9911796707
TMI Blog2020 (10) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... had complained to the Haryana State Screening Committee on Anti-profiteering on 16.10.2018, 24.09.2018 and 31.10.2018 respectively that the above Respondent was not passing on the benefit of ITC to them on the flats which they had purchased from him in the project, as per the provisions of Section 171 of the above Act. The above 3 complaints were examined by the Standing Committee on Anti-profiteering in its meeting held on 27.12.2018 and were forwarded to the DGAP for detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017. This Authority hereby determines the profiteered amount as ₹ 6,24,48,008/- as per the provisions of Section 171 (1) read with Rule 133 (1) of the above Rules which includes GST @ 12% or 8% on the base profiteered amount of ₹ 5,71,81 ,399/-. The above amount shall be paid by the Respondent to the eligible buyers as per the details given in Annexure-17 of the DGAP s Report dated 14.06.2019 within a period of 3 months from the date of passing of this order along with interest @18% per annum from the date from which the above amount was collected by him from the buyers till the payment is made failing which it shall be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d applications before the Haryana State Screening Committee on Anti-profiteering and the Applicant No. 4 and 5 had filed applications before the Standing Committee on Anti-profiteering, under Rule 128 of the CGST Rules, 2017 and submitted that they had purchased flats in the Respondent s project Aangan and alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in prices of the flats, in terms of Section 171 (1) of the CGST Act, 2017. The Haryana State Screening Committee on Anti-profiteering on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC had forwarded the applications of Applicant No. 1, 2 and 3 with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 (1) of the above Rules. 2. The aforesaid references were examined by the Standing Committee on Anti-profiteering, in its meetings held on 27.12.2018, 11.03.2019 and 11.04.2019 and it had forwarded all the 5 applications to the DGAP for detailed investigation under Rule 129 (1). 3. The DGAP on receipt of the applications and supporting documents from the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of planning for this draw. Booking for the Aangan Phase-Il project located in Sector 88A 89A, Pataudi Road, Gurugram (Haryana) was done in June 2018 i.e. in the GST regime but construction of the residential complex had not commenced till date and Aangan Phase-III project in Sector 99A, Gopalpur, Gurugram (Haryana) had not yet been launched. He has further submitted that the Aangan Phase-I project was registered and approved under the Affordable Housing Policy 2013 (AHP). The said Policy was notified under Section 9A of the Haryana Development and Regulation of Urban Areas Act, 1975 vide Notification No. PF27/48921 dated 19.08.2013, issued by the Town and Country Planning Department, Government of Haryana to facilitate creation of additional affordable housing stock in the urban areas of the State. Annexure-A attached to the above Notification had laid down several parameters and specifications for the project to qualify under the above Policy. Paragraph 5 provided that the allotment rate for units approved at Gurgaon would be ₹ 4,000/- per sq. ft. carpet area plus an additional amount of ₹ 500/- per sq. ft. for the area of the balcony in the flat up to a maximum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin his scope of supply and he had agreed to a contract price with the contractors exclusive of taxes. The Respondent has further stated that under the GST regime, since the construction service supplied by him was now taxable, he was eligible to avail ITC. Accordingly, with respect to Phase-I of his project, he was entitled to avail total ITC of ₹ 6,13,71,734/ under the GST regime which could be separated into the following broad categories:- S.No. Input/ Input Services ITC Available (Rs.) 1. Construction services supplied by the contractors 4,89,22,956 2. Steel 69,48,738 3. Steel (Transitional Credit) 22,43,044 4. Other Goods (Lifts, Electronics) 8,96,305 5. Other Services (Advertising, Housekeeping) 23,60,514 Total Credit 6,13,71,557 7. The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the contractors. Since the price payable to a contractor was exclusive of the applicable taxes, the same was now being recovered from him over and above the basic price of the contract whereas previously there was no such recovery as the contractor was also exempted from the payment of Service Tax. He has also submitted that for instance, if ₹ 100/- was the basic price of the contract, under the erstwhile regime since there was an exemption from Service Tax, the contractor was only recovering the contract price of ₹ 100/-. However, now under the GST regime, the contractor had to discharge GST at 12%, and hence, he was recovering ₹ 112/- from the Respondent, of which, ₹ 12/- would be available as credit to be offset against the output GST liability on the construction service supplied by him. There was absolutely no gain under the GST regime on account of availability of ITC so as to warrant a commensurate reduction in price. 9. The Respondent has also furnished the following documents/information to the DGAP:- (a) Copies of GSTR-1 Returns for the period from July, 2017 to December, 2018. (b) Copies of GSTR-3B Returns for the period from July, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 4,000/- per sq. ft. carpet area and ₹ 500/- per sq. ft. for the balcony area was enclosed. The details of the payment schedule have been furnished 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 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 100% 23,30,360 21,119 1,04,866.20 24,56,345.20 Applicant No. 2 5 (Amount in Rs.) S.No. Payment Stage Demand Date % of BSP Instalment Service Tax GST Total Amount payable 1. At the time of booking 26.02.2016 5.00% 1,25,887 22,817 - 6,52,253 2. Within 15 days of the date of Allotment letter 20.00% 5,03,549 - 3. Within 06 months of the date of Allotment letter 11.08.2016 12.50% 3,14,718 - 3,14,718 4. Within 12 months of the date of Allotment letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1,78,565 5. Within 18 months of the date of Allotment letter 16.08.2017 12.50% 1,78,565 - 21,427.80 1,99,992.80 6. Within 24 months of the date of Allotment letter 19.02.2018 12.50% 1,78,565 - 14285.20 1,92,850.20 7. Within 30 months of the date of Allotment letter 16.08.2018 12.50% 1,78,565 - 14285.20 1,92,850.20 8. Within 36 months of the date Of Allotment letter 12.50% 1,78,565 - 14285.20 1,92,850.20 Total 100% 14,28,520 12,946 64283.40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Further, as the service of construction of affordable housing, provided by the Respondent, was exempted from the 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 exempted from the Service Tax liability for the receipts in the pre-GST era. Post-GST, the Respondent was eligible to avail ITC of GST paid on inputs and input services. The DGAP had also stated that from the data submitted by the Respondent which had been duly verified from his Returns filed during the post-GST period (July, 2017 to December, 2018), the details of the ITC availed by the Respondent, the Respondent s turnover, the ratios of CENVAT credit/ITC to the turnovers during the pre-GST and the post-GST periods were as have been computed in Table-C below:- Table- C (Amount in Rs.) S.No Particulars Pre-GST (01.04.16 to 30.06.2017 01.07.2017 to 24.01.2018 25.01.2018 to 31.12.2018 Total (Post-GST) 1. ITC of GST Availed (A) -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further reduced from 12% to 8%, vide Notification No. 1/2018Central 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 in two parts i.e. by comparing the ITC and turnover in the pre-GST period when the tax incidence was NIL with those in (1) the post-GST period from July, 2017 to 24.01.2018 when the effective GST rate was 12% and (2) the GST period from 25.01.2018 to 31.12.2018 when the effective GST rate was 8%. 16. Accordingly, on the basis of Table-C above, the comparative ratios of the ITC availed/available to the turnovers, during the pre-GST period and post-GST periods, the recalibrated basic price and the excess realization (Profiteering) in the post-GST period have been furnished by the DGAP in Table- D below:- Table- D Sr.No. Particulars Pre-GST Post- GST 1. Period A 01.04.16 to 30.06.2017 July, 2017 to January 24 th 2018 January 25 th 2018 to December, 2018 Total July, 2017 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e turnover should have resulted in commensurate reduction in the base price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of the additional ITC that had accrued to the Respondent, was required to be passed on to the recipients. 18. The DGAP had also submitted that the Respondent had contended that in view of the price cap of ₹ 4000/- per sq. ft. under the AHP, he was prohibited from increasing the price on account of increase in the input cost or input tax in the pre GST regime and hence, any decrease in price on account of increased availability of ITC in the post-GST period was not warranted. But this argument was not legally sustainable in view of the statutory requirement under Section 171 of the CGST Act, 2017. The Respondent could not make good the loss suffered, if any, in the pre-GST era, by not passing on the benefit of ITC under the GST regime. Similarly, the Respondent had argued that there was no real benefit of ITC as his contractors were not liable to pay Service Tax in the pre-GST period (and hence no credit was available to the Respondent) but in the post-GST period his contractors were discharging GST liability, the credit of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On this account, the Respondent had realized an additional amount to the tune of ₹ 4,32,315/- (including GST) from the above 5 Applicants which included both the profiteered amount @10.25% of the basic price and GST on the said profiteered amount. The Respondent had also profiteered an amount of ₹ 6,20,15,693/- including the GST from 805 other recipients who were not applicants in the present proceedings. These 805 recipients were identifiable as the Respondent had provided their names and addresses along with unit nos. allotted to them. Therefore, this additional amount of ₹ 6,20,15,693/- was required to be returned to such eligible recipients. 22. The DGAP had also stated that the present investigation covered the period from 01.07.2017 to 31.12.2018 and profiteering, if any, for the period post December, 2018, had not been examined as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage, when the construction of the project was yet to be completed. 23. The above Report was considered by this Authority in its meeting held on 18.06.2019 and it was decided to hear the above Applicants and the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the exemption was available to the Respondent. In accordance with the AHP, the cancelled flats were first allotted to the candidates existing in the waiting list. Post allotment to the waiting list candidates, in respect of the flats which were still vacant, fresh draw was made on 12.06.2018 and the vacant flats were allotted accordingly. He had also stated that the statement relied upon in Annexure-17 of the DGAP s Report dated 14.06.2019 showing the details of the recipient home buyers for the period from 01.07.2017 to 31.12.2018 had been prepared on the basis of the details available as on 31.12.2018 and did not reflect the true state of affairs which had occurred and existed in the pre-exemption period, the exemption period and the post exemption period. In respect of the allotments made in the pre-exemption period (prior to 01.03.2016), when the project was conceived and prices determined, the Respondent was also entitled to CENVAT credit. Further, the price of ₹ 4000/- per sq. ft. which was recoverable from the buyers was excluding taxes, which were to be charged extra on actuals. 27. The Respondent had also argued that the DGAP had overlooked the fact that the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax in respect of various items such as Steel and other inputs, as also services (advertisement, housekeeping, etc.) had increased in the GST era from that what was payable under the pre-GST era. He had also stated that the methodology adopted by the DGAP for computing the alleged profiteering was also incorrect and he had submitted the following Table showing the ratio of the CENVAT credit/ITC availed to the total turnover:- S. No. Particulars Pre-GST (01.02.2016 to 28.02.2016) 1 Input Tax Credit of GST availed (A) Nil 2 Total CENVAT/ Service Tax Credit Availed(B) 51,56,352/- 3 Total Turnover (C) 38,61,54,794/- 4 Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (D) 3,84,814 5 Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to Turnover (E) 3,82,713 6 Relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 vide which he submitted that the project Aangan was registered and approved under the AHP 2013 which laid down several parameters and specifications which were required to be satisfied before the project could qualify under the AHP such as the allotment rate for the units approved at Gurgaon was ₹ 4,000/- per sq. ft. with an additional amount of ₹ 500/- per sq. ft. for the balcony area in a flat limited to 100 sq. ft., exclusive of Service Tax/GST, He had further submitted that under the AHP, he was barred from increasing the allotment rate for the units beyond the maximum cap of ₹ 4,000/per sq. ft. Hence, even if the actual cost exceeded the projected cost, or an additional tax was required to be borne which could not be availed as credit, the said increased cost could not be recovered from the customers by hike in the rate of allotment. He had also stated that he had applied for grant of license under the AHP and was granted the same vide License No. 81 of 2014 dated 08.08.2014 which was annexed as Annexure-A. At the time of applying for the grant of license under the Scheme, construction service in relation to projects approved under the AHP were subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said increased cost from the buyers in vie o the maximum cap of ₹ 4000/- per sq. ft. mandated under the AHP. Subsequent to 01.03.2016, the Respondent had awarded the construction work of the project to a sub-contractor. The subcontractor was obligated under the contract to provide all goods and services, except Steel required for undertaking the work. The consideration payable under the contract was exclusive of applicable taxes and the construction service supplied by the sub-contractor under the AHP was also exempted from the levy of Service Tax in terms of the aforesaid exemption. Consequently, the sub-contractor had not levied any Service Tax on the service rendered by him nor the Respondent had reimbursed the sub-contractor the Service Tax component. Further, Service Tax was neither a cost to the Respondent nor it was reimbursed by him. He had also furnished a copy of the Price Schedule agreed upon between the sub-contractor and the Respondent for payment of consideration exclusive of taxes. 33. The Respondent had also contended that after the implementation of the GST w.e.f. 01.07.2017, the construction of a complex intended for sale to a buyer, except when the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronics) 8,96,305 4. Other Services (advertising, housekeeping) 23,60,514 Total Credit 5,91,28,513 36. The Respondent had also contended that the DGAP in his Report dated 14.06.2019 had not considered that the project had been launched in February, 2016, when the Respondent had availed CENVAT credit of the tax paid on input services and also that under the GST regime, only the initial status quo had been restored and that accordingly, there was no benefit of ITC obtained by the Respondent. He had further submitted that Section 171 of the CGST Act, 2017 could be interpreted and applied only with the prospective effect under the GST regime and could not be used to determine whether there had been profiteering on the basis of comparison with the erstwhile regime. 37. The Respondent had also cited the judgements recorded in the cases of State of Punjab v. Bhajan Kaur 2008 12 SCC 112 = 2008 (5) TMI 604 - SUPREME COURT wherein it was held that a statute was presumed to be prospective unless held to be retrospective, either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-sections (3) and (4) of section 9; (c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy; 40. From the above definition, it was evident that the ITC was the credit of IGST, CGST, SGST and UGST none of which existed prior to 01 .07.2017. In other words, ITC was not even in existence prior to 01.07.2017. Thus, even if the overall amount of ITC substantially increased on 01.07.2017 under the GST laws as compared to the corresponding amount of CENVAT and VAT credit available on 30.6.2017 under the erstwhile laws and the Respondent did not reduce the price on 01.07.2017, he did not fall foul of Section 171 (1) because ITC did not exist prior to 1.7.2017, which disabled comparison thereof with reference to the period prior to 01.07.2017. Thus, whether the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the Respondent had obtained benefit from the same. The Respondent had also submitted various definitions of the word benefit from different dictionaries and stated that the determination whether a benefit had been obtained necessarily entailed a comparative exercise between the present and the previous scenario to discern whether any additional advantage had been gained. The DGAP in his Report dated 14.06.2019 had presumed that the entire ITC availed in the post-GST regime was a benefit to him and had held the same to be profiteering. The DGAP had failed to appreciate that for the credit to be a benefit , the same had to be a cost under the previous regime. Where the ta component, as in the case of the construction services by the subcontractor which were exempted, was never a cost to the Respondent, the same could not be considered a benefit now when credit was available on payment of tax. In the present case, on comparison between the scenarios, it was evident that the Respondent had not obtained any benefit from the availability of ITC under the GST regime. 43. He had also stated that majority of the credit now available under the GST regime, which was in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, 2016, the Respondent was discharging Service Tax on the allotment turnover and had availed CENVAT credit on input services as also when Service Tax was exempted w.e.f. 01.03.2016, the Respondent was not eligible to avail credit of the tax paid on the inputs. 46. He had further stated that even if there was benefit obtained with respect to inputs and input services under the GST regime, even then, the extent of benefit would be limited to 14.5% in respect of inputs and 15% in respect of input services. 47. He had also submitted that under the erstwhile regime, the rate of Excise Duty on goods/inputs (including Steel) was 12.5% and the Central Sales Tax was 2%, hence, the cost borne by the Respondent was 14.5% at the highest. However, under the GST regime, most goods/inputs were subjected to the GST @ 18%. Therefore, under the GST regime the Respondent was paying an incremental tax of 3.5%, which was being recovered from him by his suppliers. Therefore, even to avail the ITC under the GST regime, the Respondent was paying additional tax of 3.5%. Therefore, the said additional payment of 3.5% tax under the GST regime could not be considered a benefit as the said amount was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of input tax paid was never borne by the customer and the said cost was being borne by the Respondent and could not be recovered due to the maximum price cap of ₹ 4000/- per sq. ft. mandated under the AHP. In fact, during the period of construction, the price of Steel had gone up several folds from ₹ 23,027/- per MT exclusive of taxes to ₹ 38,200/- per MT exclusive of taxes, yet the Respondent had not been able to pass on this increased cost to his customers. Thus, given the statutory limitations under the AHP, unlike any other business where an increase in costs led to an increase in price, the price that could had been charged by the Respondent always had remained fixed at ₹ 4000/- per sq. ft. regardless of any increase in costs. Thus, where the cost of input tax never led to a commensurate increase in price, there could be no contention that now if the same was available as credit, there should be a commensurate decrease in price to the customer, as the customer was never bearing the cost of the same. Accordingly, where the recipient was not bearing the cost of the same, there could not be any requirement to reduce price in lieu of availability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again became a pass through under the GST regime. 51. He had also mentioned that in view of the aforementioned explanation, he did not gain any benefit from the availability of ITC under the GST regime so as to pass on the same by way of commensurate reduction in price. The end recipient had never borne any additional cost on account of such unavailability of ITC as he had not, nor could have, passed on the commensurate increase in price to the customer. 52. He had also submitted that the quantum of ITC availed by him, as on date, was the entire credit pertaining to the construction activity undertaken by him for providing the output service, however, the eligibility to take credit was limited to the extent of services supplied. The construction activity undertaken by the Respondent was a supply of services in terms of clause (b) of entry 5 of Schedule Il to the CGST Act, 2017, which reads as under:- (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 had been received after issuance of completion certificate, where required, by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to reversal on the basis of flats unsold at the time of issuance of CC/OC. 54. The Respondent had further stated that in the present case, he had availed ITC pertaining to the entire construction activity, however, the same was provisional and might be subjected to proportionate reversal attributable to vacant flats at the time of issuance of CC/OC which meant that the amount of ITC actually admissible to the Respondent could only be determined once the number of unsold flats at the time of issuance of CC/OC was known. However, the figure of unsold flats at the time of issuance of the CC/OC could not be known at this point as the same entirely depended on the procedure prescribed under the AHP. He had also submitted that since the said figure was not and could not be known at the given time, consequently, the extent of reversal that might be required was also unknown as the quantum of ITC actually available to him was not discernible and when the actual quantum of credit itself was unknown, the anti-profiteering proceedings on account of the same could not be sustained and were untenable. 55. He had also claimed that he might be liable to reverse ITC in respect of the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on input services. The comparison being drawn by the DGAP had to be with respect to the credit availed in the month of February, 2016 vis- -vis the credit availed under the GST regime. Accordingly, for an ideal comparison, it was imperative to exclude the ITC availed in the GST regime on account of construction services provided by the sub-contractor as in the month of February, 2016 there was no sub-contractor appointed by the Respondent. 59. The Respondent had filed his next written submissions on 21.08.2019 vide which he had submitted the details sought by this Authority vide its order dated 07.08.2019 i.e. break-up of turnover of the pre-GST era mentioned in his written submissions dated 19.07.2019 and computation of the amount of profiteering as per his own calculation which is given in the Table below:- S.No. Particulars Pre-GST (01.02.2016 to 28.02.2017 Post GST (01.07.2017 to 31.12.2018 1 Incremental Input Tax Credit of GST Availed (A) 0 82,86,713/- 2 Total CENVAT/ Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Turnover 81,48,31,294/- 55,78,67,303/- 4. Amount paid to for sub-contractors services 16,64,69,113/- 37,76,84,190/- 5. Turnover excluding sub-contractor services (C) 64,83,62,181/- 18,01,83,113/- 6. Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (D) 3,84,814 3,84,814 7. Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to Turnover (E) 3,39,120 3,72,079 8. Relevant ITC (F)=(B)*(E)/(D) or (A)*(E)/(D) 45,44,071 98,67,815 9. Ratio of Input Tax Credit to Turnover (G) (F)/(C) *100 (%) 0.70% 5.48% 10. Difference in ratio (H) 4.78% 11. Profiteering, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-contractors and the incremental ITC (3% towards services and 3.5% towards goods) and after excluding the amount paid to the sub-contractors from the total turnover for the relevant period:- S.No. Particulars Pre-GST (01.02.2016 to 30.06.2017) Post GST (01.07.2017 to 31.12.2018 1 Incremental Input Tax Credit of GST Availed (A) 0 82,86,713/- 2 Total CENVAT/ Service Tax Credit Availed (B) 51,56,352/- 82,86,713/- 3 Total Turnover 81,48,31,294/- 55,78,67,303/- 4. Amount paid to for sub-contractors services 16,64,69,113/- 37,76,84,190/- 5. Turnover excluding sub-contractor services (C) 64,83,62,181/- 18,01,83,113/- 6. Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (D) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H*C) ₹ 67,56,756/- A.2 Profiteering calculation as per the formula adopted by the DGAP on the above incremental ITC benefit after excluding amount paid to the sub-contractors from total turnover:- S.No. Particulars Pre-GST (01.02.2016 to 30.06.2017) Post GST (01.07.2017 to 31.12.2018 1 Incremental Input Tax Credit of GST Availed (A) 0 1,02,05,557/- 2 Total CENVAT/ Service Tax Credit Availed (B) 51,56,352/- 1,02,05,557/- 3 Total Turnover 81,48,31,294/- 55,78,67,303/- 4. Amount paid to for sub-contractors services 16,64,69,113/- 37,76,84,190/- 5. Turnover excluding sub-contractor services (C) 64,83,62,181/- 18,01,83,113/- 6. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38,61,54,794/- 55,78,67,303/- 4. Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (D) 3,84,814 3,84,814 5. Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to Turnover (E) 3,82,713 3,72,079 6. Relevant ITC (F)=(B)*(E)/(D) or (A)*(E)/(D) 51,28,199/- 80,12,473/- 7. Ratio of Input Tax Credit to Turnover (G) (F)/(C) *100 (%) 1.32 1 From the above Table, it was clear that the ratio of credit availed in pre-GST era was lesser than the GST availed in the post-GST era, therefore there was no profiteering. B.3 Calculation after excluding amount paid to sub-contractors from the total turnover:- S.No. Particulars Pre-GST (01.02.2016 to 30.06.2017) Post GST (01.07.2017 to 31.12.2018 1 Incremental In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the incremental ITC (3% towards services and 3.5% towards goods), as is given below:- S.No. Particulars Pre-GST (01.02.2016 to 30.06.2017) Post GST (01.07.2017 to 31.12.2018 1 Incremental Input Tax Credit of GST Availed (A) 0 82,86,713/- 2 Total CENVAT/ Service Tax Credit Availed (B) 51,56,352/- 82,86,713/- 3 Total Turnover 81,48,31,294/- 55,78,67,303/- 4. Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (D) 3,84,814 3,84,814 5. Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to Turnover (E) 3,39,120 3,72,079 6. Relevant ITC (F)=(B)*(E)/(D) or (A)*(E)/(D) 45,44,071 80,12,473/- 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the facts on record. He had also stated that all other facts/ queries raised by the Respondent had been explained in his Report dated 14.06.2019. 67. This Authority after carefully considering all the Reports filed by the DGAP, submissions of the Respondent and other material placed on record had observed certain discrepancies in the DGAP s Report dated 14.0.2019 and accordingly ordered reinvestigation in the matter in terms of 133(4) of CGST Rules, 2017 on the following issues vide its I.O. No. 20/2019 dated 13.12.2019:- (i) Whether no CENVAT Credit was available to the Respondent in the pre-GST regime in spite of the fact that he had claimed availing of CENVAT credit and payment of Service Tax? (ii) An amount of ₹ 5,91,28,513/- had been availed by the Respondent as ITC as per the GST Returns, however, the DGAP had claimed that during the period from July, 2017 to December, 2018, profiteered amount was ₹ 6,24,48,008/-. Since the Respondent had claimed that the amount of profiteering in the DGAP s Report was greater than the amount of ITC availed by the Respondent in post-GST period as reflected in statutory returns, it was imperative that the mathematica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Table below:- Table (Amount in Rupees) Particulars Period from 01.07.2017 to 24.01.2018 (GST @ 12%) Period from 25.01.2018 to 31.12.2018 (GST@ 8%) Total Base profiteered amount 1,73,02,448 3,98,78,951 5,71,81,399 Amount of GST at applicable rate 20,76,294 31,90,316 52,66,610 Total profiteering 1,93,78,742 4,30,69,267 6,24,48,008 71. Therefore, the DGAP has claimed that the total profiteered amount during the period from 01.07.2017 to 31.12.2018 came out to be ₹ 6,24,48,008/- which included GST (@ 12% or 8%) of ₹ 52,66,610/- on the base profiteered amount of ₹ 5,71,399/-. Hence, the base amount of profiteering was less than the actual input tax credit of ₹ 5,91,28,513/- availed by the Respondent because the input tax credit considered for profiteering was proportionate to the sold units only and the total amount of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent, as on 31.12.2018, 814 number of flats were sold by the Respondent. Accordingly, as on 31.12.2018, only 24 flats had remained unsold. Therefore, those 814 flat buyers were those customers/recipients who had made payments to the Respondent in the post-GST period from 01.07.2017 to 31.12.2018 and accordingly the benefit of input tax credit was required to be passed on by the Respondent to these customers/recipients only or in other words, the profiteered amount of ₹ 6,24,48,008/- was computed in respect of these 814 home buyers only. However, the details of the flats which remained unsold and/or were cancelled/re-allotted as submitted by the Respondent were as on 31.03.2019 which was beyond the period of current investigation. Therefore, these details as on 31.03.2019 had no relevance with the fact that as on 31.12.2018, there were 814 number of sold flats and 24 numbers of unsold flats. 74. The DGAP has thus stated that the allegation that the Respondent did not pass on the benefit of input tax credit consequent to the implementation of GST w.e.f. 01.07.2017 was correct and the base price of the flats was not reduced commensurately by the Respondent when there was add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the DGAP had overlooked the fact that for rendering construction services there was no statutory requirement/compulsion to obtain permission to start construction. An assessee was entitled to avail credit on all the services utilised for being in the business of rendering construction services. Prior to the commencement of the actual activity of construction, there were a host of activities such as identifying the land, getting permissions, appointing a consultant to advise on construction, appointing agents to market a project and architect services etc. which were required to be purchased. In the instant case, the Respondent had, in the month of February 2016, availed credit of the tax paid on services of brokerage, consultancy, advertisement and security etc. He had also discharged Service Tax on the amount of allotment received by him from his customers. The Respondent has also submitted that the DGAP s Report dated 12.02.2020 had overlooked the statutory provisions of the Finance Act, 1994 and the finding that he was not entitled to avail any CENVAT credit during the pre-GST era was completely baseless and unsustainable. 79. The Respondent has further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P 2013 . The said AHP was notified under Section 9A of the Haryana Development and Regulation of Urban Areas Act, 1975 vide Notification No. PF-27/48921 dated 19.08.2013 issued by the Town and Country Planning Department, Government of Haryana to facilitate creation of affordable housing stock in the urban areas of the State. The above project has three phases out of which the Angan Phase-I project is subject matter of the present proceedings. It has also been revealed that the Applicants No. 1, 2 3 had complained to the Haryana State Screening Committee on Anti-profiteering on 16.10.2018, 24.09.2018 and 31.10.2018 respectively that the above Respondent was not passing on the benefit of ITC to them on the flats which they had purchased from him in the project, as per the provisions of Section 171 of the above Act. The above 3 complaints were examined by the Standing Committee on Anti-profiteering in its meeting held on 27.12.2018 and were forwarded to the DGAP for detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017. It has further been revealed that the Applicant No. 4 vide his application dated 19.02.2019 and the Applicant No. 5 vide his applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been passed on by the Respondent or the profiteered amount came to ₹ 6,24,48,008/- which included 12% or 8% GST on the basic profiteered amount. The DGAP has also intimated that this amount also included the profiteered amount of ₹ 4,32,315/- including 12% or 8% GST in respect of the Applicant No. 1 to 5. He has also supplied the details of all the buyers who have purchased flats from the Respondent along with their unit numbers and the profiteered amount in respect of each buyer vide Annexure-17 attached with his Report, who are required to be passed on the above amount as benefit of ITC. 85. The computation of the ratio of CENVAT credit and ITC of VAT to the total turnover for the period from 01.04.2016 to 30.06.2017 and of the ITC to the total turnover for the period from 01.07.2017 to 31.12.2018 for the above Phase of the project as per Tables C and D has been done by the DGAP so that the benefit of ITC due to each flat buyer could be calculated. Calculation of the above ratios was required to be done to compute the additional benefit of ITC which has become available to the Respondent after implementation of the GST w.e.f. 01.07.2017. The above ratios ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of GST is required to be added in the profiteered amount as the Respondent had forced his buyers to pay the above amount of GST on the additional price which he could not have charged from them as he should have commensurately reduced the price due the benefit of ITC which was available to him. As per the provisions of Section 171 (3A) the above amount falls in the explanation of the profiteered amount as the Respondent has denied benefit of the above amount to his buyers. Therefore, the profiteered amount computed by the DGAP is correct and hence, the objection raised by the Respondent in this regard cannot be accepted. 87. He has also stated that the factum of the project having been conceived and its pricing determined keeping in mind the availability of CENVAT credit during the pre-GST period had also been completely ignored by the DGAP. On this claim perusal of para 5 of the AHP promulgated vide Notification No. PF-27/48921 dated 19.08.2013 shows that the maximum allotment rate of ₹ 4000/- per sq. ft. on carpet area basis was fixed for the Gurgaon area, where this project is located, by the Government of Haryana w.e.f. 19.08.2013 after taking in to account the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy getting the benefit of ITC and hence it also did not have any impact on the allotment rate. As has been mentioned in para supra the denial of benefit of CENVAT credit on the input services w.e.f. 01.03.2016 had also no impact on the price of the flats as it was not revised by the Government of Haryana. The Respondent had also started getting benefit of ITC during the post-GST period to which he was not entitled earlier and all the taxes were also to be paid by the buyers themselves and several concessions had also been granted to him through the above Policy. The claim that Annexure-17 did not reflect the correct status of allotments is not correct as the rate of allotment which was fixed under the AHP after considering all the relevant factors has remained unchanged and was not enhanced by the State Government. Therefore, Annexure-17 reflecting position of allotment as on 31.12.2018 has been correctly prepared and hence, the above contention of the Respondent is not tenable. 89. The Respondent has also argued that the DGAP had overlooked the fact that the Respondent had paid Service Tax of ₹ 1,35,71,447/- from February to March 2016 and CENVAT credit of ₹ 51,56,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no Service Tax applicable on the services rendered by the sub-contractor w.e.f. 01.03.2016 to 30.06.2017 then how could there be any additional benefit of ITC in the post-GST period. In this regard it would be appropriate to mention that the amount of ITC available to the Respondent during the post-GST period has to be computed on the basis of the entire GST paid on the purchase of goods and services and its calculation is not dependent on the levy of Service Tax during the pre-GST period. Since, the Respondent was not eligible to claim CENVAT credit on the Service Tax and ITC on the VAT during the pre-GST period, the entire amount of ITC available to him during the post-GST period amounts to additional benefit of ITC which he is liable to pass on to the buyers as per the provisions of Section 171 (1). Further, the sub-contractor engaged by the Respondent has also become eligible to avail ITC during the post-GST period which he is liable to pass on to the Respondent by reducing his prices. Therefore, the above plea of the Respondent cannot be accepted. 92. The Respondent has further submitted that the DGAP had also not considered that anti-profiteering measures stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for computing the alleged profiteering was incorrect. He has also submitted a Table claiming that the ratio of ITC availed to the total turnover during the pre-GST period w.e.f. 01.02.2016 to 28.02.2016 was 1.32%. Perusal of the Table shows that the Respondent has based his computation on the CENVAT credit of ₹ 51,56,352/- which he has claimed to have availed during the one month of February 2016. The above claim of the Respondent cannot be accepted as the methodology adopted by the DGAP for computation of the profiteered amount is in consonance with the provisions of Section 171 (1) and is based on the comparison of the ratios of CENVAT credit and ITC to the turnovers during the pre and the post-GST periods. The Respondent has also admitted in his submissions that the above amount of CENVAT credit was availed by him during the months of February and March 2016 but as discussed in para supra there is no evidence on record to establish his above claim. Hence, the above amount cannot be considered for computation of the pre-GST ratio of CENVAT credit to turnover as no Service Tax was leviable during the month of March 2016 as it had been exempted by the State Government. Moreov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Service Tax of 15% against the GST of 18%, needed to be factored in while computing the profiteered amount. As discussed above the Respondent is availing full benefit of ITC on the rates of GST on the purchase of Steel items as well as the services and hence he has no ground to claim factoring in of the above incremental increases in the rates of tax as they do not impose cost on him. Moreover, his suppliers have also become eligible to claim benefit of ITC on the Steel items and the services which they are supplying to the Respondent and hence they are legally bound to pass on the benefit of ITC to the Respondent in the shape of reduced prices. The Respondent cannot misappropriate the amount of ITC and treat it as his profit as this benefit flows to him from the precious tax revenues of the Central and the State Government which they have forgone in the public interest. Therefore, the above contention of the Respondent is untenable. 97. The Respondent has filed his next written submissions on 19.07.2019 vide which he has submitted that in February 2016 allotment of 3,82,713 sq. ft. area was done due to which 25% payment became due and accordingly he had discharged Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the month of February 2016, Therefore, the Respondent was not eligible to claim CENVAT credit on the invoices obtained by him during the months of July to January 2016. It is also not clear on which date the Respondent was registered under the Service Tax during the month of February 2016 as he has not attached the Registration certificate and therefore his claim of obtaining registration during the above month cannot be taken to be correct. It is also revealed from the CENVAT credit Register that 37 invoices out of total 62 invoices have been issued during the month of February 2016 which raises serious doubts on the genuineness of these invoices. Further the Respondent is also not eligible to claim CENVAT credit for the month of March 2016 as the State Government had granted exemption on payment of the Service Tax w.e.f. 01.03.2016 and hence, the CENVAT credit claimed by the Respondent on the invoices issued during the month of March 2016 is not correct. The Respondent has also made contradictory claims by stating on the one hand that he had paid Service Tax on the price collected by him from the buyers and on the other hand he has contended that he had become entitled to CEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been restored and hence there was no benefit of ITC obtained by the Respondent. In this regard it would be relevant to mention that as has been discussed above the Respondent was not entitled to the benefit of CENVAT credit during the month of February 2016 due the reasons mentioned in detail and hence there is no question of the restoration of the status quo ante. Moreover, benefit of additional ITC during the post-GST period is required to be computed on the entire amount of ITC available to the Respondent after deducting the amount of CENVAT credit. Since, no CENVAT credit was available to the Respondent during the pre-GST period, the entire ITC available during the post-GST period amounts to the benefit of additional ITC which is required to be passed on by the Respondent to his buyers. Hence, the above plea of the Respondent is incorrect. 100. He has also stated that Section 171 of the CGST Act, 2017 could be interpreted and applied only with the prospective effect under the GST regime and could not be used to determine whether there had been profiteering on the basis of comparison with the erstwhile regime. In the context of this claim it would be appropriate to mention t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC had substantially increased on 01.07.2017 as compared to the corresponding amount of CENVAT credit and VAT credit available on 30.6.2017 and the Respondent did not reduce his price on 01.07.2017, he did not fall foul of section 171(1) because ITC did not exist prior to I . 7.2017. The above argument of the Respondent is not correct as CENVAT credit and ITC did exist both under the Service Tax as well as the VAT during the pre-GST period as per the provisions of the CENVAT Credit Rules, 2004 and Section 2 (1) (w) of the Haryana VAT Act, 2003 under which a registered dealer was eligible to claim full adjustment of the amount which he had paid as Service tax or VAT against his tax liability and claim refund if the amount of tax paid was more than his liability. The same benefit of ITC is available to a dealer on the payment of GST. Therefore, the CENVAT credit and the ITC on VAT can be safely compared with the ITC available on the GST. The DGAP has accordingly compared the amount of CENVAT credit or ITC which the Respondent had availed or not availed during the pre-GST period with the ITC which has become available to him in the post-GST period so that the additional benefit ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 01.07.2017 which is required to be compared with the credits available during the pre-GST period and accordingly prices are to be reduced commensurately. The legislature is not required to prescribe the detailed mathematical methodology to compute the above benefit as the same depends on different factors in respect of different projects as well as various sectors like real estate and capital goods. The mathematical methodology applied by comparing the pre-GST benefit of CENVAT credit and ITC on VAT and postGST ITC to compute the profiteered amount in the present case is appropriate, reasonable, justifiable and in consonance with the provisions of Section 171 (1) and hence, the same can be safely relied upon. In case the Respondent is not satisfied with the same he could have suggested his own methodology but he has failed to do so. Therefore, the above contention of the Respondent is not tenable. 106. The Respondent has further contended that the Malaysian Government under the Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations 2014 (Annexure-F) has prescribed methodology for computing the profiteered amount b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e input services received from the sub-contractors was never a cost earlier as the said service providers were exempted from payment of Service Tax. Since the price payable to the sub-contractors was exclusive of applicable taxes, the same was now recovered from the Respondent over and above the basic price of the contract whereas previously there was no such recovery as the sub-contractor was also exempted from the payment of Service Tax, Thus, there was no benefit under the GST regime on account of availability of ITC. In this regard it would be appropriate to mention that the Respondent has become entitled to the benefit of ITC on the full amount of GST which he is now paying to his sub-contractors. During the pre-GST period since the Central Excise Duty and the Entry Tax were part of the price of the service which he was getting from his sub-contractors he was not getting ITC on them. The Respondent is also getting full ITC on the purchases made by him from his sub-contractors and is not required to pay even a single penny from his pocket. Moreover, the subcontractors have also become eligible to additional benefit of ITC in the post-GST regime which they are bound to pass on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices was being borne by the recipients, so now when credit was available and the tax was no longer a cost, the benefit of tax should be passed on to the recipients. He has also stated that the DGAP had wrongly assumed that the costing of the service directly varied with the availability of ITC which was incorrect as the cost of input tax paid was never borne by the buyers as it was being borne by the Respondent and could not be recovered due to the maximum price cap of ₹ 4000/- per sq. ft. Accordingly, when the recipient was not bearing the cost of the tax, there could not be any requirement to reduce price in lieu of availability of ITC under the GST regime. In this regard it would be pertinent to mention that the assumption made by the DGAP that when the burden of tax was being borne by the buyers during the pre-GST period which was now available as benefit of ITC to the Respondent the same should be passed on to the buyers is correct as the Respondent cannot deny the benefit of ITC to the buyers as he was getting the benefit on ITC on those taxes and cesses on which he was not getting ITC in the pre-GST regime. Accordingly, he is required to pass on the benefit of ITC w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le-C of the Report dated 14.06.2019 the ratios of CENVAT credit/lTC on VAT/ITC on CST have been computed for the pre and post-GST period by taking in to consideration the total sold area relevant to turnover and the relevant ITC to the sold area. Accordingly, as per Table-D of the Report the profiteered amount has been computed only on the sold area. Therefore, entitlement to the benefit of ITC has been calculated as per Annexure-17 only in respect of those buyers who have purchased the flats and paid the instalments during the post-GST period and it has not been computed in respect of the unsold flats. Since the ITC pertaining to the unsold flats has not been taken in to account while calculating the benefit of ITC there would be no problem in reversing the ITC in respect of the unsold flats at the time of issue of the OC/CC. The Respondent cannot force the buyers to wait for the benefit of ITC till the number of unsold flats is known at the time of the issue of the CC/OC when the project would be completed, which may take several years, when he himself is enjoying the benefit of ITC every month by availing it to discharge his tax liability. The Respondent cannot adopt different y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was not available to him during the pre-GST regime. The Respondent is not paying CST from his own funds and therefore, he cannot misappropriate the ITC which has now become available to him from the public exchequer and he has to pass it on to his buyers. Therefore, the above plea of the Respondent is not maintainable. 117. The Respondent has further contended that the DGAP had failed to note that the Respondent s project had started in February, 2016 and he had availed CENVAT credit on input services. The comparison being drawn by the DGAP had to be with respect to the credit availed in the month of February, 2016 vis-a-vis the credit availed under the GST regime. As has been discussed in detail in para supra the Respondent has wrongly availed CENVAT credit on input services during the month of February 2016. The CENVAT credit shown to have been claimed for one month of February 2016 can also not be compared with the ITC available to him during the post-GST period of 18 months w.e.f. 01.07.2017 to 31.12.2018. Such a comparison would be entirely unreasonable, illogical, incorrect and against the provisions of Section 171 (1). Hence, the above claim of the Respondent is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and turnover for the period w.e.f. 01.02.2016 to 30.06.2017 and compared them with the wrong figures of ITC and turnover for the period w.e.f. 01.07.2017 to 31.12.2018. The Respondent has no reason to deduct the amount paid by him to his sub-contractors from the turnovers during both the above periods. Therefore, the above ratios and the profiteered amount computed by the Respondent is absolutely wrong and hence they cannot be taken cognizance of. 121. The Respondent has further furnished another Table of computation of profiteering after excluding from the ITC considered post-GST, ITC in respect of the sub-contractors and the incremental ITC (3% towards services and 3.5% towards goods) and after excluding the amount paid to the sub-contractors from the total turnover for the relevant period and has calculated the pre and post-GST ratios as 0.70% and 4.45%, benefit of ITC as 3.75% and total profiteered amount as ₹ 67,49 653/-. As discussed in the para supra the calculation of the ratios and the profiteered amount is completely wrong and hence it cannot be considered. 122. The Respondent has also prepared another Table without excluding sub-contractor s turnovers from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his present project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has 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. However, since the provisions of Section 171 (3A) have come in to force w.e.f. 01.01.2020 whereas the period during which violation has occurred is w.e.f. 01.07.2017 to 31.12.2018, hence the penalty prescribed under the above Section cannot be imposed on the Respondent retrospectively. Accordingly, Show Cause Notice directing him to explain 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 is not required to be issued. 127. This 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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