its meeting held on 08.10,2018 and it had referred the application to the DGAP for investigation under Rule 129(1) of the CGST Rules, 2017 to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients. 2. Thereafter, the DGAP issued a notice to the Respondent on 14.01.2019 under Rule 129 of the above Rules, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way or commensurate red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC pertaining to the unsold area which was required to be reversed by the Respondent is furnished in Table-A below:- Table A Particulars Factor Amount Total saleable Area of Flats (in Sq. mtr.) A 1,240.49 Area Sold before completion certificate is obtained (in sq. mtr.) B 964.67 Area sold before completion certificate is obtained (in Percentage) C=B/A 77.77% Area remaining unsold when completion certificate is obtained (in sq. mtr.) D=A-B 275.82 Area remaining unsold when completion certificate is obtained (in Percentage) E=D/A 22.23% ITC available for the period between July, 2017 till December, 2018 as per GSTR-3B (in Rs.) F 24,40,762 Proportionate ITC to be reversed (in Rs.) G=F*E 5,42,698 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,49 1,240,49 7. Area Sold relevant to Turnover as per Home buyers list (G) 182.37 274.31 8. Relevant CENVAT/Input Tax Credit (H)=[(C) or D*(G)/(F)] 28,549 5,39,727 9. Ratio of CENVAT/ Input Tax Credit to Turnover [(I)=(H)/(E)]*100 0.14% 4.08% 7. The DGAP has reported that from the above table, it was clear that the ITC, as a percentage of turnover, that was available to the Respondent during the pre-GST period was 0.14% whereas during the post-GST period, it was 4.08%. On the basis of the same the DGAP has reported that the Respondent had been benefitted from additional ITC to the tune of 3.94% of his turnover in post-GST period. Accordingly, the profiteering had been calculated by comparing the ratio of ITC available to the turnover and the turnover during the pre-GST period when Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J=H+I 1,42,28,407 10. Excess Realization or Profiteering Amount K=G-J 5,83,593 8. The DGAP has further stated that from the above Table- C it was observed that the additional ITC of 3.94% of the turnover should have resulted in commensurate reduction in the basic price as well as cum-tax price. In terms of Section 171 of the CGST Act, 2017, the benefit of the additional ITC is required to be passed on to the recipients and the profiteering has to be determined at the given point of time in terms of Rule 129(6) of the CGST Rules, 2017. The Respondent had retained the benefits that accrued on account of additional ITC. In other words, the Respondent had contravened the provisions of Section 171 of the CGST Act. 2017 by not reducing the pre-GST basic price by 3.94% on account of the benefit of additional ITC and charging GST @ 12% on the pre-GST basic price. 9 The DGAP in his report has further stated that as regards the extent of the profiteering or the benefit not passed on by the Respondent, taking into account the aforesaid CENVAT/IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount @ 12%. The recipients other than the Applicant were identifiable as per the documents provided by the Respondent and therefore, the profiteered amount was required to be returned to the Applicant and other recipients who were riot Applicants in the present proceedings but were identifiable. 12. The above investigation Report was received by this Authority from the DGAP on 11.06.2019 and was considered in the sating of the Authority held on 11th June, 2019 and it was decided to accord opportunity of hearing to the Applicants and the Respondent on 25.06.2019. Neither the Respondent nor the Applicant No. 1 appeared for the hearing. The Respondent vide letter dated 20.06.2019 made the following submissions and stated that:- a. The complaint/application Rad by the Applicant No. 1 was not legal and bonafide, b. The allegation made by the Applicant, that the benefit of the ITC had not been passed on to him, was not true and correct. c. The agreement to sale between the Applicant and him was executed before the Sub-Registrar Haveli No, 17 in the year 2017 i.e on 01.03.2017 vide Reg. document Sr. No.1072/2017. Hence, instead of GST, Service Tax was applicable for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section 171 of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 15. Perusal of Section 171 of the CGST Act shows that it provides as under:- (1). Any reduction an rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. 16. It is clear from the plain reading of Section 171(1) mentioned above 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 hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. 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 0.14% and during the post-GST period (July-2017 to December-2018), it was 4.08% Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the DGAP. A Report confirming the action taken on the directions passed vide this order shall be submitted by the concerned Commissioner CGST/SGST within a period of 4 months from the date of this order. 19. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the fiats being constructed by him in his Project 'Navkar Darshan' in contravention of the provisions of Section 171 (1) of the CGST Act 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) d) of the CGST Rules, 2017 should not be imposed on him. Accordingly, the notice dated 12.06.2019 vide which rt was proposed to impose penalty under Section 29, 122-127 of the above Act read with Rule 21 and 133 of the COST Rules, 2017 is withdrawn to that extent. 20. A copy of this order be sent to both the Applicants, the Respondent, Commissioners CGST/SGST Pune as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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