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TMI Blog2020 (2) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... nt during the pre-GST period (April 2016 to June-2017) was 0.94% and during the post-GST period (July-2017 to March-2019), it was 0.39%. On this basis, the DGAP has reported that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it does not qualify to be a case of profiteering - there are no reason to differ from the Report of DGAP and we therefore agree with his findings that the the provisions of Section 171 of the CGST Act 2017 have not been contravened in this case. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Therefore, the allegation that the Respondent has not passed on the benefit of ITC in this case is not found sustainable. Accordingly, the application filed by Applicant No. 1, requesting action against the Respondent for alleged violation of the provisions of Section 171 of the CGST Act, is dismissed as not maintainable. X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.04.2019. However, the Respondent did not avail of the said opportunity. Vide e-mail dated 07.03.2019 (Annex-4), the Applicant No. 1 was also given an opportunity to inspect the non-confidential evidence/reply furnished by the Respondent on 13.08.2019 or 14.08.2019. However, the Applicant No. 1 did not avail of the said opportunity. The DGAP has stated that the investigation in this case had been carried out for the period from 01.07.2017 to 31.03.2019 and the time limit to complete the investigation was extended up to 26.09.2019, by this Authority, in terms of Rule 129(6) of the Rules, vide Order F.No. 22011/NAA/19/2018/3819 dated 19.06.2019 (Annex-5). 5. In his Report the DGAP has stated that in response to the notice dated 09.04.2019, the Respondent replied vide letters/e-mails dated 10.05.2019 (Annex-6), 18.062019 (Annex-7), 22.07.2019 (Annex-8), 07.08.2019 (Annex-9) and 08.08.2019 (Annex-10). Vide the aforementioned letters, the Respondent also submitted the following documents/information:- (a) Copies of GSTR-I & GSTR-3B Returns for the period July, 2017 to March, 2019. (b) Copies of GSTR-3B Returns for the period July, 2017 to December, 2018. (c) Copies of Tran-I Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been claimed in the relevant months when inward supplies were received by the Respondent. He has also cited 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) which 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 CGST 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 units which were under construction but 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 completion certificate, in terms of Section 17(2) & Section 17(3) of the Central Goods and Services Tax Act, 2017 which read as under: Section 17 (2) "Where the goods or services or both ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 2016 to June, 2017) and post-GST (July, 2017 to March, 2019) periods, has been furnished by the DGAP in Table-'B' below:- Table-'B' (Amount in Rs.) Sr.No. Particulars April, 2016 to June, 2017 (Pre-GST) July, 2017 to March, 2019 (Post-GST) 1 CENVAT credit of Service Tax Paid on Input Services (A) 2,39,28,297 - 2 Credit of VAT paid on Inputs (B) - - 3 Total CENVATNAT Credit Available (C) = (A+B) 2,39,28,797 - 4 Input Tax Credit of GST (D) 95,45,185 5 Total Turnover as per Home buyers list (E) 52,18,93,588 8,08,48,071 6 Total Saleable Area of Flats in the project (in Sq. mt.)(F) 17,15,490 17,15,490 7 Area Sold relevant to Turnover as per Home buyers list (G) 3,50,360 56,385 8 Relevant CENVAT/lnput Tax Credit (H)=(C) or D*(G)/(F)] 48,87,054.52 3,13,732.67 9 Ratio of CENVAT/ Input Tax Credit to Turnover [(I)=(H)/(E)]*100 0.94% 0.39% 12. The DGAP further mentioned that in the impugned project under consideration, the total number of flats was 1446, out of which the Respondent had raised demand on 257 home buyers during the pre-GST era and in post-GST period covered by the investigation, i.e., 01.07.2017 to 31.03.2019, the Respondent had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the flats for sale to the Government employees of the Central and State Governments, Public Sector Companies and officials of any Ministry, Department, Commission, DRDO, Police, PSUs, Public Sector Banks, Government run educational institutions, Autonomous bodies etc. Both serving and retired employees were eligible under the Scheme. Further, relatives having blood relations with the above category of consumers could become joint applicants. c) That the Respondent had promoted 'Officer Enclave' inside his project, 'Hill Town'. The Officer enclave project was spread over around 17 acres of land in a project site having a total area of 140 acres. d) That the Respondent had offered the flats in the High Rise and the Low rise apartments in the said project e) That the High Rise project was scrapped later on by the relevant authorities because the requisite permissions for the construction of the project had not been obtained. f) That he had made payments as per the mutually agreed construction milestones and that for the last two years there was no construction taking place at the site and due to the stoppage of construction, there were no fresh sales in the project. g) That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f completion of the project. n) That as per Section 171 (1) of GST act, any reduction in the rate of tax on any supply of goods or services or the benefit of ITC should be passed on to the recipient by way of commensurate reduction in prices, so, In the present case Base Rate should be recalculated to take into effect the reduction in price due to free flow of ITC allowed in the GST regime. o) That the term "Profiteering" as defined under various dictionaries was as follows:- • Black's Law Dictionary- The taking advantage of unusual or exceptional circumstances to make excessive profits • Law Lexicon- To seek or obtain excessive profits, one who is given to making excessive profits • Shorter Oxford English Dictionary - Make or seek to make an excessive profit • Mount Vs Welsh- Any conduct or practice involving the acquisition of excessive profit • Islamic Academy of Education vs. State of Karnataka = 2003 (8) TMI 469 - SUPREME COURT Profiteering would mean taking advantage of unusual or exceptional circumstances to make excessive profits. Hence, in the present case, the builder had been allowed free flow of credit, but the benefit arising th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present matter, he was in agreement with the DGAP Report. He has further stated that the construction of the subject project was very slow and only 20% of the construction activities had been completed and that he was always bound with the Builder Buyer Agreement/Allotment Letter. 19. This Authority has carefully examined the DGAP's Report, the written submissions of the above Applicants as well as the Respondent's placed on record. The issues to be decided by the Authority are as under:- 1) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 20. A perusal of Section 171 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravened in the present case. 23. The above Applicant has further stated that the claim of the DGAP that the total saleable area was 17,15,490 square meter appeared to be wrong as the project is in 17 acres. However, the DGAP in his supplementary report dated 14.10.2019 has stated that it was a typographical error and it may be read as square feet instead of square meter. 24. The Applicant No. 1 has also mentioned definition of "Profiteering" as per various dictionaries. However, the word "profiteered" has been duly defined in the explanation attached to Section 171 and hence there is no ambiguity on anti profiteering or profiteering provisions. The provisions of explanation to Section 171 are quoted as under:- "Explanation:- For the purpose of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both." 25. The Applicant has also relied upon the orders passed by this Authority in the case M/s. Theco India Pvt. Limited = 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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