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TMI Blog2020 (1) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Respondent subsequently to mislead the present proceedings. Therefore, the claim of the Respondent of his having passed on the benefit of ITC to the eligible buyers cannot be accepted as no reliable and irrebutable evidence has been furnished by the Respondent to prove his above claim. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project (Supertech Basera in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently 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 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. - Case No. 01/2020 - - - Dated:- 1-1-2020 - SH. B.N. SHARMA, CHAIRMAN, SH. J.C. CHAUHAN, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Present:- 1. None for the Applicants No 1 to 8. 2. None for the Applicant No. 9. 3. Sh. D. K. Gupta, Group C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the above Applicants No. 1 to 8 during the period from 21.01.2019 to 23.01.2019. However, the Respondent did not avail of the said opportunity. The Applicants No. 1 to 8 were also given an opportunity to inspect the non-confidential evidences/reply furnished by the Respondent on 21.06.2019, 24.06.2019 and 25.06.2019. However, they also did not avail of the said opportunity. 4. The DGAP in his above Report has stated that the period covered by the current investigation was from 01.07.2017 to 31.12.2018. Also, the time limit to complete the investigation was extended upto 06.07.2019 by this Authority vide its Order dated 19.03.2019 in terms of Rule 129 (6) of the CGST Rules, 2017. 5. The DGAP has also stated that in response to the notice dated 15.01.2019, the Respondent has submitted replies vide letters dated 04.02.2019, 15.02.2019, 28.02.2019, 05.03.2019, 14.06.2019 and 18.06.2019 and has stated that:- a. He has never denied the benefit of excess ITC to his customers and the customers were duly informed vide e-mail dated 24.11.2018 that they were required to wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed. The details of payment schedule have been furnished by the DGAP in Table- A below:- Table- A Time of Payment % of the total price payable At the time of submission of the Application for allotment 5% of the total price At the time of Allotment letter 20% of the total price Within 06 months of the date of Allotment letter 12.5% of the total price Within 12 months of the date of Allotment letter 12.5% of the total price Within 18 months of the date of Allotment letter 12.5% of the total price Within 24 months of the date of Allotment letter 12.5% of the total price Within 30 months of the date of Allotment letter 12.5% of the total price Within 36 months of the date of Allotment letter 12.5% of the total price 9. The DGAP in his report has also submitted that another relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and no ITC was available to the Respondent in the pre-GST era. Further, as the service of construction of affordable housing, provided by the Respondent, was exempt from Service Tax vide Notification No. 25/2012-ST dated 20 06 2012, as amended by Notification No. 9/2016-ST dated 01.03.2016, the Respondent was not eligible to avail CENVAT credit of Central Excise Duty paid on the inputs and Service Tax paid on the input services in the pre-GST era. Besides, the Respondent neither had any output VAT liability nor could he avail ITC of VAT in the pre-GST period. Post-GST, the Respondent was eligible to avail ITC of GST paid on the inputs and the input services. The details of the ITC availed by the Respondent, his turnover from the project Supertech Basera and the ratio of ITC to turnover during the pre-GST period (April, 2016 to June, 2017) and post-GST period (July, 2017 to December, 2018), has been furnished by the DGAP in Table-B below:- Table- B (Amount in Rs.) S.No. Particulars (Pre-GST) 01.04.2016 to 30.06.2017 (Flats) (Shops) (Post-GST) 01.07.2017 to 24.01.2018 (Flats) (Shops) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was NIL and during the post-GST period (July-2017 to December, 2018), it was 2.68%. This clearly confirmed that post-GST, the Respondent had been benefited from additional ITC to the tune of 2.68% (2.68% (-) 0%) of the turnover. The DGAP has further claimed that the Central Government, on the recommendation of the GST Council, has levied 18% GST (effective rate was 12% in view of 1/31d abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable and low-cost housing was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. In view of the change in the GST rate after 01.07.2017, the issue of profiteering had been examined by the DGAP in two parts, i.e., by comparing the ITC and turnover in the pre-GST period when the tax liability of the Respondent was NIL with those in (1) the post-GST period from July, 2017 to 24.01.2018 when the effective GST rate was 12% on both residential flats and commercial shops and (2) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,10,39,68,037 10. GST @12% or 8% I=H*B 4,56,55,702 10,39,278 5,71,87,456 10,38,82,436 11. Commensurate Demand J=H+I 42,61,19,887 96,99,929 77,20,30,657 1,20,78,50,473 12. Excess Demand or Profiteered Amount K=G-J 1,17,34,498 2,67,117 2,12,60,195 3,32,61,809 12. The DGAP in his report has claimed that as per Table- C , the benefit of ITC of 2.68% of the turnover should have resulted in commensurate reduction in the base prices. Hence, provisions of Section 171 (1) of the CGST Act, 2017 had been contravened, as the Respondent had not passed on the benefit of the additional ITC to the recipients by way of commensurate reduction in prices. 13. The DGAP in his report has also contended that the next issue to be examined was the amount of profiteering made in this case. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of outward supplies of the construction service submitted by the Respondent, it was observed that the services had been supplied in the state of Haryana only. 16. The DGAP in his Report has also stated that the benefit of additional ITC of 2.68% of the turnover which has accrued to the Respondent was required to be passed on by the Respondent to the Applicant No. 1 to 8 and other recipients. It appeared that Section 171 (1) of the CGST Act, 2017 has been contravened by the Respondent in as much as the additional benefit of ITC @ 2.68% of the base price received by the Respondent during the period from 01.07.2017 to 31.12.2018, has not been passed on to the Applicant No. 1 to 8 and other recipients. On this account, the Respondent has realized an additional amount to the tune of ₹ 34,31,510/-(including GST) from the Applicant No. 1 to 8, which included both the profiteered amount @ 2.68% of the base price and GST on the said profiteered amount. He has further stated that the investigation revealed that the Respondent had also realized an additional amount of ₹ 2,98,30,299/- which included both the profiteered amount @ 2.68% of the base price and GST on the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions dated 05.08.2019, he submitted :- a. That he had adopted the scheme of 1% GST on this project with effect from 01.04.2019 and hence, he requested to calculate the profiteering for the period from 01.07.2017 to 31.03.2019 instead of from 01.07.2017 to 31.12.2018. b. That as per the Government s New Policy he had balance of CENVAT Credit as on 31.03.2019 of ₹ 1,62,78,213/-, which was not allowable to be carried forward and he was ready to reverse the same with the consent/permission of this Authority. He requested to consider these facts and give him the final ratio of Profiteering on the amount received during the period from 01.07.2017 to 31.03.2019 so that he could pass on the same to his customers. 20. The Respondent vide his submissions dated 22.08.2019 has also submitted the following documents:- i. Statement of ITC/CENVAT Credit availed and Turnover for the period from 01.04.2016 to 31.12.2018. ii. List of all payments received by the customers and ITC benefit passed on to the customers on 06.08.2019. iii. Balance Sheets for the period from 2016-17 to 20174-18. iv. Ledger copies of customers. v. Details of the total nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- 1) Whether the Respondent has availed benefit of additional ITC during the period between 01.07.2017 to 31.12.2018 which he was liable to pass on to his buyers? 2) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent ? 3) If yes then what was the quantum of profiteering? 25. Perusal of Section 171 (1) of the CGST Act shows that it provides as under:- (1). 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. 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 DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utation of profiteering by the DGAP in any manner. It is apparent that the Respondent by his act of reversal of ITC has attempted to deny his customers/homebuyers the benefit of ITC. Accordingly, the above amount cannot be adjusted as has been claimed by the Respondent. 27. In this context, after having carefully going through the contentions of the Respondent we also observe that the reversal of the ITC has been effected by the Respondent even before occupancy certification/ completion certificate was issued by the competent authority. The above voluntary reversal of the credit has been effected by the Respondent only in August 2019, i.e. much after the expiry of the period of investigation of the DGAP i.e. from 01.07.2017 to 31.12.2018. Further, Rule 42 of the CGST Rules, 2017 lays down the mode of computation of mandatory reversal of the unutilized input tax credits in respect of unsold flats/shops of a real estate project at the time of receipt of completion/ occupancy certificate or on the date of first occupancy, whichever is earlier. This is the only method prescribed for reversal of ITC under the CGST Rules and the same requires that such reversal is effected only after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent of his having passed on the benefit of ITC to the eligible buyers cannot be accepted as no reliable and irrebutable evidence has been furnished by the Respondent to prove his above claim. 29.Based on the above facts the profiteered amount is determined as ₹ 3,32,61,809/- in terms of Rule 133 (1) of the CGST Rules, 2017, during the period from 01.07.2017 to 31.12.2018. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 also orders that the Respondent shall reduce the prices to be realized from the buyers of the flats/shops commensurate with the benefit of ITC received by him as has been detailed above. The above amount of ₹ 3,32,61,809/- which includes 12% GST on the base profiteered amount of ₹ 3,04,01,093/- has been profiteered by the Respondent from the Applicant No. 1 to 8 and other flat buyers which is required to be refunded to the above Applicant No. 1 to 8 and the other flat buyers as per the Annexure-20 of the DGAP Report dated 02.07.2019 alongwith interest @18% from the date from when the above amount was profiteered by him till the date of payment as per the provisions of Rule 133 (3) (b) of the above Rules. The present inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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