9911796707
TMI Blog2020 (11) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant No. 1 and Applicant No. 2 which includes both the profiteered amount @ 2.67% of the taxable amount (base price) and 12% GST on the said profiteered amount. The Respondent has passed on the benefit of ₹ 2,06,88,394/- to his buyers on account of ITC which has been duly confirmed by the DGAP. Therefore, the Respondent is directed to pass on the balance benefit of ITC of ₹ 19,40,731/- to the remaining 148 residential flat buyers and ₹ 5,67,310 to the remaining 9 commercial shop buyers, mentioned at Sr. 2 4 of Table-E, as per Annexure-3 and Annexure-5 of the DGAP s Report dated 28.02.2020. The details of the profiteered amount and the buyers have been mentioned by the DGAP in the above Annexures. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on an aggregate amount of ₹ 25,08,041/- to the above mentioned 157 buyers along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made, within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-3 and Annexure-5 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods Service Tax (CGST) Rules, 2017. The brief facts of the case are that vide their applications dated 09.10.2018 and 16.12.2019 filed before the Standing Committee on Anti-profiteering under Rule 128 (1) of the CGST Rules, 2017, the Applicant No. 1 and 2 had alleged profiteering by the Respondent in respect of the purchase of Flats in his Paradise project located in Sector-62, Gurgaon. The above Applicants had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above fiats. The aforesaid first application was considered by the Standing Committee on Anti-profiteering, in its meeting held on 13 th December 2018, wherein it was decided to forward the same to the DGAP to conduct a detailed investigation into the allegation made in the complaint according to Rule 129 (1) of the CGST Rules, 2017. The second application was considered by the Standing Committee on Anti-profiteering, in its meeting held on 11 th March 2018, wherein it was also decided to forward the same to the DGAP to conduct a detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e home buyers. 6. The Respondent had also submitted the following documents/information to the DGAP vide his above-mentioned letters/e-mails during the course of the investigation:- (a) Copies of GSTR-1 Returns for the period July 2017 to December 2018 (b) Copies of GSTR-3B Returns for the period July 2017 to December 2018. (c) Copies of VAT Returns (including all annexures) ST-3 Returns for the period April 2016 to June 2017. (d) Copies of all demand letters issued and sale agreement made with the Applicant. (e) Copies of Balance Sheet for FY 2016-17 2017-18. (f) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018. (g) CENVAT/lnput Tax Credit register for the FY 2016-17 and 2017-18 and April 2018 to December 2018 (h) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit for the period April 2016 to June 2017, for the project Paradise . (i) List of homebuyers of the project Paradise along with details of benefit passed on. (j) Copy of RERA Registration Certificate of the Project Paradise . (k) Copy of Tran-1. 7. The DGAP has also stated that all the documents placed on record were carefully ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Within 15 days of the date of the Allotment letter 20.00% 4,61,900 3. Within 06 months of the date of the Allotment letter 01.08.2017 12.50% 2,88,688 34,643 3,23,331 4. Within 12 months of the date of the Allotment letter 31.01.2018 12.50% 2,88,688 23,095 3,11,783 5. Within 18 months of the date of Allotment letter 03.08.2018 22.10.2018 12.50% 2,88,688 23,095 3,11,783 6. Within 24 months of the date of the Allotment letter 31.01.2019, 31.03.2019 10.04.2019 12.50% 2,88,688 28,869 23,095 13,609 3,27,043 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis transactions in securities, sale of land, and, subject to clause (b) of paragraph 5 of Schedule Il, sale of building. Therefore, the DGAP has claimed that the ITC of the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST. 11. The DGAP has also observed that before 01.07.2017, i.e., before the GST was introduced, 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) and thus the Respondent was not eligible to avail CENVAT credit of Central Excise duty paid on the inputs or Service Tax paid on the input services, as per the CENVAT Credit Rules, 2004, which were in force at the material time. However, the Respondent was eligible to avail credit of Service Tax paid on the input services (CENVAT credit of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Balcony Area) (in SQF) (H) 4,15,905 3,91,100 (Residential) + 24,805 (Commercial) 4,15,905 9 Total Sold Area (Excluding Balcony Area) (in SQF) relevant to turnover (l) 3,60,548 3,91,100 (Residential) + 6624.89 (Commercial) 3,97,724.89 10 ITC Relevant to Turnover [(J)=(C)*(I)/(H)] or [(J)=(D)*(I)/(H)] 16,25,398 2,07,64,062 Ratio of Input Tax Credit to turnover [(K)=(J)/(G)*100] 0.43% 3.10% 12. The DGAP has also submitted from the above Table- B that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April 2016 to June 2017) was 0.43% and during the post-GST period (July 2017 to December 2018), it was 3.10% which clearly confirmed that post-GST, the Respondent has been benefited from additional ITC to the tune of 2.67% [3.10% (-) 0.43%] of the turnover. 13. The DGAP has further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Analysis of Increase in input tax credit: 6. Base Price raised from July 2017 to December 2018 (Rs.) E 38,118,553 215,870.625 415,839,125 669,828,303 7. GST raised over Basic Price (Rs.) F= E*B 4,574,226 25,904,475 33,267,130 63,745,831 8. Total Demand raised G=E+F 42,692,779 241,775,100 449,106,255 733,574,134 9. Recalibrated Basic Price H=E*(1-D) or 97.33% of E 32,100,788 210,106,879 404,736,220 651,943,887 10. GST on recalibrated basic price @ as applicable I=H*B 4,452,095 25,212, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the Applicant No. 1 and 2. It was also observed that the Respondent had supplied the construction services in the State of Haryana only. 16. The DGAP has further stated that the Respondent had submitted that he had passed on the benefit of ₹ 81,82,783/- to the home buyers. A summary of category-wise input tax credit benefit required to be passed on and the benefit claimed to have been passed on by the Respondent, was furnished by the DGAP as is given in Table- D below:- Table-D (Amount in Rs) Sr.No. Category of Homebuyers No. of Units Area (in Sqf) Amount Received Post GST Benefit required to be passed on as per Annex-17 Benefit claimed to have been Passed on Difference Remark A B C D E F G H=F-G 1. Applicant (Residential) 1 566 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less than what he ought to have passed on in the case of 740 residential flats including that of the Applicants (Sr. 1 2 of the above table), by an amount of ₹ 1,03,98,855/- and in the case of 23 commercial shops (Sr. 3 of the above table), by an amount of ₹ 10,24,778/-. The details of these amounts were given in Annexure-18 19 of the DGAP s Report. Further, the benefit claimed to have been passed on by the Respondent was higher than what he should have passed on, in respect of one of the already sold commercial shops (Sr. 4 of above Table), by an amount of ₹ 19,987/-. The details of this excess benefit claimed to have been passed on were given in Annexure-20 of the DGAP s Report. However, this excess benefit claimed to have been passed on to some recipients, could not be set off against the additional benefit required to be passed on to some other recipients as per Annexure-18 19 of the DGAP s Report and it could only be adjusted against any future benefit that might accrue to such recipients who had received the excess benefit. 18. The DGAP has further mentioned that the above computation of profiteering was in respect of 740 home buyers and 23 commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible recipients. 20. The DGAP has also stated that the present investigation has covered the period from 01.07.2017 to 31.12.2018. Profiteering, if any, for the period post-December, 2018, has not been examined by him, as the exact quantum of ITC that would be available to the Respondent in the future could not be determined at this stage when the construction of the project was yet to be completed. He has further stated that the provisions of Section 171 (1) of the Central Goods and Services Tax Act, 2017 requiring that a reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices , have been contravened by the Respondent in the present case. 21. The above Report was considered by the Authority in its meeting held on 09.07.2019 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 05.08.2019. The Respondent was issued a notice on 10.07.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed. Dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the total area of each flat. f) Status of the project in terms of the sold and the unsold units as of 30.06.2019. g) Registry between the landowner and builder for the Sector-62. h) Sample Credit Letters and Respective Ledger for the period from 01.04.2016 to 31.12.2018. 24. The Respondent vide his above submissions has also submitted the details of other projects which were on-going as on 1st July 2017 as under:- Sr. No. Project Name ITC Benefit claimed to have passed on till 30.08.2019 (Amount in Lacs) Residential Commercial TOTAL 1 Sector-70 2 3.72 NIL 23.72 2 Sector-84 179.30 14.84 194.14 3 Sector-99 108.59 18.34 126.92 25. The Respondent has also submitted that the Report furnished by the DGAP dated 19.06.2019, was acceptable to him and ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 had submitted the list of home buyers along with credit notes, Ledgers, and undertakings/ acknowledgments in respect of 84 (Eighty Four) buyers, on a sample basis, showing the amount of ITC benefit which the Respondent had claimed to have passed on, as is mentioned in the below Table:- Sr. No. Name of Customer Contact No. Unit No. Profiteering amount to be passed Amount of ITC credit already Passed Credit to be passed (Excess assed 1 Saurabh Goyal 9810035634 T3-1103 28,287 31,442 -3,155 2 Sudesh Ahuja T5-103 28,287 31,442 -31155 3 Kuldeep 9466892318 T6-101 13,585 15,041 -1 ,456 4 Usha Gupta 9953540928 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9811252268 T3-1104 28,287 31,442 -3,155 18 Ankit Sharma 9313878569 T1-1208 28,287 31,442 -3,155 19 Nitin Kharbanda 9357763030 T2-404 28,287 31,442 -3,155 20 Mohd Anees Khan 9311492225 T1-1007 28,287 31,442 -3,155 21 Sweet Dudeja 9999640312 T6-7010 13,585 15,041 -1,456 22 Pratibha Singh Rathore 7891476456 T6-606 13,585 15,041 -11456 23 Inderjit Sinhh 9872840300 T7-3010 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-B/3 28,287 31,442 -3,155 37. Sanu Mittal 9711954457 5M/84 25,282 28,043 -2,761 38. Arun Salhotra 8860404433 5K-91 28,287 31,442 -3,155 39. Manju Aggarwal 9818180103 A-48 28,287 31,442 -3,155 40. Avadesh Prasad 9999236100 6 25,282 28,043 -2,761 41. Anju Devi 8470987749 B-37 13,585 15,041 -1,456 42. Aman Garg 9810007446 2330 28,287 31,442 -3,155 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56. Mukesh Chand 9810167980 T1-305 25,282 28,043 -2,761 57. Priya Yadav 9350459178 T1-208 28,287 31,442 -3,155 58. Rohit Prabhakar 8860618063 T1-204 28,287 31,442 -3,155 59. Ashok Kumar 9212259667 T1-503 28,287 31,442 -3,155 60. Sumitra Kumari 9873857976 T1-1104 28,287 31,442 -3,155 61. Preeti Grover 9899430103 T1-1206 25,282 28,043 -2,761 62. Vikram Singh Bisht ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ujjinwal 9711287841 T2-908 28,287 31,442 -3,155 76. Deepak Sikhwal 9891231534 T2 -704 28,287 31,442 -3,155 77. Ashima Hans 9811634752 T2-606 25,282 28,043 -2,761 78. Kiran Kumar 9810787670 T1-703 28,287 31,442 -3,155 79. Santosh Kumari 9416834464 T-1005 25,282 28,043 -2,761 80. Rajni Bansal 9899076126 T6-808 13,585 15,041 -1,456 81. Rahul 9416895566 T6-901 13,585 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gregate profiteered amount, came to ₹ 1,95,86,429/- including the GST applicable on the basic profiteered amount of ₹ 1,78,84,716/-. The DGAP also reported that the above aggregate amount of profiteering also included the profiteered amount of ₹ 25,282/- (inclusive of GST as applicable) for each of the Applicant No. 1 and 2. 30. It was clear to us from the perusal of the above facts that the Respondent had indeed benefited on account of ITC to the extent of 2.67% of his turnover during the post-GST period, i.e. from July 2017 to December 2018 and hence the provisions of Section 171 of the CGST Act, 2017 had been contravened by the Respondent since he had not passed on the above benefit to his home buyers. Further, he had profiteered to the extent of ₹ 1,95,86,429/-, inclusive of GST @ as applicable, on the base profiteered amount of ₹ 1,78,84,716/ Further, it was clear to us that the Respondent had realized additional amounts of ₹ 25,282/- each from Applicant Nos. 1 and 2, inclusive of GST. The Respondent had also realized an additional amount of ₹ 1,95,35,865/- (inclusive of GST as applicable) from all the home buyers other than the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2020 to this Authority. The above report of the DGAP is discussed in the subsequent paras. 33. The DGAP has stated that after receipt of Order No. 3/2020 dated 02.01.2020 from this Authority, a letter dated 22.01.2020 was issued to the Respondent calling for all credit notes, demand notes, and ledger accounts of all homebuyers for verification of the amount of benefit of ITC passed on by the Respondent. The Respondent submitted the soft copies of ledgers and a summary list of ITC passed on to the homebuyers in his project Paradise, Sector -62 and stated that he had passed on the complete ITC benefit in most of the cases and in the remaining cases he would pass on the ITC benefit based on final order issued by this Authority. 34. The DGAP has stated that the case was reinvestigated based on data submitted by the Respondent on 03.02.2020. The main issues which were examined by the DGAP are given as follows:- a) To verify the total amount of Input Tax Credit benefit claimed to have been passed on to their home buyers by the Respondent till the date of order and the balance amount sill to be passed on to each of the home buyers. b) To investigate the issue of passin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,52,411 0 -9,92,617 No benefit to be passed on as per Annex-4 4. Commercial Shop Buyers 9 5,80,100 12,790 5,67,310 5,67,310 Further Benefit to be passed on as per Annex-5 5. Commercial Shop Buyers 1 0 1,86,540 0 -1,86,540 No Consideration Paid Post-GST, However, Respondent passed on benefit. Details as per Annex-6 6. Commercial Shop Buyers 3 0 0 0 0 No Consideration Paid Post-GST and no benefit passed on. 6. Unsold Shop 60 0 Unsold Units Total Commercial (B) 87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable in both, the pre and post GST eras, and the only difference was that the tax rate on services had been increased from 15% to 18%. The Respondent has submitted the following illustration to strengthen his contention:- Pre-GST Post-GST Particulars Amount in Lacs Amount in Lacs Expenses 1000 1000 Service Tax paid @ 15% 150 180 Cenvat Credit available 150 180 Turnover 5000 5000 CENVAT/Turnover 3.00% 3.60% Incremental .60% The Respondent has further submitted that in the instant case, during the post-GST regime, he has availed ITC amounting to ₹ 18,13,110/on input services, which meant that ITC amounting to ₹ 3,02,185 * 3/18) pertained to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent for filing his rejoinder, if any. The Respondent, vide his letter dated 11.08.2020, has stated that he has completed his submissions and requested for the closure of the hearing. Therefore, this Authority had closed the hearing in the matter on 13.08.2020 43. We have carefully considered all the submissions filed by the Applicants, the Respondent, and the other material placed on record and find that Applicant Nos. 1 and Applicant No. 2, vide their complaints dated 09.10.2018 and 16.12.2018 respectively, had alleged that the Respondent was not passing on the benefit of ITC to them on purchase of the flats, which they had purchased in the Paradise Project being executed by the Respondent in Sector-62, Gurugram, even though he was availing ITC on the purchase of the inputs at the higher rates of GST which had resulted in the benefit of additional ITC to him and was also charging GST from them @12%. These complaints were examined by the Standing Committee in its meetings held on 13.12.2018 and 11.03.2019 and forwarded to the DGAP for investigation under Rule 129 (1) of the above Rules. The DGAP vide his Report dated 19.06.2019 had found that the Respondent had profiteered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethodology has also been approved by this Authority in all the cases where the benefit of ITC is required to be passed on. Therefore, the above methodology is appropriate, logical, reasonable, and in consonance with the provisions of Section 171 of the CGST Act, 2017. 45. The Respondent has also claimed that he has passed on the benefit of ₹ 2,06,88,394/- to his buyers on account of ITC. He has also submitted copies of the acknowledgments from the buyers in respect of 84 (Approx. 10%) buyers out of 763 total beneficiaries of ITC Benefit vide his submissions dated 05.11.2019 and 25.11.2019 as mentioned in the Para - 28 above. The Respondent further submitted copies of Ledger Accounts and credit notes in respect of all the buyers vide his submissions dated 25.11.2019. The DGAP has also categorically admitted in his Report dated 28.02.2020 that he has verified the above claim of the Respondent and found it to be correct. The DGAP has also submitted Table-E supra and stated that the benefit passed on by the Respondent to the recipients was less than what he ought to have passed on in the case of 148 residential flats and 9 commercial shops (Sr. No. 2 4 of Table) by an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jeopardy by availing the benefit of additional ITC as well as by not reducing the prices of the flats. The Respondent is not required to pay even a single penny from his own pocket as the benefit of ITC and hence he cannot deny the above benefit. Moreover, the benefit of ITC is also available to the suppliers of the Respondent from whom he is purchasing services and other inputs, and accordingly, such suppliers are also bound to pass on the benefit of ITC to the Respondent which would result in a reduction of cost of the flats built by the Respondent. It would also be worthwhile to mention that the Respondent is also utilizing the ITC to which he has become entitled on the purchase of the services post GST while discharging his tax liability and hence he is using the above amount in the furtherance of his business and therefore, he cannot refuse to pass on the benefit of ITC. Accordingly, the above contention of the Respondent is frivolous and hence it cannot be accepted. 47. It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 2.67% of the turnover during the period from July 2017 to December 2018 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dates from which he has received the additional amount of consideration from them till the passing on of the ITC benefit, as he has used this amount in his business, as per the provisions of Section 171 (1) of the CGST Act, 2017 read with Rule 133 (3) (b) of the above Rules. Accordingly, the DGAP is directed to ensure that the interest is paid to be eligible house buyers and submit report confirming payment of the interest. In case the interest is not paid the same shall be recovered by the concerned CGST/SGST Commissioner and paid to the eligible buyers. 50. Accordingly, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats of the above Project commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.12.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. 51. It is also evident from the above narration of the facts that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in his above project in contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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