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TMI Blog2019 (2) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember-2018), it was 7.08%. This confirms that in the post-GST period, the Respondent has been benefited from additional ITC to the tune of 1.51% (7.08%-5.57%) of his turnover and the same is required to be passed on by him to the eligible flat buyers, including the Applicant No. 1. We observe that the computation of the amount of ITC benefit to be passed on by the Respondent to the eligible flat buyers works out to ₹ 1,25,33,555/-. The said computation of the amount of profiteering worked out by the DGAP is based on the data and information supplied by the Respondent himself. We also take note of the fact that the Respondent has not challenged the said mathematical computation and has agreed to pass on the ITC benefit to the recipients - Hence we observe that the amount of profiteering computed by the DGAP is correct and 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 ITC in the post-GST regime. The Respondent has profiteered an amount of ₹ 1,25,33,555/- for the period of investigation. Therefore, in view of the above facts, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the CGST Rules, 2017. 2. The above Complaint was examined by the Standing Committee on Anti-profiteering in its meeting held on 13.12.2018 and vide its minutes was forward to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017. 3. The DGAP in his report has stated that the Applicant had submitted the following documents along with his application: (a) Copies of demand letters issued to him, both pre-GST and post-GST. (b) Copies of the communication with the Respondent regarding benefit of input tax credit. On further perusal of the said application, it was revealed that the Applicant had booked a flat in the Respondent s project Oyster Grande vide application dated 21.06.2016, in the pre-GST era. 4. The DGAP on receipt of the said reference from the Standing Committee on Anti-profiteering, issued a notice under Rule 129(3) of above Rules on 14.01.2019, 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 of commensurate reduction in price and if so, to suo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 1,62,79,414 7. The DGAP has further stated that vide the aforementioned letters/emails, the Respondent submitted the following documents/information (a) Copies of GSTR-1 Returns for the period July, 2017 to December, 2018 (b) Copies of GSTR-3B Returns for the period July, 2017 to December, 2018. (c) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018 (d) Copies of Tran-I for the period July, 2017 to December, 2017. (e) Copies of VAT ST-3 Returns for the period April, 2016 to June, 2017. (f) Copies of all demand letters, sale agreement/contract issued in the name of the Applicant No. 1 (g) CENVAT/ITC register for the period April, 2016 to December, 2018. (h) copy of Balance Sheets for FY 2016-17 2017-18. (i) Tax rates, pre-GST and post-GST. (J) Details of turnover, output tax liability/GST payable and ITC availed and its reconciliation with the turnover as per the list of home-buyers. In terms of Rule 130 of the CGST Rules, 2017, the Respondent also submitted that except the copies of demand letters and the sale agreement/contract issued to the Applicant No. 1, all oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. Therefore, the ITC pertaining to the unsold units was outside the scope of the investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate additional ITC available to them post-GST. 10. The DGAP also claimed that prior to 01.07.2017, i.e. before CST implementation, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services. However, CENVAT credit of Central Excise Duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which were in force at the material time. Moreover, since the Respondent was paying VAT @1% under Haryana VAT Composition Scheme, he was not eligible to avail ITC of VAT paid on the inputs. Further, post-GST, the Respondent could avail the ITC of GST paid on all the inputs and input services including the sub-contracts. As per the information submitted by the Respondent for the period April, 2016 to December, 2018, the details of the ITC availed by him, his turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover. 11. The DGAP has also mentioned that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service (after one third abatement towards value of land, effective GST rate was 12% on the gross value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, the profiteering had been examined by comparing the applicable tax rate and ITC available to the Respondent during the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.5% and VAT@ 1% were leviable (total tax rate was 5.5% on the basic price) with the post-GST period (July, 2017 to December, 2018) when the effective GST rate was 12% on the gross value. On the basis of the figures contained in Table- B above, the comparative figures of ITC availed/available as a percentage of the turnover in the pre-GST and post-GST periods and the recalibrated basic price as well as the excess collection (profiteering) during the post-GST period, have been tabulated in Table- C below:- Table-C (Amount in Rs.) S. No. Particulars Pre-GST Post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Section 171 of the of the CGST Act, 2017. 13. The DGAP has also claimed that having established the fact of profiteering, the next step was to quantify the same. On the basis of the aforesaid CENVAT/ITC availability in the pre and post-GST periods and the demands raised by the Respondent on the Applicant and other home buyers towards the value of construction on which GST liability @ 12% was discharged by the Respondent during the period 01.07.2017 to 31 12.2018, the amount of benefit of ITC not passed on to the recipients or in other words, the profiteered amount came to ₹ 1,25,33,555/- which included GST on the base profiteered amount of ₹ 1,11,90,675/-. This amount was inclusive of ₹ 1,46,656/- (including GST on the base amount of ₹ 1,30,943/-) which was the profiteered amounts in respect of the Applicant No. 1 It was also observed that the Respondent had supplied construction services in the State of Haryana only. 14. The DGAP in his report has also stated that it was pertinent to mention that the above computation of profiteering was with respect to 422 home buyers and 13 commercial shop buyers. Whereas the Respondent had booked 512 residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yet to be completed. 17. The DGAP has concluded that the provisions of Section 171(1) of the CGST Act, 2017 requiring that any reduction in 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 , have been contravened by the Respondent in the present case. 18. The above Report was considered by the Authority in its meeting held on 24.06.2019 and it was decided to hear the above Applicant No. 1 and the Respondent on 09.07.2019. Accordingly a notice was issued to them. Sh. Amit Tandon, the Applicant No. 1 appeared in person and Sh. Vishal Aggarwal, Advocate, Smt. Tuhina, Advocate and Sh. Naveen K. Mittal, Employee Adani Group, authorised representatives appeared on behalf of the Respondent. 19. The Applicant No. 1 filed his submissions on 22.07.2019 stating that:- i. He was not given any chance to review the non-confidential information/documents submitted by the Respondent as the mail sent by the DGAP was on an incorrect e-mail id. However, he trusted the examination and investigation done by the DGAP ii. He further stated that as per the investigation re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,57,900 14,185 46,422 32,238 Total Tax 4,91,130 11,94,178 7,03,048 v. In his submissions, the Applicant No. 1 further stated that the above mentioned points were meant only to provide clarifications and they were not meant to challenge any of the points mentioned in the investigation report. He agreed to the findings and would accept the refund from the Respondent as per the report alongwith the interest. 20. The Respondent, vide his written submissions dated 11.07.2019 stated that he did not agree with the report of the DGAP dated 19.06.2019. However, he added that without prejudice to his rights and contentions, as the subject project was a premium project of him, and in order to avoid any negative publicity and unnecessary litigation, he was willing to accept the computation of the profiteering made in the report of the DGAP. The Respondent further stated that he undertook to pass on 30% of the ITC benefit as computed by the DGAP within 3 weeks and that he would pass on the balance amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent to submit the following documents:- a. Statement showing project-wise ITC/CENVAT Credit availed and Turnover as per the statutory Returns (GST, ST, VAT Returns) for the period from 01.04.2016 to 31.12.2018. b. Project-wise list of all payments received from each of the buyers and the ITC benefit passed on, if any, to them. c. Balance Sheets for the years 2016-17, 2017-18 2018-19 along with the project wise Trial Balance for the same period. d. Ledger for the period from 01.04.2016 to 31.12.2018. e. Details of the total number of apartments/flats/commercial units/residential units in the project with total area of each flat. f. Tran-2 Returns. g. Details of Credit Reversal, if any h. Agreement between the land owner and the builder for the subject project. 23. The Respondent, vide his submissions dated 21.08.2019, submitted the following information/documents:- a. Statement showing project wise ITC/Cenvat Credit availed and Turnover as per the statutory Returns for the period from 01.04.2016 to 31.12.2018. He has stated that he has only one project. b. Project wise list of all the payments received from each of his buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of Credit/lTC available as on 12.02.2019. e. Details of Reversal of credit as on 12.02.2019 f. Total profiteered amount for the flats sold up to 31.12.2018 Details thereof. g. Copy of sample receipt from the Applicant alongwith other recipients/flat owners in respect of the profiteered amount made to them. 27. The Respondent, vide his submissions dated 10.09.2019, submitted that 87 flats have been constructed in each of the Towers A to F, 58 flats in Tower-G and 88 flats each in Tower H J. He also submitted the details relating to the number of flats sold up to 31.12.2018. He also submitted that he had not sold any flat during the period from 01.01.2019 to 12.02.2019. He further stated that the opening GST credit balance as per the Electronic Credit Ledger was ₹ 10,10,96,515/- in February 2019 and that since February 2019, he has reversed an amount of ₹ 2,24,71,268/- in terms of Rule 42 of the CGST Rules, 2017. He also submitted the unit wise breakup of profiteered amount. Further, he has stated that in respect of the 90 customers, who have been sold units but no demands were raised to them till 31.12.2018, he has undertaken to pass on the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athematical computation and has agreed to pass on the ITC benefit to the recipients. Hence we observe that the amount of profiteering computed by the DGAP is correct and 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 ITC in the post-GST regime. 31. Further, it has been revealed from the record that the Respondent has profiteered an amount of ₹ 1,25,33,555/- 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 Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The above amount of ₹ 1,25,33,555/which includes 12% GST on the base profiteered amount of ₹ 1,11,90,675/-, has been profiteered by the Respondent from the Applicant No. 1 and other flat buyers which is required to be refunded to the Applicant No. 1 and other flat buyers alongwith interest @18% from the date when the above amount was profiteered by him till the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to submit any proof of having passed on the ITC benefit to the other eligible buyers. Further, passing on of the ITC benefit by the Respondent to the Applicant No. 1 and the four recipients in respect of whom he has furnished credit notes since the said credit notes were not furnished by the Respondent before the DGAP. For the same reason, the claim of the Respondent regarding his having passed on the benefit to the other eligible buyers can also not be accepted as evidence. Therefore, the said claim of the Respondent is not accepted. 34. It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Oyster Grande project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. Accordingly, a notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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