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TMI Blog2020 (5) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ber-2018), it was 5.17%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.84% (5.17% - 1.33%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as ₹ 2,72,21,5351- which was availed by the Respondent vide Table- C Supra on the basis of the information supplied by the Respondent, which the Respondent has himself accepted that he was in agreement with the DGAP Report dated 24.09.2019 and hence the amount of profiteering computed by the DGAP is hereby accepted as correct - the Respondent, vide his submissions, has himself admitted that he has resorted to profiteering in as much as the ITC benefit that has accrued to him was not passed on to his customes/ flat buyers/ recipients. by way of commensurate reduction in the prices of the flats/ units. The DGAP has calculated the total profiteered amount as ₹ 2,72,21,5321- for the period from 01.07.2017 to 31.03.2019, out of which, an amount of ₹ 2,04,77,678/- was claimed to be passed on by the Respondent to the home buyers b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d benefit of ITC to the buyers of the flats being constructed by him in his Project Azea Botanica 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. 23/2020 - - - Dated:- 5-5-2020 - DR. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Present:- 1. None for the Applicants No 1. 2. None for the Applicant No. 2. 3. Sh. Sahli Dua, CA Sh. Ankit Bhargave, CA for the Respondent. ORDER 1. The present Report dated 24.09.2019 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove Report has stated that the period covered by the current investigation was from 01.07.2017 to 31.03.2019. Also, the time limit to complete the investigation was extended upto 26.09.2019 by this Authority vide its Order dated 19.06.2019 (Annex-5) 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 23.04.2019 (Annex-6), 14.05.2019 (Annex-7), 10.06.2019 (Annex-8), 09.08.2019 (Annex-9), and 05.09.2019 (Annex-10) and has stated:- a. That he had outsourced the construction work to a contractor named M/s Vensa Infrastructure Ltd. All the expenses on construction including material, labour and other expenses were to be borne by the contractor. The contactor on completion of various milestones had raised invoices based on the agreed rate and charged Service Tax/GST as applicable. In the pre-GST regime, out of the total Cenvat credit claimed by him, 75% was on Service Tax paid to the contractor for construction. Post implementation of GST, the applicable tax rate on works contract service had gone up from 6% to 18%. Despite an increase in the tax rate, he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. At the time of Booking 24-02-2016 5% 2,87,700 10,430 - 2,98,130 2. On Agreement 24-03-2016 5% 2,87,700 10,430 - 2,98,130 3. On Start of Excavation 24-03-2016 10% 5,75,400 23,327 - 5,98,727 4. On Start of Basement Slab 24-03-2016 10% 5,75,400 25,893 - 6,01,293 5. On Start of 1st Floor 24-03-2016 5% 2,87,700 12,947 - 3,00,647 6. On Start of 2nd Floor 01-07-2016 5% 2,87,700 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. On Offer of possession - 5% 4,56,822 - 51,738 5,08,560 Total 100% 62,95,550 1,98,192 2,40,172 67,33,914 10. The DGAP has reported that the contention of the Respondent that the accurate quantum of ITC benefit would be passed on to the recipients once the project was fully completed and the Respondent had knowledge of the exact benefit of ITC, might be correct but the profiteering, if any, had to be established at a given point of time, in terms of Rule 129 (6) of the Rules. Therefore, the ITC which was available to the Respondent and the amount received by him from the Applicant and other recipients till 31.03.2019, had to be taken into account for determining the extent of profiteering 11. The DGAP has also reported that another aspect that was kept in mind while determining the amount of profiteering was that the ITC proportionate to the unsold units would have to be reversed once the completion certificate was obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported that prior 01.07.2017, i.e., in the pre-GST era, the Respondent was eligible to avail CENVAT credit of Service Tax paid on input services only (no credit was available in respect of Central Excise Duty paid on inputs and VAT paid on inputs). However, post-GST, the Respondent could avail ITC of GST paid on all inputs and input services. From the data submitted by the Respondent, the details of the ITC availed by the Respondent, his turnover for the project Azea Botanica , the ratio of ITC to the turnover during the pre-GST (April, 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) 2,88,12,927 - 2. Credit of VAT on Inputs (B) - - 3. Total CENVATNAT Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2016 to June, 2017 July, 2017 to March, 2019 1. Tax Rate B 4.5% 12% 2. Ratio of CENVAT credit/ ITC to Turnover as per Table B above (%) C 1.33% 5.17% 3. Increase in ITC availed post-GST (%) D=5.17%less 1.33% - 3.84% Analysis of Increase in ITC: 4. Base Price raised during post-GST period (July, 2017 to March, 2019) E 69,64,97,850 5. Less: Base Price raised during July, 2017 to March, 2019 (Flats sold after 01.07.2017 and agreement done after adjusting benefit GST ITC) F 6,35,56,734 6. Net Base Price raised during post-GST period (July, 2017 to March, 2019) G=E-F 63,29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e home buyer wise break-up with the flat/ unit number was given in Annex-12. Further, as per SI. No. 130 of Annexure-12, the benefit to be passed on to the Applicant No. 1 worked out to ₹ 56,266/- which included both the profiteered amount @3.84% of the base price and 12% GST on the said profiteered amount. 16. The DGAP has also claimed that the Respondent had submitted that he had passed on the benefit of Rs. 2,04,77,678/- to 134 home buyers who have booked their flats upto 31.03.2019. A summary of category-wise profiteering and the benefit passed on has been furnished by the DGAP in the Table- D below:- Table-D (Amount in Rs.) S.No. Category of Customers No. of Units Area (in Sqf) Amount Raised Post GST Profiteering Amt. as per Annex-12 Benefit claimed to have been Passed on by the Respondent Difference Remark A B C D E F G H=F-G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional benefit to be passed on to other recipients but might be adjusted against the future demands from such home buyers. 18. The DGAP has further reported that the above computation of profiteering was with respect to 262 home buyers from whom construction value had been received by the Respondent during the period 01.07.2017 to 31.03.2019 (excluding flats sold after 01.07.2017 on which agreements were executed after adjusting benefit of GST ITC. Whereas the Respondent had booked 319 flats till 31.03.2019, he had claimed that effective from 01.07.2017, he had sold 11 flats at the rates agreed by the customers on all-inclusive prices after considering market conditions, escalations, demand-supply balance, GST ITC benefit, development in the locality, location of the land, proximity to education institution/ hospitals/ airport etc. and the price so fixed was mutually negotiated and agreed upon. The Respondent had also submitted the declaration letter given by these 11 home buyers to the Respondent with the agreement. This argument of the Respondent has merit and therefore, ITC pertaining to the above 11 units was outside the scope of this investigation as the selling price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 73,61,288/- was required to be returned to the Applicant and such eligible recipients. 20. The DGAP has further stated that in the present case, the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017. 21. The investigation Report was received by this Authority from the DGAP on 25.09.2019 and was considered in the sitting held on 26.09.2019 and it was decided to accord opportunity of hearing to the Applicants and the Respondent on 24.10.2019. Notice was also issued to the Respondent directing him to explain why the Report dated 24.09.2019 furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. 22. The Respondent vide his submissions dated 13.11.2019 contended as under:- a. That there was no benefit of ITC on supplies received by him as the costing (including taxes) had increased in the GST regime. b. That the basic sale price was agreed by him and the home buyers in the pre-GST Service Tax era after considering the CENVAT available to the Respondent. Now in the GST era since the same benefits were available to him, there was no addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a period of 21 months i.e. July 2017 to March 2019. The ratio of CENVAT to Turnover in the initial years of the project was significantly higher than the ratio for the period April 2016 to June 2017. If the CENVAT of the period prior to April 2016 was not considered, it might result in an incorrect computation of profiteering. Table-1 below depicts the ratio of Total CENVAT to Total Turnover (calculated in the manner as laid down in the report of DGAP) if the entire CENVAT prior to April 2016 was also considered:- Table-1 (Amount in Rs.) S.No. Particulars Upto Mar Apr 16 to Jun 17 Total Pre- GST 1 Total CENVAT Credit of Service Tax Paid on Input Services (Refer annexure 2) (A) 2,23,32,968 2,88,12,927 5,11,45,895 2 Total Turnover as per Home Buyers List (B) 18,84,06,472 72,38,10,202 91,22,16,674 3 Total Saleable Residential Area in the projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. That he had estimated and passed on the benefit of ITC amounting to ₹ 2,04,77,6781- to all the home buyers whose basic sale prices exceeded the threshold fixed by him. He had fixed the threshold considering the margins available on the agreed rate at which the booking had been made. The benefit was passed on by reducing it from the demand of the home buyers. He contended that it was evident from Table D of the Report of DGAP that he had passed on the benefit on the basis of his estimation. j. That in order to avoid further litigation, he agreed to pass on the ITC benefit determined by this Authority. 23.The Respondent has also contended the following:- a. That post implementation of GST he had passed on the benefit of ITC to the home buyers by way of reduction in the amount demanded from the home buyers at the time of raising the demands on them in accordance with the payment schedule agreed with the home buyers. b. That alongwith his submissions he has submitted the list of home buyers to whom the benefit had been passed onalong with copies of the credit notes that he had issued to the home buyers. He also prayed that this list and the details of the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent on account of GST charged by the contractor as the said contractor was also enjoying ITC on the purchases made by him resulting in reduction in prices of the materials purchased by him which he would have passed on to the Respondent. b. That the contention of the Respondent that the accurate amount of ITC benefit would be passed on to the recipients once the project was fully completed and the Respondent had complete knowledge of the exact benefit of ITC, but profiteering, if any, had to be arrived at a given point of time in terms of Rule 129 (6) of the Rules. Therefore, the ITC available to the Respondent and the amount demanded by him from the Applicant No. 1 and the other recipients till 31.03.2019, was taken into account for the same. The ITC pertaining to unsold units was already excluded from the computation of profiteering. c. That profiteering was computed for the period July-2017 to March-2019 for which comparision was made with the ITC available in the pre-GST period of 01.04.20156 to 30.06.2017. Therefore, the period considered in DGAP s Report was reasonable and comparable. d. That for computation of profiteering, he had considered the total dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit had been duly verified and upon verification, it was observed that the Respondent had already passed on the additional ITC benefit of ₹ 2,04,77,678/- by reducing the amount from the demand letters. He had provisionally, in order to comply with the DGAP s Report had issued credit notes to the home buyers to whom the additional benefit was required to be passed on to save the interest that might be payable on the profiteered amount. The list of such credit notes was attached as Annexure A . Further, the copies of acknowledgements from a few home buyers regarding the receipt of credit notes for passing on of the additional ITC benefit had also been attached as Annexure B . 29. The Respondent vide his submissions dated 24.02.2020 has further stated that as per the directions of this Authority passed vide order dated 10.02.2020, he had submitted the copies of the acknowledgements from the home buyers regarding the receipt of the credit notes issued for passing on of the addititonal ITC benefit. 30. This Authority has carefully examined the DGAP s Reports, the written submissions of the above Applicants as well as the submissions of the Respondent. The issues to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering in as much as the ITC benefit that has accrued to him was not passed on to his customes/ flat buyers/ recipients. by way of commensurate reduction in the prices of the flats/ units. We also observe that the Respondent is in agreement with the DGAP s report and that he has stated that he is ready to pass on the said benefit to his customes/ flat buyers/ recipients. 33. We further observe that the DGAP has calculated the total profiteered amount as ₹ 2,72,21,5321- for the period from 01.07.2017 to 31.03.2019, out of which, an amount of ₹ 2,04,77,678/- was claimed to be passed on by the Respondent to the home buyers by way of reduction in the demand raised by him on his customers/ flat buyers/ recipients. The DGAP, vide his report dated 02.01.2020, has also reported that the claim of the Respondent that he had passed on the ITC benefit amounting to ₹ 2,04,77,6781- to his customers/ flat buyers by way of reducing the amount from their demand letters, has been duly verified by the DGAP with the data submitted by the Respondent and had been found to be correct as per the calculations made in the table-D para-22 of the DGAP Report dated 24.09.2019. Table-D of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to ₹ 73,61,2881- and the applicable interest on the total profiteered amount of ₹ 2,72,21,532 is actually passed on by the Respondent to his customers/ flat buyers/ recipients. 38. It is also observed that the present investigation is only up to 31.03.2019 and any additional benefit of ITC which shall accrue subsequently shall also be passed on to the customers/ flat buyers/ recipients by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 or any other buyer they shall be at liberty to approach the State Screening Committee Uttar Pradesh for initiating fresh proceedings under Section 171 of the above Act against the Respondent. 39. Further, in line with Rule 136 of the CGST Rules 2017, this Authority directs the jurisdictional CGST Commissioners to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible buyers along with applicable interest. A report in compliance of this order shall be submitted to this Authority by the jurisdictional Commissioner CGST within a period of 4 months from the date of receipt of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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