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TMI Blog2022 (7) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. This amount profiteered is Rs. 1,581/- (including GST) in respect of the Applicant No.1, Rs 316/- (including GST) in respect of Applicant No. 2, Rs 1,166/- (including GST) in respect of Applicant No. 3, and Rs 1,239/- (including GST) in respect of the Applicant No. 4. Interest - HELD THAT:- The Respondent is also liable to pay Interest as applicable on the entire amount profiteered, i.e. Rs. 20,57,207/-, for the project Shriram Summit'. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date or passing ant payment, as per provisions of Rule 133 (3) (b) of the CGST Rules, 2017. Penalty - HELD THAT:- t has also been found that the Respondent has denied the benefit of additional ITC to his customers/recipients in contravention or the provisions of Section 171 (1) of the CGST Act. 2017 and resorted to profiteering and hence, committed an offence under section 171 (3A) of the CGST Act, 2017. Therefore, the Respondent is liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Applicant No. 2, 3 .4 against, the Respondent, In respect of purchase of a flat, in the project Shriram Summit . d. On receipt of the references from the Standing Committee on Anti-profiteering on 06.05.2020, a Notice under Rule 129 of the Rules was issued by the DGAP on 26.05.2020, calling upon the Respondent to reply as in whether he admitted that the benefit of ITC had not been passed on to the Applicant Nos. 1 to 4 by way of commensurate reduction in prices and if so, to suo morn determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all supporting documents. Vide the said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/i formation furnished by the Applicant No. 1, during the period 04.06.2020 to 06.06.2020. However, the Respondent did not avail of this opportunity. e. In response to the Notice and several reminder letters, the Respondent did not submit all the requisite documents on the due date. Hence, three Summons under Section 70 of the CGST Act, 2017 read with Rule 132 of the Rules, were issued to the Respondent to submit all the relevant documents. In compliance of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to April, 2020 for the project Shriram Summit . (vii) Cenvat/ITC Register for the FY 2016-17, 2017-18, 2018-19 and for the period April, 2019 to April, 2020 for the project Shriram Summit . (viii) List of home buyers in the project Shriram Summit . (ix) Brief profile of the Respondent. (x) Details of applicable tax rates, Pre-GST and Post-GST. (xi) Status of Project as on 30.04.2020. j. In the Notice dated 26.05.2020, the Respondent was informed that if any information/documents was provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was required to be furnished. However, the Respondent informed that all documents provided by the Respondent, might be treated as confidential except documents related to the Applicant Nos. 1 to 4 only. k. Vide e-mail dated 18.03.2021, an opportunity was given to the Applicant Nos. 1 to 4 to inspect the non-confidential documents/reply furnished by the Respondent on 19.03.2021 to 22.03.2021. However, the above Applicants did not avail the said opportunity. l. After examining the subject applications, various replies of the Respondent and the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST. n. It was observed by the DGAP that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services as well as credit of VAT purchases (CENVAT credit of Central Excise Duty was not available) in respect of the flats for the project Shriram Summit sold by him. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April, 2016 to April, 2020, the details of the ITC availed by him, his turnovers from the project Shriram Summit , the ratios of ITCs to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to April, 2020) periods, have been furnished in Table- A below:- Tablet-'A' (Amount in Rs.) Sr.No. Particular Total (Pre-GST) April, 2016 to June, 2017 Taxable Turnover (July, 2017 to April, 2020) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 3. Ratio of CENVAT credit to Total Turnover as per table - 'A' above during the period 01.04.2016 to 30.06.2017 (%) C 6.88% 4. Ratio of CENVAT credit to Total Turnover as per Table A' above during the period 01.07.2017 to 30.04.2020 (%) C 6.96% 5. Increase in ITC availed post-GST (%) D=6.96% less 6.88% 0.08% 6. Analysis of Increase in input tax credit: 7. Base Price raised during July, 2017 to April, 2020 (Rs.) E 2,29,59,89,851 8. GST raised over Base Price (Rs.) F=E*B 27,55,18,782 9. Total Demand raised G=E+F 2,57,15,08,633 10. Recalibrated Base Price H=E*(1-D) or 99.92% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted to such recipients. t. As aforementioned, the present investigation covered the period from 01.07.2017 to 30.04.2020, profiteering, if any, for the period post April, 2020, had not been examined as the exact quantum or ITC that would be available to the Respondent in future could riot be determined at this stage, when the construction of the project was yet to be completed. 3. The above Report had been carefully considered by this Authority and a Notice dated 17.06.2021 was issued to the Respondent to explain why the Report dated 31.03.2021 furnished by the DGAP should not be accepted and his liability for profiteering in violation of the provisions of Section 171 should not be fixed. The Respondent was directed to file written submissions which had been filed on 15.07.2021 wherein the Respondent had inter-alia, submitted that:- a) The Project Shriram Summit had been developed on 56,792 Sq. mtr. of land area out or which 13,391 sq. mtr. was covered area and 44,910 sq, mtr. was open area. The project was High rise Residential Apartments having 1128 flats being constructed in 2 Phases. Phase-1 has 2 Blocks 2B+G+13 Floors in 17 towers, Block-01 10 Towers with 520 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of ITC has been passed on. 126. Power to determine the methodology and procedure.- The Authority may determine the methodology and procedure for determination as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices. Thus, on joint reading of Section 171 with Rule 126, it was evident that this Authority had been empowered to determine the methodology and procedure for determination as to whether the supplier had passed on. the benefit to the recipient. c) The methodology adopted by DGAP was arbitrary and grossly incorrect as the learned DGAP had arrived at the profiteering or Rs. 20,57,207/- on the basis of difference between the ratios of ITC,s to turnovers to area sold under the Pre-GST and Post-GST Period. Since this Authority had not prescribed any methodology or procedure to determine the benefit to be passed on by the Supplier, the DGAP had adopted its own method by arriving at the benefit as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project was still under construction, The actual benefit, if any could be determined only after completion of the project. The Respondent relied upon the judgment in the case of Hon'ble Bombay High Court in the ease of ACIT Vs. NGC Networks India Pvt. Ltd. [TS-41-HC-2018(ROM)]. The Hon'ble Court followed its earlier decision in the case of CIT Vs. Cello Plast [TS-602-HC-2012(BOM)] wherein the Hon ble Court had applied the legal maxim lex non cogit ad impossibilia (law does not compel a man to do what he cannot perform). That maxim was applied by the Larger Bench of the Tribunal in the case of Hico Linterprises Vs. Commissioner of Customs (2005) 189 ELT 135]. g) The levy of Penalty under Section 171 (3A) read with Rule 133(3)(d) was unwarranted. The Respondent retied upon the decisions in the cases of:- (i) Rajasthan Spinning Weaving Mills Ltd. v. CCE [2005 (179) E.L.T 70 (Tri- Del.)] (ii) H.E.G Ltd. v. CCE, Bhopal [2005 (191) E.L.T. 1199 (Tri-Del)]. (iii) Flyingman Air Courier Nt. Ltd v. CCE, Jaipur [2004 (170) E.L.T 417 (Tri-Del)] (iv) Union or India v. Kamlakshi Finance Corporation Ltd. [1991 (55) E.L.T. 413 (SC)] h) (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of penalty did not arise. 4. Copy of the above submissions dated 15.07.2021 filed by the Respondent were supplied to the DGAP for supplementary Report under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications vide supplementary report dated 28.03.2022 wherein stated that:- a. For the contention raised by the Respondent that the impugned Notice' and 'Report' was unconstitutional and ultra-vires the DGAP has clarified that challenging the constitutional validity of Section 171 of the CGST Act, 2017 on Anti-profiteering and Rules made thereunder was erroneous and without any legal backing. The provisions of Section 171 of the CGST Act, 2017 on Anti- profiteering have been passed by the Parliament. The Respondent could not proceed with an assumption that the Legislature enacting the statute had committed a mistake and when the language of the statute was plain and unambiguous. The Respondent was not at liberty to find a defect but to proceed on a looting to follow the intention of the Statute. If the view of the Respondent was accepted the whole exercise of the legislature would be an exercise in futility. Section 171 (1) of the Act, envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the tax reduction as well as the existing base price (price without GST) of the product. The computation of commensurate reduction in prices was purely a mathematical exercise which was based upon the above parameters and hence it would vary from product to product and hence no fixed mathematical methodology could be prescribed to determine the amount of benefit which a supplier was required to pass on to a recipient or the profiteered amount. However, to give further clarifications and to elaborate upon this legislative intent behind the law, this Authority had been empowered to determine/expand the Procedure and Methodology in detail. However, one formula which fits all cannot be set while determining such a Methodology and Procedure as the fact of each case was different. In real estate project parameters such as date of start and completion of the project, price of the house/commercial unit, mode of payment of price, stage of completion of the project, timing of purchase of inputs, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realized before and after the GST implementation would always be different than the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the methodology adopted by the DGAP in this case was strictly in terms of Section 171 of the CGST Act, 2017 and the Rules made thereunder. c. For the contention raised by the Respondent that benefit to be determined basis the ITC which was cost to Respondent in pre-GST, the DGAP has clarified that in pars 15 Table A' of the Report dated 31.03.2021, the CENVAT of Service Tax paid on input services ITC of VAT paid on purchase of inputs in the Pre GST period had been clearly indicated. Further, ITC of GST available in the post GST period had also been clearly indicated. Therefore, the contention of the Respondent was not correct. ITC was available on the inputs (goods and services) purchased/used in the project, which was cost to the Respondent. Hence, when ITC was being considered in the investigation then it implied that the cost to the Respondent had been considered. Considering the cost or input turnover again, would have no use in computing the amount of profiteering or benefit of ITC to be passed on under Section 171 of the CGST Act, 2017. Section 17 1 (1) of the CGST Act, 2017 was very clear which stated that any reduction in the rate of tax or the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal benefit of ITC in the GST regime was required to be passed on by the suppliers to the recipients by way of commensurate reduction in prices, in terms of Section 171 of GST Act, 2017. However, considering the vast difference in the nature and type of goods and services supplied by various trades and industry, it would not be feasible to prescribe a uniform method/practice/principle/rule to calculate such additional benefit of ITC available in the GST regime. The additional benefit of ITC would vary depending on the conditions of the supply as well as the nature of goods or services supplied and had to be determined on a case-to-case basis, in terms of Chapter XV of the CGST Rules, 2017. Furthermore., the sale of land being a transfer of immovable property and license approvals were outside the ambit of both Service Tax as well as GST. There was no implication of the cost of hind in arriving at the ratio of total credit available to the Respondent as abatement for the same was provided in determination of taxable turnover. Further, cost of land, land development rights, license approvals etc. were integral parts of the cost of project and were already accounted for in the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in post-GST regime which was not available earlier was required to he passed on by the suppliers to all the recipients by way of commensurate reduction in price, in terms of Section 171 or CGST Act, 2017. Therefore, the averment made by the Respondent was incorrect. As stated above, the Respondent had been benefitted with additional ITC only after introduction of the GST. This additional benefit of ITC pertained to the entire project or in other words related to each flat/unit of the project of the Respondent. Hence all unit/flat buyers were eligible to get their due benefit of ITC from the Respondent irrespective of his bookings made in pre-GST or post-GST period. Whatever was the negotiated price, the benefit of additional ITC had to be specifically passed on to all the recipients by the Respondent. This benefit had to be passed on over and above any other kind of negotiations made with the homebuyers. c. For the averment made by the Respondent that the impugned Notice' and Report' was premature, the DGAP has submitted that the maxim lex non cogit ad impossibilia was not applicable in the present case. It implied that law did not permit a man to do that whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all the inputs and input services being used in the entire project/projects. The Respondent was eligible to utilize the ITC in respect of sold area on the critical date in the project and remaining ac pertaining to the unsold area was required to be reversed. Therefore, the ITC utilized would always be less than the available ITC. Accordingly, in the investigation report also, the ITC proportionate with the sold area on the critical date had been considered by the DGAP. In the impugned period the Respondent had availed ITC and utilized it for payment of outward taxes. The Respondent had also collected GST from the home-buyers without passing on the benefit of additional ITC to them. This was in contravention to Section 171 of the CGST Act, and Rules made therein. The Benefit under Section 171 of the Act has to be passed on at the time of raising the invoices/receipt of advances. In all the investigated cases pertaining to Construction Service, the amount of credit availed was taken instead of credit utilized as the unutilized credit was available for utilization to set off the future tax liabilities. Therefore, the DGAP had conducted his investigation within the scope of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Senthil Constructions 4 TVC Concretes 5 Prem Plumbings Private Limited b. The Occupancy Certificate dated 25.09.2022 issued by the Bangalore Development Authority was also submitted. 9. The Authority has carefully considered the Reports filed by the DGAP, all the submissions and the documents placed on record, and the arguments advanced by the Respondent during the hearing. It is clear from the plain reading of Section 171 (1) that it deals with two situations: - one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. It is observed from the report that the ITC, as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 6.88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, no guidance is required to be provided. The Respondent has gut benefit of ITC, which he is required to pass on to the buyers. It is also submitted that the facts of each case are different so quantum of profiteering is determined by taking into account the particular facts of each case. Hence, there cannot be one-size-fits-all mathematical methodology. A straight jacketed approach is not feasible as the facts of each ease vary substantially. Method of determination of profiteered amount varies from industry to industry. For example, in one real estate project, date of start and completion of the project, price of the house/commercial unit, mode of payment of price, stage of completion of the project, timing of purchase of inputs, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realized before and after the GST implementation would always be different than those of the other project and hence the amount of benefit of additional ETC to he passed on in respect of one project would not be similar to that of another project. Issuance of Occupancy Certificate/ Completion Certificate would also affect the amount of benefit of l IC as no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST regime to the buyers on- property by way of reduced prices/installments. The DGAP in its reply dated 28.03.2022 has elaborately discussed this issue and accordingly, the DGAP following the standard procedure and methodology had compared the ITC to turnover ratios in pre post GST periods in the present case which is rational, logical appropriate in terms of Section 171. Therefore, in view of the above, the contention made by the Respondent regarding ITC being cost cannot be accepted. 10.4 The Authority finds that, the Respondent has also made averment that Anti-Profiteering measure does not to apply to flats sold post introduction of GST. In this regard, it is to mention that the DGAP has investigated the matter of additional benefit of ITC in respect of project which was launched before implementation of GST (pre-GST era) and continued in GST regime. It was done because in the erstwhile tax regime (pre-GST), various taxes and cesses were being levied by the Central Government and the State Governments, which got subsumed in the GST. Out of these taxes, the ITC of some taxes was not allowed in the erstwhile tax regime. In ease of Construction Service, while the ITC of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e.f. 01.01.2020, by inserting Section 171(3A). The Respondent is liable for the imposition of penalty for the period 01.01.2020 to 30.04.2020 under the provisions of the above Section. Further, the facts of each ease are different from every other case. The Respondent has referred to several case laws in support of the contention that penalty was not imposable due to lack of intention to evade payment and also the matter related to interpretation of statute. However, the Authority finds that all referred cases pertain to Central Excise and are not directly relevant to Anti-Profiteering. Further, the provisions of Section 171 and Rules made thereunder are very simple and unambiguous with no scope of wrong interpretation. In view of the above, the case laws relied upon by the Respondent are of no help to him. 11. For the reasons mentioned herein above, the Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP s Report or the methodology adopted. The Authority finds that the Respondent has profiteered by an amount of Rs. 20,57,207/- during the period of investigation i.e. 01.07.2017 to 30.04.2020. The Authority determines an amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. Therefore, the Respondent is liable for the imposition of penalty for the period 01.01.2020 to 30.04.2020 under the provisions of the above Section. Accordingly, a Notice he issued to him 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 ort hint 17. The concerned jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order. It may be ensured that the benefit of ITC has been passed on to each homebuyer as per this Order along with interest @ 18%. In this regard an advertisement of appropriate size to be visible to public at large 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. Shriram Properties Pvt. Ltd., Project- Shriram Summit , Location- Golahalli Electronic City, Bangalore and amount of profiteering Rs. 20,57,207/- so that the concerned home buyers can claim the benefit of ITC if not passed on. Home buyers may also be informed that the detailed NAA Order is available on Authority's website www.naa.gov,in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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