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TMI Blog2022 (5) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... n 171 (1) of CGST Act, 2017 and has committed an offence under section 171(3A) of the Act. That section 171 (3A) of the CGST Act, has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 30.11.2020, therefore, he is liable for imposition of penalty under the above section. Application disposed off. X X X X Extracts X X X X X X X X Extracts X X X X ..... duct investigation in respect of the above project and submit Report to this Authority for determination whether the Respondent is liable to pass on the benefit of ITC in respect of the above project to the buyers or not as per the provisions of Section 171(1) of the above Act." "26. Due to the above reasons the Report dated 31.08.2020 furnished by the DGAP cannot be accepted. Therefore, in terms of the provisions of Rule 133 (4) and Section 171 (2) of the CGST Act, 2017 the DGAP is directed to further investigate the present case on the above issues and submit his Report under Rule 129 (6) of the above Rules. The Respondent is directed to extend all assistance to the DGAP and furnish him necessary documents or information as required during the course of the investigation." 3. Therefore, the DGAP has submitted the present Report under Section 171 (2) of the CGST Act, 2017 covering the issues raised by this Authority in Para 25 of the above said I.O. dated 11.12.2020. 4. The DGAP has submitted that as per the directions of this Authority vide aforesaid Order dated 11.12.2020, all the projects on which the Respondent was availing ITC from the common pool were required to be inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the limitation period as per the Hon'ble Supreme Court's Order dated 27.04.2021 passed in Miscellaneous Application No. 665/2021 in SMWP(C) No. 3/2020. Further, the above relief has been further extended and the period from 02.10.2021 shall have limitation period of 90 days from 03.10.2021 as per the Hon'ble Supreme Court's Order dated 23.09.2021 passed in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020. Therefore, the present Report has been filed during the period of limitation. 8. The Respondent has responded to the DGAP vide letter dated 23.09.2021 and subsequent reminders. the Noticee submitted his replies vide letters/e-mails dated 05.10.2021, 12.10.2021, 02.11.2021, 15.11.2021, 23.11.2021, 07.12.2021, 10.12.2021, 11.12.2021, 12.12.2021, 13.12.2021, 14.12.2021 and has submitted:- a) That he has filed a writ petition under Article 226 and 227 of the Constitution of India before the High Court of Delhi (numbered as W.P (C) No.12329 of 2021) inter alia against the DGAP and the National Anti-Profiteering Authority (NAA) seeking amongst others an appropriate writ, order or direction quashing the Order dated 11.12.2020 passed by the NAA. b) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is necessarily required to be kept for the purpose of reversal under Rule 42 since all the projects are having different OC dates. different areas and the reversal is mandatorily required to be made project wise only on the basis of area sold vs. area unsold on the date of receiving of OC. The reversal cannot be made and would be impossible in absence of project wise record/ accounting. Further. for the post implementation period of GST the Respondent submitted he had already passed the available benefit to the property buyers on account of reduction in cost due to increase in tax credits or for any other reasons. Such benefit can be passed project wise only and has been passed accordingly. h) That only Ultima Phase-2 project was registered under RERA and there was no agreement/registry between the land owners and the developer for these three projects namely "The Camellias", "The Crest" & The Ultima". i) That there are down payment plans, construction linked payment plans, periodic payment plans etc. and the customers have opted for payment plans as per their convenience and the same are mixed. 9. Further the DGAP has reported that the Respondent vide the aforementioned lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017 and; (iii) To comply with the directions contained in the Interim Order No. 38/2020 dated 11.12.2020 of this Authority. 12. The DGAP has further reported that in para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) which reads as "Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Further. clause (b) of Paragraph 5 of Schedule II of the CGST Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate. where required, by the competent authority or after its first occupation, whichever is earlier". Thus, the ITC pertaining to the residential units and commercial shops which were under construction but not sold was provisional ITC which might have been required to be reversed by the Respondent, if such units remained unsold at the time of issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nputs (B) 0 0 3. Total CENVATNAT/Input Tax Credit Available (C=A+B) 0 53,22,44,630 4. Input Tax Credit of GST Available (D) 38,25,32,956 53,22,44,630 5. Total Turnover from Residential Area (E) 20,85,75,99,622 5,48,89,78,351 6. Total saleable area in Sq. Ft. (F) 35,52,341 35,52,341 7. Sold Area relevant to turnover in Sq Ft. (G) 12,89,161 6,74,979 8. ITC proportionate to Sold Area (H)= (C or D)* G/F) 13,88,22,981 10,11,31,605 9. Ratio of Cenvat/lnput Tax Credit to Turnover (1=H/E*100) 0.67% 1.84% From the above Table-`A', it was observed that the ITC as a percentage of the turnover that was available to the Respondent in respect of the project "The Camellias" during the pre-GST period (April, 2016 to June. 2017) was 0.67%, and during the post-GST period (July, 2017 to November, 2020), it was 1.84%. Hence, post-GST the Respondent has been benefited from additional ITC to the tune of 1,18% of the turnover in respect of the project "The Camellias". 14. The DGAP has further submitted that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centage of the turnover that was available to the Respondent in respect of the project "The Crest" during the pre-GST period (April, 2016 to June, 2017) was 2.64%, and during the post-GST period (July, 2017 to November, 2020), it was 14.40%. This clearly confirmed that post-GST, the Respondent has benefited from additional ITC to the tune of 11.76% of the turnover in respect of the project "The Crest". 16. Similarly on the basis of the figures contained in Table 'C', above, the comparative figures of the ratios of ITCs availed/available to the turnovers in the pre-GST and post-GST periods as well as the turnovers, the recalibrated base price and the excess realization (profiteering) during the post-GST period in respect of project "The Crest" have been furnished by the DGAP in Table-D below:- Table-D - Project "The Crest" (Amount in Rs.) S. No. Particulars 1. Period A July, 2017 to November, 2020 2. Output tax rate (%) B 12.00% 4. Increase in ITC availed post-GST (%) C=14.40% less 2.64% 11.76% 5. Analysis of Increase in ITC: 6. Total Basic Demand during July, 2017 to December, 2019 D 98,29,79,749 7. GST @12% E=D*12% 11,79,57,570 8. Total deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Increase in ITC: 6. Total Basic Demand during July, 2017 to December, 2019 D 29,21,24,530 7. GST @12% E=D*12% 3,50,54,944 8. Total demand F=D+E 32,71,79,474 9. Recalibrated Basic Price G=D*(1-C) or 88.99% of D 24,82,64,646 10. GST @12% H=G*12% 2,97,91,758 11. Commensurate demand price I=G+H 27,80,56,403 12. Excess Collection of Demand or Profiteered Amount J=I-F 4,91,23,070 It is clear from the Table-F above that the additional ITC of 15.01% of the turnover for the project "The Ultima" should have resulted in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on to the recipients. 19. The DGAP in his report has claimed that as per the calculations explained in Tables 'B', 'D' and 'F' mentioned above, the aforesaid CENVAT/ITC availability in pre and post-GST periods and the details of the amount collected by the Respondent from the home/flats buyers in respect of the units sold by the Respondent during the period 01.07.2017 to 30.11.2020, the benefit of ITC that needed to be passed on by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent in the post-GST period from 01.07.2017 to 30.11.2020 and the same was required to be passed on by the Respondent to his recipients. Hence. the Respondent had realized an additional amount to the tune of Rs. 12,94,35,170/-(including GST) from 184 homebuyers. These 184 buyers were identifiable as per the documents provided by the Respondent, giving the names along with unit no. allotted to such buyers. c) The Respondent has contravened the provisions of Section 171 of the CGST Act, 2017 by not passing on the benefit of additional ITC to the tune of 15.01% of the turnover for the project The Ultima'', which has accrued to the Respondent in the post-GST period from 01.07.2017 to 30.11.2020 and the same was required to be passed on by the Respondent to his recipients. Hence, the Respondent had realized an additional amount to the tune of Rs. 4,91,23,070/-(including GST) from 123 homebuyers. These 123 buyers were identifiable as per the documents provided by the Respondent, giving the names along with unit no. allotted to such buyers. 21. The DGAP has further reported that any reference to the Central Goods and Services Act, 2017 and Central Goods and Service Tax Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x on any supply of goods or services or benefit of ITC. to the recipient by way of commensurate reduction in price. ii. That neither reduction in rate of tax on supply of goods / services nor benefit of ITC has been defined in the CGST Act. A reduction in rate of tax on supply of goods / services would mean a reduction in the rate of tax on goods /services supplied by a registered person. The Respondent was admittedly a construction service provider and supplied construction services on which there was no reduction in rate of tax. iii. While the phrase benefit of ITC has not been defined, the definition of ITC was contained in section 2 (63) of the CGST Act, which is extracted for ready reference:- 63) "ITC means the credit of input tax; Input tax is defined in section 2(62): "(62) "input tax" in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes- (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) the tax payable under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITC was beyond the scope of Section 171 of the CGST Act. vii. That the entire proceedings were beyond jurisdiction and the scope of Section 171 of the CGST Act and the DGAP's report was liable to be set aside based on this ground alone. Section 171 was inapplicable in the present facts as it applied only when there was a one-to-one identification between procurement of goods/services and their supplies. In the present case, since the same was not possible, the provisions of Section 171 were inapplicable. f) PRESENT PROCEEDINGS ARE EX-FACIE WITHOUT JURISDICTION AND ALSO CONTRARY TO THE RELEVANT STATUTORY PROVISIONS:- i. There was no complaint filed by any flat buyer/customer or the Commissioner with respect to three projects in question, namely. "The Camellias". "The Crest" and "The Ultima". This Authority vide its order dated 11.12.2020 took suo moto cognizance and directed DGAP to investigate Respondent's another project, namely "The Ultima". ii. That neither the CGST Act nor the CGST Rules confer any power either on this Authority or DGAP to initiate investigation against any of the registered persons on their own motion, i.e. suo moto. Initiation of investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n / State Human Rights Commission Protection of Human Rights Act, 1993 8. Airports Authority of India / Eviction officers appointed under Section 28B Airports Authority of India Act, 1994 v. That the GST Council in its 17th meeting had specifically discussed the issue of whether this Authority should be conferred with suo moto powers. However, despite such discussions, no such specific powers had been conferred on this Authority. Instead, apart from an interested party, the Commissioner has been given the authority to file an application for initiation of anti-profiteering proceedings. Therefore, it was submitted that this Authority had no suo moto powers. vi. That the DGAP vide its earlier report dated 31.08.2020 had investigated Respondent's project, namely, "The Sky Court". As provided in Rule 133 (4), this Authority could have only directed further investigations in the matter" i.e., only Respondent's project The Sky Court". Therefore, it was evident from the language of Rule 133 (4) that this Authority did not have any power to expand the investigations and had no suo moto powers under Rule 133 (4) to enquire into any project which was covered by the report. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate was neither treated as a supply of goods nor supply of services. Therefore, there could be no question of passing of GST benefit on the same. The allegation by Sh. Sudhir Jain was only in respect of GST charged on the preferential location charges on which GST was required to be collected at 18%. He had made no allegation whatsoever that the Respondent did not pass the benefit of ITC or reduction in taxes. GST was applicable on the preferential location charges collected by the Respondent and accordingly the same was recovered from him. The Standing Committee ought to have considered the fact that there could be no question of benefit to be passed on to Sh. Sudhir Jain. iii. Thus, the Standing Committee had no evidence against the Respondent and had failed to provide any prima facie evidence based on which it had come to the conclusion that the allegation of profiteering needed to be investigated. iv. That as the reference by Standing Committee was not in accordance with the CGST Rules, the order dated 11.12.2020 of this Authority, the DGAP's notice dated 23.09.2021 and DGAP's report dated 16.12.2021 were required to be set aside on this ground alone. h) PR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent, he could not defend his case and make requisite submissions before this Authority. It was submitted that in the present case except for providing a copy of the report of the DG, as on date the Respondent had not been served any notice/communication regarding the issues to be examined and actions proposed to be taken against the Respondent. The Respondent could not presume the report of DG to be a show cause notice and defend himself. vi. That even if the CGST Act and the CGST Rules did not provide for issuance of a show cause notice before initiating proceedings under Section 171, the Authority should have issued a show cause notice to the Respondent in terms of principles of natural justice as held by courts in various cases. i) IN ABSENCE OF PRESCRIBED METHOD OF CALCULATION OF PROFITEERING IN THE ACT OR THE RULES OR THE PROCEDURE, THE PROCEEDINGS ARE ARBITRARY AND LIABILE TO BE SET ASIDE:- i. That the CGST Act read with the CGST Rules did not provide the procedure and mechanism of determination and calculation of profiteering. In absence of the same, the calculation and methodology used in the report was arbitrary and was in violation of principles of natural jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t $1. At the same time if the cost of the business rose by $1 under the new tax scheme, then prices might rose by not more than $1. These regulations had been set as barometers for calculating profiteering. It is submitted that no such procedure for calculation of profiteering had been provided under the CGST Act and CGST Rules. Absence of the same violated the principles of natural justice and thus. the investigation was liable to be set aside. Reliance has been placed on the case of Eternit Everest Ltd. vs. Union of India, reported at 1997 (89) E.L.T. 28 (Mad.), where the Hon'ble Madras High Court has held that in absence of machinery provisions pertaining to determination and adjudication upon a claim or objection, the statutory provision will not be applicable. vi. In the case of Commissioner of Income Tax, Bangalore vs. B.C. Srinivasa Setty, reported as (1981) 2 SCC 460, the Hon'ble Supreme Court held that charging section is not attracted where corresponding computation provision is inapplicable. It is submitted that relying on the case of BC Srinivas Shetty, Allahabad HC in the case of Samsung (India) Electronics Pvt. Ltd. vs. Commissioner of Commercial Taxes U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input services for supplying the service and no one to one correlation between input and output. In light of the said facts, there ought to have been a standard methodology to determine the profiteering for real estate sector. j) COMPARISON OF RATIO OF ITC TO TURNOVER FOR PRE-GST PERIOD AND GST PERIOD IS NOT THE CORRECT MECHANISM FOR CALCULATION OF PROFITEERING AMOUNT:- i. That the DGAP had arrived at the figures of alleged profiteering on the basis of the difference between the ratio of ITC to turnover under the pre-GST and GST period. That using this formula for calculating the benefit of additional ITC accrued to the Respondent would never yield the correct quantum of profiteering. ii. The comparison of above ratio was not appropriate for the reason that under the real estate sector, there was no correlation between turnover and the cost of construction or development of a project. The turnover reflected the amount collected by developer as per payment or booking plans issued by it which was purely based on market driven strategy. On the contrary, the ITC accrued to a developer on the basis of actual cost incurred by him while undertaking the development of a project. Accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. This credit was available to the Respondent even before GST and hence, the Respondent could not be asked to transfer this additional credit to the customers The impact on this account (due to increase in tax rate of services) is as follows:- Particulars Pre-GST Post-GST ITC (assuming services of Rs. 100 received from a vendor) 15 18 Taxable turnover 120 120 % of Credit 12.5% 15% f. Based on the above calculation, it was submitted that if the value of service received and value of service provided pre and in GST regime had remained the same, there was an increase of 2.5% of ITC, however, in reality, there was no additional benefit arising to the Respondent as he had paid an additional 3% tax to its service providers and taken ITC of the same. The amount (%) would increase in case services were procured in April'16 to May'16, when Service Tax rate was 14.5%. In other words, increase in the tax rate did not result in a benefit. Tax was paid in advance to supplier and availed as credit and utilized for payment of output tax. In other words, increase in rate of tax reduced the net amount of tax to be paid in cash and was not a benefit. g. Further, the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 April 2018 to March 2019 ITC 15.252 18.998 Turnover 47.634 568.287 Credit to turnover ratio 32.01 3.34 Difference in credit to turnover ratio 28 67 k. That within the same regime for two given periods, the credit to turnover ratio could vary as highlighted in the above table. Similar exercise could be done in the pre-GST regime to show that credit to turnover ratio would vary:- Particulars April 2016 to March 2017 April 2018 to March 2019 Cenvat Credit 29.329 8.924 Turnover 2251.512 1716 531 Credit to turnover ratio 1.30 0.52 Difference in credit to turnover ratio 0.78 l. The comparison of pre-GST credit to turnover ratio to the post-GST ratio had resulted in skewed and inconsistent results in various orders passed by this Authority. The percentage of credit to turnover ratio (in GST regime) has varied from 0.2% (in Vatika Limited, Case No. 64/2019) to 20.98% (in Emaar MGF Land Ltd., Case No. 26/2020). m. That the Hon'ble Finance Minister/Chairperson of GST Council in the 32nd GST Council Meeting dated 10.01.2019 while summarizing the challenges faced by the real estate sector had stated that combined ITC available to a builder is 8-9%. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te) dated 28.06.2017 provided for exclusion of land value from the value of taxable construction services and deems the value of land as 1/3rd of the total amount charged from customers. In this regard, reference could be made to Para 2 of the aforesaid notification, extracted below:- "2. In case of supply of service specified in column (3), in item (I); (I) (ia), (ib), (ic), (id), (ie) and (if) against serial number 3 of the Table above, involving transfer of land or undivided share of land, as the case may be, the value of such supply shall be equivalent to the total amount charged for such supply less the value of transfer of land or undivided share of land, as the case may be, and the value of such transfer of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply." Emphasis supplied iii. Section 171 (2) of the CGST Act empowered the Central Government to constitute an Authority / empower an existing Authority to inter alia examine whether ITCs availed by a registered person had actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the DGAP report on account of land value. The calculation of same was as follows:- Project (A) Profiteering Amount (B) Profiteering amount on land (C) (B/3) Profiteering on value excluding land value(C- The Camellias 7,23,50,135/- 2,41,16,712/- 4,82,33,423/- The Crest 12,94.35,170/- 4,31,45,057/- 8.62,90,113/- The Ultima 4,91,23,070/- 1,63,74,357/- 3,27,48 713 Total 25,09,08,375/- 8,36,36,125/- 16,72,72,250 I) ALLEGED PROFITEERING AMOUNT HAS BEEN INCORRECTLY INFLATED IN THE REPORT BY ADDING GST AND THE SAME IS NOT SUSTAINABLE:- i. That the profiteered alleged by the DGAP was arrived at by comparing the amount collected / raised by Respondent from his customers including GST @ 12%, with the recalibrated prices / commensurate base price including GST. For instance, if the Respondent had charged INR 100 + 12% GST thereon (thus totaling to INR 112 incl. GST), but as per the DGAP, the Respondent should have charged INR 90 + 12% GST thereon (thus totaling to INR 100.8), the profiteering has been computed as difference of INR 112 and 100.8, i.e. INR 11.2. In effect, it was the DGAP's contention that the Respondent had profiteered to the extent of 12% GST co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he term "collected' meant in the context of the sales tax legislation of Gujarat. It observed as under:- "34. Section 37 (1) uses the expressions, in relation to forfeiture any sum collected by the person - shall be forfeited'. What does collected' mean here? Words cannot be construed effectively without reference to their context. The setting colours the sense of the word. The spirit of the provision lends force to the construction that 'collected" means "collected and kept as his" by the trader. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return if eventually it was not taxable, it is not collected. 'Collected., in an Australian Customs Tariff Act, was held by Griffth C.J., not to include money deposited under an agreement that if it was not legally payable it will be returned' (Words & Phrases p. 274). We therefore, semanticise. Collected not to cover amounts gathered tentatively to be given back if found non-exigible from the dealer" viii. Since the amount collected as GST by the Respondent from the recipients on the alleged profiteering amount had already bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Respondent's three projects. Respondent received the completion certificate on the following dates:- S.No. Project Date of completion certificate 1. The Camellias 27.07.2017 2. The Crest 24.07.2017 3. The Ultima (Tower E,H,J,K,L & EWS) 11.06.2018 4. The Ultima (Tower-A.B,N,Q,R & Shops) 05 02 2019 iii. That for all the three projects, DGAP has taken the period of investigation from 01.07.2017 to 30.11.2020. It is submitted that DGAP erred in computing profiteering for the period beyond the date of receipt of completion certificate as tabulated above. The DGAP's report is contrary to THIS AUTHORITY's direction vide order dated 11.12.2020 and therefore. the proceedings against the Respondent are liable to be dropped. iv. that DGAP erred in considering the same area on both side while comparing the profiteering which has resulted in wrong calculation of percentage of profiteering e.g. a buyer has booked an apartment for Rs. 1.80,00,000/- having an area of 3,000 sq. ft. during the financial year 2016-2017 and has made a payment of Rs. 1,40,00,000/- during the period upto 30-06-2017 i.e. pre GST period and has made a payment of Rs. 20,00,000/- only dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Benefits due to reduction in sourcing costs due to increase in credits; 2. VAT which would have been by the Respondent on its own account if GST was not introduced vii. The total benefit was then divided by total area to arrive at the per square feet benefit to be passed on to the flat buyers. The amount of benefit passed on was also reviewed by the Chartered Accountant. viii. In light of the above evidence and documents filed by the Respondent, the benefit amounting to Rs. 17,13,88,832/- was required to be considered as the same has already been passed on to the flat buyers. (O) OTHER GROUNDS:- i. In absence of a judicial member, the constitution of this Authority is improper ii. Section 171 of the CGST Act and Rules made thereunder pertaining to anti-profiteering are unconstitutional being violative of Article 14 and Article 19 (1) (g) of Constitution of India; iii. Rules 126, 127 and 133 of the CGST Rules suffer from the vice of excessive delegation; iv. Non-prescription of any methodology or guidelines render the investigation report unsustainable. On the basis of the aforementioned submissions it is submitted that the proceedings being violative of princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 2004 and the respective VAT Acts to arrive at the benefit of ITC was beyond the scope of Section 171 of the CGST Act. In respect of the above contention of the Respondent, it is relevant to mention here that Section 171 (1) of the CGST Act, 2017 provides that Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." It is clear from the plain reading of the above provision that it mentions "reduction in the rate of tax or benefit of ITC" which means that if any reduction in the rate of tax is effected by the Central or the State Governments or if a registered supplier avails the benefit of additional ITC the same have to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their tax revenue. Although there has been no reduction in the rate of tax in the case of Construction Service, however, a number of taxes and duties which were being levied under the State Acts of Haryana has been subsumed in the GST under the CGST and Haryana GST Act, 2017 on which ITC is now available to the Respondent un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach supply to every recipient and this Authority is empowered to examine whether these benefits have been passed on or not. To assist this Authority while making such examination an investigating agency designated as the DGAP has been created under Rule 129 of the CGST Rules, 2017 to conduct detailed investigation and submit Report to this Authority under Rule 129 (6) to determine whether the above benefits have been passed or not in terms of Section 171 (1) and Rule 133 (1) of the above Rules. Under Rule 129 (2) the DGAP has mandate to conduct investigation and collect necessary evidence to determine whether these benefits have been passed on. Further. the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs vide its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a. "Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Standing Committee had no evidence against the Respondent based on which it had come to the conclusion that the allegation of the profiteering needed to be investigated. Thus, the reference by the Standing Committee was not in accordance with the CGST Rules. 31. In this regard, the Authority finds that, upon perusal of the complaint No. NAACMP62413 of Sh. Sudhir Jain, it is observed that in reply to the column 'General information about the Supplier who has not passed on the benefit', Sh. Sudhir Jain has specified the name of M/s DLF Ltd. i.e. the Respondent having address DLF Gateway Tower, R Block, DLF City Phase III, Gurugram-122002, Haryana as the supplier who has not passed on the benefit of ITC. Further. upon perusal of the Minutes of meeting of the Standing Committee on Anti-profiteering held on 05.07.2019, the Standing Committee on Anti-profiteering has found that the complaint of Sh. Sudhir Jain has been considered in its meeting and there was sufficient and necessary prima facie evidence of profiteering against the Respondent. Thus, upon being prima facie satisfied, the Standing Committee has forward the complaint to the DGAP for further investigation. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined under Section 171 of the Act. The Report of the DGAP was also supplied to the Respondent along with all the annexures. The Respondent was also given opportunity to file his consolidated written submissions against the allegations levelled by the DGAP in his report vide the above show cause notice dated 02.03.2022. The description of the goods and services' and the grounds/reasons on the basis of which profiteering has been alleged' have also been mentioned in the report of the DGAP and the same has been supplied to the Respondent. Hence, there is no need to issue separate show cause notice to the Respondent on the above grounds. The Respondent cannot claim that he should be served with the notice containing details of every flat buyer, the amount paid by him, the ITC and tax paid by him every month etc. He has been supplied with all the material/documents which have been relied upon by the DGAP while framing the Report and hence he has no ground to allege violation of principles of natural justice. Hence, the Authority finds that, this submission and objection of the Respondent is devoid of merit. 36. The Respondent has argued that in absence of prescribed method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted in respect of all such products/units/services by the DGAP. What would be the 'profiteered amount' has been clearly defined in the explanation attached to Section 171. These benefits can also not be passed on at the entity / organisation / branch/ invoice/ business vertical level as they have to be passed on to each and every buyer at each product/unit/service level by treating them equally. The above provision also mentions any supply" which connotes each taxable supply made to each recipient thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer on a particular product therefore he would pass less benefit or no benefit to another customer than what is actually due to that customer, on another product. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him subject to his eligibility. The term commensurate" mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the price which has to be computed in respect of each product or unit or service based on the price and the rate of tax reduction or the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or determining the benefit of additional ITC which has to be passed on to the buyers of the units. Moreover, this Authority under Rule 126 has been empowered to 'determine' Methodology & Procedure and not to 'prescribe' it. Similarly, the facts of the cases relating to the sectors of Fast Moving Consumer Goods (FMCG), restaurant service, construction service and cinema service are completely different from each other and therefore, the mathematical methodology adopted in the case of one sector cannot be applied to the other sector. Moreover, both the above benefits are being given by the Central as well as the State Governments as a special concession out of their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous, mandatory and legally enforceable. The above provisions also reflect that the true intent behind the above provisions, made by the Central and the State legislatures in their respective GST Acts, is to pass on the above benefits to the common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer as per payment or booking plans issued by it which was purely based on market driven strategy. Accrual of ITC was not dependent on the amount collected from the buyers. In this industry, there might be cases where advance was received by the suppliers/dealers even before the commencement of the projects. Likewise, units might be sold after the completion of the project as well. Thus, receiving of inputs/input services and taking credit of the same did not have any immediate/direct relation with the turnover in real estate sector. Accordingly. calculating profiteering on the basis of turnover could not reflect the correct outcome of benefit of credit to the Respondent. 40. In relation to the above submission of the Respondent, the Authority finds that there is correlation between the Turnover and the cost of construction as the Respondent is raising demands on the basis of the completion of each stage of the development of the project. The raising of demand has no correlation with the market driven strategies of the Respondent as is evident from his 3 plans which he is offering to his buyers. Accordingly, the Respondent is earning ITC on the basis of the material purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cannot be accepted. 45. The Authority finds that, it has also been claimed by the Respondent that reversal of ITC due to receipt of Completion Certificate also had a bearing on ITC availed by the developer and such a critical factor needed to be given appropriate weight while making the final computation of profiteering. However, the DGAP had added back such reversal without adding any reasons for such addition. In this regard, the report of the DGAP is very clear on the issue of reversal of ITC. The issue of reversal of ITC has been duly taken care of in Para 16 of the DGAP's Report which clearly states that no ITC benefit is to be passed on the unsold units and the ITC earned on them is to be reversed. Therefore, the claim of the Respondent is not sustainable. 46. The Respondent has also averred that in the pre-GST regime, services were subject to Service Tax @15%; however, the said services were taxable @18% in the post-GST regime. Therefore, there was an increase of 3% in ITC available to the Respondent which was not due to any additional benefit due to increase in the rate of tax. This credit was was available to the Respondent even before GST and hence, the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable area, area sold and the taxable turnover received before and after the GST implementation would always be different from the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to the other project as is clear from the ratios calculated in respect of all the 03 projects of the Respondent. Since, the facts in the case of M/s Vatika Limited, Case No. 64/2019) and M/s Emaar MGF Land Ltd (Case No. 26/2020) are different, the ratio of ITC to Turnover has also been different in both the cases. Hence, the contention of the Respondent cannot be accepted. 51. It has also been contended by the Respondent that for the purpose of calculation of profiteering, the value of land needed to be excluded. As 1/3rd of the total amount charged was towards land and not towards the services provided by Respondent. in this regard, the Respondent has placed reliance on the Order of this Authority passed in the case of M/s. Fusion Buildtech Pvt. Ltd. and M/s. Bhartiya City Developers Pvt. Ltd. In the cases relied upon by the Respondent, the DGAP has excluded the value of land from its profiteering calculation Table and the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of ITC to his customers by charging excess GST. The Authority finds that. had the Respondent not charged the excess GST, the customers would have paid less price while purchasing the flats from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent. Therefore, the Authority finds that the above contention of the Respondent is untenable and hence it cannot be accepted. In support of his above claim, the Respondent has relied upon the decision given by the Hon'ble Apex Court in the case of R. S. Joshi Sales Tax Officer Gujarat v. Ajit Mills Limited (1977) 4 SCC 98. However. keeping in view the facts of the present case before us, the Authority finds that the law settled in the decision relied upon by the Respondent is not applicable to the Respondent. 55. The Respondent has further averred that for computation of credit to turnover ratio, the DGAP had considered period from 01.07.2017 to 30.11.2020 whereas he has received the Completion Certificate in al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further required for the calculation of the 'Ratio of the CENVAT/ITC to Turnover'. The difference in the 'Ratio of the CENVAT/ITC to Turnover' in the pre-GST and post-GST regime determines whether there is any profiteering or not. Therefore, the Authority holds that this contention of the Respondent is not maintainable and cannot be accepted. 58. The Respondent has also claimed that he has passed on the benefit of ITC amounting to Rs. 17,13,88,832/- to all the flat buyers in respect of all the three projects. In this regard. this Authority observes that the above claim of the Respondent is not correct. To support his claim, the Respondent has not submitted any documentary evidence indicating that the benefit of additional ITC has been passed on by him to his flat buyers/customers. The Respondent has submitted a mere excel sheet containing details of the flat buyers and the amount of benefit which was passed on in support of his claim, which cannot be relied upon in the absence of documentary evidence. 59. The Respondent has further stated that in the absence of a judicial member, the constitution of this Authority is improper. In this regard, the Hon'ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent name. However, by virtue of the constitutional convention while constituting the analogous court/Tribunal it will have to be ensured that the appointment and security of tenure of Judges of that court would be the same as of the court sought to be substituted….. it is not possible for us to accept that under recognised constitutional conventions, judicial power vested in superior courts cannot be transferred to coordinate courts/Tribunals. The answer is, that such transfer is permissible. But whenever there is such transfer, all conventions/customs/practices of the court sought to be replaced have to be incorporated in the court/Tribunal created. The newly created court/Tribunal would have to be established in consonance with the salient characteristics and standards of the court which is sought to be substituted." (Emphasis supplied) In the case of Rojer Mathew supra, the Hon'ble Court was inter alia considering provisions of the Finance Act, 2017 which led to merger of several Tribunals as well as the rules therein, where one of the issue was absence of a Judicial Member. With regard to this question, the relevant findings of the Hon'ble Court are reproduced h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administration of justice unlike a ministerial Tribunal which is more influenced and controlled and performs functions akin to machinery of administration. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 95. …. The term "experience in law" is an expression of wide connotation. It presupposes that a person should have the requisite qualification in law as well as experience in the field of law. However, it is worthwhile to note that having a qualification in law is not equivalent to having experience in law and vice versa. "Experience in law". thus, is an expression of composite content and would take within its ambit both the requisite qualification in law as well as experience in the field of law…." Some findings of the Hon'ble Supreme Court in the case of Namit Sharma supra, reproduced herein above, have been reversed by the Hon'ble Court in the Review Petition filed by the Union of India. The Judgment in the review Petition has been reported as Union of India v. Namit Sharma (2013) 10 SCC 359. The relevant findings from the said judgment are reproduced herein below:- `29. Once the Court is clear that the Information Commissions do not exercise judicial po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in the price of the goods or services or both supplied by him." The duties of this Authority have been further elaborated in Rule 127 of the CGST Rules, 2017 which reads as follows:- "127. Duties of the Authority.- It shall be the duty of the Authority,- (1) to determine whether any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices; (ii) to identify the registered person who has not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices; (iii) to order, (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry powers which it exercises under the Act can be said to be quasi-judicial in nature but it does not require a Judicial Member in its Council. The constitution and composition of the Council is provided in Section 3 of the said Act. The Institute of Chartered Accountants of India has been constituted under the Chartered Accountants Act, 1949. The ICAI also exercises quasi-judicial functions over its registered members and can pass orders which have far reaching consequences affecting the rights of Chartered Accountants but even its composition does not require a Judicial Member's presence. Its composition is provided in Section 9 (2) of the above Act and the same does not include a mandatory Judicial Member. Similarly, the Assessing Officers, Commissioners of Appeal under the Income Tax Act. 1961 and the CGST Act, 2017, the Authorities on Advance Rulings under both the above Acts and the Dispute Resolution Panel under the Income Tax Act, 1961 all perform quasi-judicial functions but there is no requirement that such persons who must be possessing either a law degree or have had judicial experience. Such a requirement is not only impractical but would also render several statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of ensuring that the both the above benefits are passed on to the general public as per the provisions of Section 171 read with Rule 127 and 133 of the CGST Rules. 2017. Hence, the anti-profiteering related Rules and Section 171 of the Act have express approval of the Parliament, all the State Legislatures, the Central and all the State Governments and the GST Council and therefore, Section 171 and the Rules are constitutional and are not violative of Article 14 and 19 (1) (g) of the Constitution. This Authority has nowhere interfered with the business decisions of the Respondent and therefore, there is no violation of Article 14 and 19 (1) (g) of the Constitution. 61. The Respondent has further contended that Rule 122, 127 & 133 of the CGST Rules suffered from excessive delegation. In this regard it would be pertinent to mention that above mentioned CGST Rules have been framed by the Central Government under Section 164 on the recommendation of the GST Council which is a constitutional body established under 101s' Amendment of the Constitution and comprises of all the Finance/Taxation Ministers of the States and the Union Finance Minister. Hence, the above Rules have ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tima' respectively and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as Rs. 7,23.50.135/-, Rs. 12,94,35,170/- & Rs. 4,91,23,070/- for the projects The Camellias', The Crest' and The Ultima' respectively which was availed by the Respondent the details of which are mentioned in Table- B, D & F supra. 63. In view of the above discussions, the Authority finds that the Respondent has profiteered by an amount of Rs. 7,23 50,135/-, Rs. 12,94.35,170/- & Rs. 4,91,23,070/- for the projects 'The Camellias', The Crest' and The Ultima' respectively during the period of investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers in all the above three projects shall be refunded by him, along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. 64. The Authority finds no reason to differ from the above-detailed computation of profiteering in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 30.11.2020, therefore, he is liable for imposition of penalty under the provisions of the above Section. Accordingly, notice be issued to him. 69. The concerned jurisdictional CGST/SGST Commissioner is directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each homebuyer as per Annexure- 1, 2 & 3 attached with this Order along with interest @18%, if not paid already. In this regard an advertisement of appropriate size to be visible to the public may also be published in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder (Respondent) - M/s DLF Ltd., Project- The Camellias', The Crest' and The Ultima' Location- Haryana and amount of profiteering so that the concerned homebuyers can claim the benefit of ITC if not passed on. Homebuyers may also be informed that the detailed NAA Order is available on Authority's website www.naa.gov.in. Contact details of concerned Jurisdictional CGST/SGST Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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