9911796707
TMI Blog2019 (12) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government, on the recommendation of the GST Council, had levied 18% GST effective rate of 12% in view of 113rd abatement on value on the construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. Accordingly, the DGAP has computed the profiteered amount by comparing the applicable tax rate and ITC available in the pre-GST period when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8% - Since, the calculations have been prepared on the basis of the information reflected in the Returns filed by the above Respondent and the details submitted by him hence, the computations made are taken to be correct and accordingly the profiteered amount is determined as 2,58,80,927/- as per the details mentioned above in terms of the provisions of Rule 133 (1) of the CGST Rules, 2017. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2018, it was forwarded to the DGAP for detailed investigation. 3. The DGAP on receipt of the application issued notice dated 16.01.2019 to 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 of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all the supporting documents. Further, the DGAP vide his letter dated 16.01.2019, had given an opportunity to the Respondent to inspect the non-confidential evidences/information submitted by the above Applicant. However, the Respondent did not avail of the said opportunity. The DGAP, vide e-mail dated 14.01.2019 had requested the Applicant No. 1 to provide copies of demand letters and any other relevant documents along with his contact details. However, neither the Applicant responded nor did he submit the desired documents to the DGAP. The DGAP, vide email dated 31.05.2019, had also given the Applicant No. 1 an opportunity to inspect the non-confidential evidences/information submitted by the above Respondent. However, the Applicant No. 1 did not avail of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the execution of works contract were part of the cost of the project. Now, under the GST regime, the benefit of erstwhile Central Excise duty/Service Tax was available to the Respondent and the same was required to be passed on to the recipients. He also stated that he was negotiating with the sub-contractor for getting the benefit of ITC and the same would be passed on to the home buyers on or before the completion of the project. 5. The Respondent further submitted that Section 171 of the CGST Act, 2017 provided that it was mandatory to pass on any benefit due to reduction in rate of tax or input tax credit, to the consumer, by way of commensurate reduction in prices and the applicability of this statute would have arisen in the following two situations: a) If there was reduction of rate of tax on the supply of goods or services b) If additional benefit of input tax credit was available. He then submitted that on perusal of the facts of the present case, it could be summarised that in the GST regime, there was no reduction in the rate of tax on supply of goods and services as compared to the pre-GST regime, instead, there was an increase in the rate of GST by approxima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC passed on. The Respondent had also requested to treat all the data/information furnished by him as confidential, in terms of Rule 130 of the CGST Rules, 2017. 9. Based on the above mentioned documents filed by the Respondent, the DGAP submitted that the main issues for determination were whether there was any benefit of reduction in rate of tax or input tax credit on the supply of construction service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so, whether such benefit was passed on to the Applicant No. 1, in terms of Section 171 of the CGST Act, 2017. 10. The DGAP further submitted that the Respondent, vide his letter dated 06.02.2019, submitted a copy of an application dated 17.08.2016, demand letters and payment recipients for the sale of flat No. A-801 to one of the recipients Shri Nephe Singh, measuring 543.539 square feet, at the basic sale price of ₹ 4,000/- per square feet and 85.94 square feet balcony area at the basic sale price of ₹ 500/- per square feet. The details of payment schedule were furnished in Table-IA' below:- Table-'A' (Amount in Rs.) S.No. Payment Stage % of total cost 1. At the time of Application 5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent, he could still file an application under Rule 128 of the CGST Rules, 2017 alleging profiteering by a registered person. 13. The DGAP also submitted that para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) reads as:- "Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Further, clause (b) of Paragraph 5 of Schedule II of the Central Goods and Services Tax Act, 2017 reads as:- "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. Thus, the ITC pertaining to the residential units which were under construction but were not sold was provisional ITC which may be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the completion certificate, in terms of Section 17(2) & Section 17(3) of the CGST Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, his turnover from the present project and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to December, 2018) periods in the Table given below:- Table-'B' (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) 01.07.2017 to 24.01.2018 (GST@12%) 25.01.2018 to 31.12.2018(GST@8%) Total (Post-GST) (1) (2) (3) (4) (5) = (3)+(4) (6) (7) (8) = (6) + (7) 1. Credit of Service Tax Paid on Input Services used for Commercial Shops (A) 7,04,170 15,29,496 22,33,665 - - - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) 57,49,401 6,05,284 63,54,685 - - - 3. Rebate of VAT(WCT) Paid to sub-contractors (C) 16,60,642 2,69,370 19,30,012 - - - 4. Total CENVAT/lnput Tax credit Available (D) = (A+B+C) 81,14,212 24,04,149 1,05,18,362 - - - 5. input Tax Credit of GST Availed (E) - - - 1,94,74,702 3,38,83,516 5,33,58,219 6. Turnover from commercial Shops as per ST-3 return (F) 1,60,89,374 30,71,780 1,91,61,154 5,36,11,866 7. Turnover from residential flat as per VAT Returns (G) 17,39,19,166 1,93,86,385 19,33,05,551 59,83,56, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in Table-'C' below. Table 'C' (Amount in Rs.) S.No. Particulars Post- GST Period 1. Period A 01.07.2017 to 24.01.2018 (Flats & Shops) 25.01.2018 to 31.12.2018 (Shops) 25.0.2018 to 31.12.2018 (Flats) Total 2. Output GST rate % B 12 12 8 3. Ratio of CENVAT credit/Input Tax Credit to Total Turnover as per table - 'B' above (%) C 5.89 5.89 5.89 5.89 4. Increase in input tax credit availed post-GST (%) D=5.89% less 3.17% 2.72 2.72 2.72 2.72 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to December, 2018 (Rs.) E 21,89,59,064 5,36,11,866 59,83,56,680 87,09,27,610 7. GST raised over Base Price @12% or 8% (Rs.) F=E*B 2,62,75,088 64,33,424 4,78,68,534 8,05,77,046 8. Total Demand raised G=E+F 24,52,34,152 6,00,45,290 64,62,25,214 95,15,04,656 9. Recalibrated Base Price H=E*(1-D) or 97.28% of E 21,30,03,377 5,21,53,623 58,20,81,378 84,72,38,379 10. GST@12% or 8% I=H*B 2,55,60,405 62,58,435 4,65,66,510 7,83,85,350 11. Commensurate demand price J = H+I 23,85,63,783 5,84,12,058 62,86,47,889 92,56,23,729 12. Excess Collection of Demand or Profiteering Amount K=G-J 66,70,369 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C D E F G H=F-G I 1. Applicant (Residential) - - - - - - No unit sold to the Applicant 2. Others Buyers (Residential) 712 3,89,022 78,77,52,831 2,33,47,091 1,27,61,725 1,05,85,366 Further benefit to be passed on List Attached as Annex-13 3. Unsold Flats 17 8,666 - - - - Unsold Units Total Residential (A) 729 3,97,688 78,77,52,831 2,33,47,091 1,27,61,725 1,05,85,366 4. Applicant (Commercial Shop Buyers) - - - - - - No unit sold to the Applicant 5. Commercial Shop Buyers 53 13,045.52 8,31,74,779 25,33,836 13,95,975 11,37,861 Further benefit to be passed on List Attached as Annex-14 6. Commercial Shop Buyers 2 517.48 - - - - No Consideration Paid Post-GST. Further no benefit passed on by the Respondent. List Attached as Annex-14 7. Unsold Shops 15 6,919 - - - - Unsold Units Total Commercial (B) 70 20,482 8,31,74,779 25,33,836 13,95,975 11,37,861 Grand Total (C)=(A)+(B) 799 4,18,170 87,09,27,610 2,58,80,927 1,41,57,700 1,17,23,227 22. The DGAP also contended that the Applicant No. 1 had not purchased any residential flat or commercial shop and thus, the Respondent was not required to pass on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d should be passed on to him. He had no locus standi in the said project under complaint. Thus, the entire proceedings had therefore been conducted on misrepresentation made by the Applicant No. 1. The law did not provide for passing on of the benefit of ITC to any passerby on the road. 27. He also submitted that the DGAP's Report dated 12.06.2019 had made incorrect finding that he had benefited from additional input tax credit of 2.72% of the turnover which was based on the average method of his own. He also clarified that he had not been given any opportunity to either controvert or respond to the DGAP adopting the average basis for determining the alleged profiteering. 28. He further stated that it was trite law that for taxing statutes, a mechanism for computation of value on which tax was to be paid was required as had been held by several Courts including the Apex Court that in absence of any computational machinery the charging provisions would be construed to have never included the transaction within its fold and no tax can be levied on such transactions. He further cited the judgements in the cases of Commissioner of Income Tax V. B. C. Srinivasa Setty (1981) 128 ITR 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of works contract involving undivided share of land, transfer of property in goods and services and thus, it was a composite works contract. The Respondent also mentioned that during the period covered by the arbitrary calculation of profiteering by the average method i.e. 01.072017 to 31.12.2018, the project was under construction with expected date of completion being approximately fifteen months later. He also requested that the profiteering, if any, could only be determined once the project was nearing completion. 30. The Respondent also contended that the average method adopted by the DGAP suffered from the following errors:- i. Certain inputs in construction including bricks, stone, dust stone aggregate etc. were exempted from VAT in pre GST period. In the post GST period, such inputs suffer GST @ 5%. Therefore, while computing the input GST, the amount of GST on such tax free items had also been considered by the DGAP which was to the detriment to the Respondent and in fact, the GST on such items which earlier were tax free had to be eliminated while computing possible profiteering. ii. Even while adopting average basis for alleging profiteering, the DGAP had erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. The Respondent further raised objections which are as follows:- (i) Did the allegation of Profiteering by the Applicant exist when it had been noticed that the provisions of Rule 128(1) had not been followed by the Standing Committee. The application had been dealt by the Standing Committee beyond the prescribed time. (ii) Did the continuation of the proceedings under the Anti-Profiteering provisions subsisted when it has been established that the applicant No. 1 was not a flat owner and had misrepresented to the Authority. Further the complainant had also misrepresented of not receiving the benefits of ITC difference in the pre and post GST era. (iii) Once the allegation of the Applicant of profiteering against the Respondent had been established to be incorrect, could the proceedings against the Respondent continue suomoto. Paragraph 9 read with paragraph 12, 13 and 14 of the "Procedure & Methodology" did not mention circumstances for continuing with the proceedings on their own motion once it had been observed that there has been a written application made against the Respondent. (iv) Was the arbitrary finding of profiteering of 2.72% of claims raised during the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project was not applicable for the purpose of section 171 of the CGST Act. He also submitted that it was evident from the submissions made by him before the DGAP on 14.05.2019 and subsequently on 01.05.2019, that he had already passed on the benefit of 1.50% to the buyers and also filed the copy of proof thereof. He further clarified that he had neither claimed any ineligible CENVAT/ITC credit nor reversed any CENVAT/ITC credit during the investigation period. 36. The DGAP was also asked to submit his report on the issues raised by the Respondent vide his above mentioned submissions. The DGAP vide his Report dated 22.07.2019 has submitted that regarding the Respondent's submissions that profiteering could only be determined once the project was nearing completion and all costs, inputs, claims and contingencies had to be taken into account and claimed that the above issues were required to be deliberated upon by applying relevant provisions of the law including Rule 129(6) of the CGST Rules, 2017. He further submitted that in his Report dated 12.06.2019, increase in the ITC as a percentage of the turnover, availed by the Respondent post-GST, had been quantified. The input or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g profiteering can be filed by an interested party or a commissioner or any other person. Therefore, though the Applicant No. 1 is not a recipient of service provided by the Respondent, he can still file an application under Rule 128 (1) of the Rules, alleging profiteering by the Respondent. Therefore, the above contention of the Respondent is not tenable. 39. The Respondent has further contended that the DGAP's Report dated 12.06.2019 had recorded incorrect findings by stating that he had benefited from additional ITC to the tune of 2.72% of the turnover, as this finding was based on the average method applied by the DGAP on his own accord. However, perusal of Table B of the above Report shows that the ratio of CENVAT and VAT for the period between April, 2016 to June, 2017 has been calculated on the basis of the figures reflected by the Respondent in his Service Tax and the VAT Returns filed during the above period. Similarly, the computation of ratio of ITC to turnover for the period from July, 2017 to December, 2018 is based on the details supplied by the Respondent himself. The Respondent had also supplied the details of the total saleable carpet area and the total sold area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. However, the mathematical methodology for determination of the profiteered amount has to be applied on case to case basis depending on the facts of each case and no fixed formula can be set for calculating the same as the facts of each case are different. The mathematical methodology applied in the case where the rate of tax has been reduced and ITC disallowed cannot be applied in the case where the rate of tax has been reduced and ITC allowed. Similarly, the mathematical methodology applied in the case of Fast Moving Consumer Goods (FMCGs) cannot be applied in the case of construction services. Even the methodology applied in two cases of construction service may vary on account of the period taken for execution of the project, the area sold and the turnover realised. It would also be appropriate to mention here that this Authority has power to 'determine' the methodology and not to 'prescribe' it as per the provisions of the above Rule and therefore, no set prescription can be laid while computing profiteering. It would be further relevant to mention that the power under Rule 126 has been granted to this Authority by the Central Govt., as per the provisions of Section 164 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the judgement passed in the case of National Mineral Development Corporation v. State of M. P. and another (2004) 65 SCC 281 = 2004 (5) TMI 575 - SUPREME COURT in his support which pertains to the issue of levy of royalty on 'slimes', but since in the present case, this issue is not involved hence, the above case is of no help to the Respondent. He has also placed reliance on the law settled in the case of Larsen & Toubro v. State of Bihar and others 2004 (134) STC 354 (Pat.) = 2003 (11) TMI 565 - PATNA HIGH COURT which was affirmed by the Hon'ble Supreme Court in the case of State of Jharkhand and others v. Voltas Ltd. (2007) 7 VST 317 (SC) = 2007 (5) TMI 18 - SUPREME COURT, in which the Hon'ble Supreme Court had held that in the absence of all exclusions which were to be prescribed for computation of tax, no tax was payable. However, perusal of the facts of the above cases shows that they pertain to the issue of works contracts but since the facts of this case are not similar to the facts of the above cases hence, they do not further the cause of the Respondent. The Respondent has also cited the case of Commissioner Central Excise & Customs Kerala & others. v. Larsen & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent was ₹ 2,58,80,927/-, and the amount of ₹ 2,33,47,091/- pertained only to the 712 Residential flat buyers. Thus, the claim of Respondent that the DGAP has stated that the total benefit to be passed on by him was ₹ 2,33,47,091/- is incorrect. Further, the DGAP has not verified the benefit of ₹ 1,27,61,725/- claimed to have been passed on by the Respondent to 712 buyers as has been mentioned in the Table-D. The DGAP has also not verified an amount of ₹ 13,95,975/- which the Respondent has claimed to have passed on in respect of the commercial shops. The Respondent has also not produced any evidence during the course of the proceedings despite clear directions from the Authority nor he has attended the personal hearings afforded to him on 03.07.2019 and 16.07.2019 to prove that he has passed on the above amount as benefit of additional ITC. Therefore, there is no ground to accept his above claims. Accordingly, the above amount of ₹ 1,27,61,725/- and an amount of ₹ 13,95,975/- (Total of ₹ 1,41,57,700/-) cannot be treated to have been passed on by the Respondent to his buyers and hence the same cannot be allowed to be adjusted against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect by the Respondent, reads as "Receipt Ref. CRMCNOV/00020/19-20 (12,471+ Tax 998.00)" which shows that no where it has been mentioned that this amount has been transferred on account of ITC benefit. Perusal of the copies of the ledger accounts of the other house buyers to whom the Respondent has claimed to have passed on the benefit of ITC also shows that the same entry has been made in all such cases on 01.05.2019. By no stretch of imagination this entry can be construed to have been made on account of passing on the benefit of ITC, therefore, the above amount cannot be taken to have been passed on account of the ITC benefit, hence, the contention of the Respondent that he had passed on the full benefit of ITC is not correct and therefore, the same cannot be accepted. 50. We also observe that the provisions of Section 171 of the CGST Act, 2017 are aimed at ensuring that the recipients get the commensurate benefit, in the form of reduction in price, in case of any tax rate reduction and/or incremental benefit of ITC which has become available to them due to sacrifice made by the State and the Central Govt. from their own tax kitty to provide accommodation to the vulnerable secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12% GST on the base profiteered amount of ₹ 59,55,687/-. He has also computed the amount of benefit of ITC or the profiteered amount that needs to be passed on by the Respondent to his recipients during the period from 25.01.2018 to 31.12.2018 as ₹ 1,92,10,558/- which includes 12% GST on commercial shops and 8% GST on residential flats, on the base profiteered amount of ₹ 1,77,33,544/-. Therefore, the total benefit of ITC which is required to be passed on during the period from 01.07.2017 to 31.12.2018, comes to Rs. which includes GST @ 12% or 8% on the base profiteered amount of ₹ 2,36,89,231/- as per Table C of the above Report. The home buyer and unit no. wise break-up of this amount has been given by the DGAP vide Annexure-12 of his Report This amount does not include profiteering pertaining to the Applicant No. 1 as he had not bought any flat or commercial shop in the Respondent present project. Since, the above tabulated calculations have been prepared on the basis of the information reflected in the Returns filed by the above Respondent and the details submitted by him hence, the computations made are taken to be correct and accordingly the profiteere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions 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 19.06.2019 vide which it was proposed to impose penalty under Section 29, 122-127 of the above Act read with Rule 21 and 133 of the CGST Rules, 2017 is withdrawn to that extent. 56. The Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Haryana to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to all the eligible buyers. A Report in compliance of this order shall be submitted to this Authority by the Commissioners CGST/SGST Haryana through the DGAP within a period of 4 months from the date of receipt of this order. 57. A copy each of this order be supplied to both the Applicants, the Respondent, Commissioners CGST/SGST Haryana as well as the Principal Secretary (Town & Planning), Government of Haryana for necessary action. File be consigned after completio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
