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TMI Blog2022 (8) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... GST period (July-2017 to April-2024 It was 13.52% for the project Axis Vedam''. This confirms that. post-GST. the Respondent has been benefited from additional ITC to the tune of 12.36% [13.52% (-) 1.17%] of his turnover for the said project 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 the customers/flat buyers/recipients as Rs. 40,94,480/- for the project 'Axis Vedam . the details of which are mentioned in Table- B - the profiteering amount of Rs. 40.94,480/- is with respect to 21 customers/flat buyers/recipients amongst all the customers as on 30.04.2020 in the project 'Axis Vedam . The list of 21 customers/flat buyers/recipients has been attached as Annexure 'A' with this Order, containing the details of the amount of benefit of ITC to be passed on in respect of the project Axis Vedam of the Respondent. Interest - HELD THAT:- The Respondent is liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 40,94,480/- for the project Axis Vedam . Hence the Respondent is directed to also pass on interest @18% to the customers/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable to Respondent should have been apportioned against the instalments towards the price of the fiat. The Karnataka State Screening Committee forwarded the said application with its recommendation, to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the Rules ii. The aforesaid reference had been examined by the Standing Committee on Anti-profiteering, the minutes of which were received by the DGAP on 06.05.2020. iii. The Applicant No. 1 had submitted along with application the copy of demand letters issued to him, both pre- ST and post-GST. iv. The Applicant No. 1 had booked a Flat No. 103 in the Respondent's project Axis Vedam , for which Agreement for Sale, Construction Agreement Customization Supplementary Agreement, all three were executed on 10.06.2016, in the pre-GST period. v. On receipt of the said reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the CGST Rules, 2017 had been issued by the DGAP on 02.06.2020, calling upon the Respondent to reply as to whether the Respondent admitted that the benefit of ITC had not been passed on to the recipients by way of commensurate reduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforementioned Ietters/e-mails, the Respondent submitted the following documents/information: a. Copies of GSTR-1 returns for the period July, 2017 to April, 2020 b. Copies of GSTR-3B returns for the period July, 2017 to April, 2020. c. Copy of Electronic Credit Ledger for the period 01.07.2017 to 30.04 2020 d. Copies of Tran-1 for the period July, 2017 to December, 2017. e. Copies of VAT ST-3 returns for the period April. 2016 to June, 2017. f. Copies of all demand letters. sale agreement/contract issued in the name of the Applicant No 1 g. CENVAT/Input Tax Credit register for the period April, 2016 to April, 2020. h. Copy of Balance Sheet for FY 2016-17 2017-18. i. Tax rates, pre-GST and post-GST. j. Details of turnover, output tax liability/GST payable and ITC availed and his reconciliation with the turnover as per the list of home-buyers. k. List of home buyers in the project Axis Vedam . xi. The Respondent vide e-mail dated 23.01.2021 has submitted that the information shared, documents and data submitted were confidential in nature and accordingly the same had been treated as confidential in terms of Rule 130 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proportionate additional ITC available to him post-GST. xiv. In response to the notice of initiation of investigation dated 01.06.2020 and subsequent reminders, the Respondent vide his submission dated 21.11.2020 provided the details of turnover and CENVAT credit /ITC availed for all the projects as mandated under erstwhile CENVAT Credit Rules 2004, present CGST Rules, 2017. The Respondent vide his submission dated 02.09.2020 further submitted that the provisions of the RERA Act. 2016 were not applicable to the subject project and accordingly, he had not obtained RERA registration for the same. xv. From the above, it was clear that the credit on input services was admissible to the Respondent under Rule 20) of the Cenvat Credit Rules 2004. which was utilized to pay service tax. Further, the Respondent vide e-mail dated 01.12.2020 submitted that he had opted for composition schemeand hence had not claimed any input credit, under VAT. The fact of non-availment of input credit. under VAT was corroborated by his VAT Returns. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Ratio of ITC Post-GST [(I)=(H)/(E)*100] 1.17% 13.52% *The calculation above. was based on the home-buyers demand data submitted by the Respondent vide email dated 01.12.2020. The OC of the project was issued on 14.11.2017, as such the Respondent has not fired the option to be filled under notification 3/2019, effective from 01/04/2019 for on-going project. xvii From the above table-'A', it was clear 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 1.17% and during the post-GST period (July, 2017 to April, 2020), it was 13.52% This clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 12.36% [13.52% (-)1.17%] of the turnover for the project Axis Vedam . xviii. It was also observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service (after one third abatement towards value of land, effective GST rate was 12% on the gross value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST @12% J = I*B 31,10,612 12. Commensurate demand price K = I+J 2,90.32,378 13. Excess Collection of Demand or Profiteering Amount (in Rs.) L=H-K 40,94,480 xx. From table- 'B' above, it was clear that the additional ITC of 12.36% of the turnover should have resulted in commensurate reduction in the basic price as well as cum-tax price for the home-buyers of the project Axis Vedam . Therefore, in terms of Section 171 of the CGST Act, 2017, the Respondent has not reduced the basic prices for the buyers of this project commensurate to the additional benefits accrued and this benefit of the additional ITC was required to be passed on by the Respondent to the recipients. In other words, by not reducing the pre-GST basic price on account of additional benefit of ITC and charging GST @12% on the pre-GST basic price. the Respondent appeared to have contravened the provisions of Section 171 of the of the CGST Act, 2017. xxi. Having established the fact of profiteering, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identifiable as the Respondent had provided their names and addresses along with unit no. allotted to them. As aforementioned, the present investigation covered the period from 01.07.2017 to 30.04.2020. However, as the project was issued Occupancy Certificate and there was no balance amount to be paid by the allottees, the verification of element of profiteering was completed. Further, as regards the 21 units allotted to land owner developer. It has been mentioned in the agreement itself that the said units would be handed over to the rand owner developer on completion of construction and the same has been confirmed in his e-mail dated 23.01.2021 and also the documents submitted by the Respondent vide e-mails dated 28 01.2021. It was also confirmed by the Respondent in the said e-mail that he had not collected any GST from the land owner developer and also had not paid the GST on the land owner share in view of the matter pending before Hon ble Supreme Court. ii. In view of the aforementioned findings, it appeared that the provisions of Section 171(1) of the CGST Act, 2017, requiring that any reduction in rate of tax on any supply of goods or services or the benefit of ITC sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication as having no merits. v. That he objected to the methodology adopted by the DGAP in computing the benefit of ITC as it had not in accordance with the provisions of Section 171 of CGST Act, 2017. The Respondent submitted that Section 171. does not define what was the meaning of the term benefit of Input Tax Credits and in what circumstances and how to compute the same. In the absence of such prescription in taw, adoption of certain method without establishing the correctness of it thorough authority or guidelines by Parliament or Government was not legal and proper It was well settled principle in law that if the valuation/quantification was not clear the levy itself failed. In this regard reliance had placed on the decision of Hon'ble Supreme Court in the case of - a. CIT v. B.C. Srinivasa Setty (1981) 2 SCC 460 b. Commissioner of C Ex. Cus,, Kerala vs Larsen Toubro Ltd. 2015 (039) STR 0913 S.C. vi. That without prejudice to the foregoing, the Respondents submitted that in the absence of any prescribed methodology prescribed by law, adoption of any particular method without explaining the theory and purpose beyond it and also explaining legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .50% 4.50% 4 ITC Post-GST Rs. 50 Rs. 50 Rs. 50 5 Revenue accured/realized Pre-GST Rs. 600 Rs. 700 Rs. 800 6 % of ITC to Revenue - Post -GST 8.33% 1.14% 6.25% 7 Difference in ITC % 3.83% 1.14% - 2.75% From the above table it could be seen that though the cost and ITC remained same, due to the fact that revenue was varying due to various factors like collection was based on milestone. Further the buyers pay belatedly even after completion of the milestone and not exactly on milestone, expenses incurred but milestone not yet achieved etc.. Therefore the percentage of ITC/CENVAT Credit to sales was not the proper method of computation of excess credit if any; b. The ITC was dependent upon the type of expenditure incurred during the relevant period. The ideal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no additional benefit accruing to the Respondent. f. There were anomalies in the workings as explained above which require to be changed. 6. Copy of the above submissions dated 08.03,2021 received on 15.03.2021 filed by the Respondent was supplied to the DGAP for clarifications under Rule 133(2A) of the CGST Rules. 2017. The DGAP filed his clarifications dated 24.03.2021 vide which the DGAP has clarified:- i. That Section 171(1) of CGST Act, 2017 which governed the anti-profiteering provisions under GST states that 'Any reduction in the rate of tax reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices . Accordingly, the Respondent at the first instance should have reduced the basic price commensurate to reduction in the rate of tax and should have passed on the benefit to the recipients as envisaged under sub-section 1 of Section 171 of the CGST Act. 2017. However, it was observed that the Respondent has not complied with the provisions of law discussed supra and has collected more than what was due. By doing so, the Respondent has defeated the very objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Orders passed from time to time. Similar methodology has been followed in all the cases in the past, which have been upheld by the Authority. 7. Further, the DGAP's clarification dated 24.03.2021 has been supplied to the Respondent and the Applicant No. 1 to file their rejoinder. The Respondent vide letter dated 08,07 2021 has submitted his rejoinder against DGAP's clarifications wherein he has reiterated his earlier submissions dated 08.03.2021. 8. The proceedings in the matter could not be completed by the Authority due to lack of required quorum of Members in the Authority during the period 29.04.2021 till 23.02.2022 and the minimum quorum was restored only w.e.f. 23.02.2022, In the present case, both the Respondent and the Applicant No. 1 were given many opportunities i.e. on 28.04.2022, 13.05.2022 and 10.06.2022 for personal hearing. Both the Applicant No. 1 and the Respondent did not avail the same. However, the Respondent vide letter dated 09.06.2022 has requested to consider his earlier written submissions dated 08.03.2021 and 08.07.2021 and sought exemption from personal hearing. 9. This Authority has carefully considered the Report furnished by the DGAP, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r scarce and precious tax revenue, It also provides that the above benefits are to be passed on any supply i.e. on each product or unit of construction or service to every buyer and in case they are not passed on, the quantum of denial of these benefits or the profiteered amount has to be computed for which investigation has to be conducted 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 prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntation 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. Therefore, no set procedure or mathematical methodology can be framed for 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x has to be passed on to the recipients by way of reduction in prices. Based on the above Explanation there is no doubt on the definition of profiteering which has been duly incorporated in the CGST Act, 2017 and hence the above contention of the Respondent is incorrect and the interpretation given by the Respondent is wrong. 12. The Respondent submitted that the methodology adopted in the Report for ascertaining the increase in credit is not acceptable. The availment of ITC/CENVAT credit is essentially linked to the expenditure incurred or to be incurred and not linked to the revenue. Adopting the percentage of credit to revenue without considering the expenditure incurred is improper. The ITC is dependent upon the type of expenditure incurred during the relevant period. The ideal way for computation of differential credit post GST from that of pre GST, would have been based on cost and not based on revenue. Therefore, the methodology adopted is not appropriate. in relation to this submission. 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent from his recipients. 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 only 1.17% and during the post-GST period (July-2017 to April-2020), it was 13.52% for the project Axis Vedam . This confirms that, post-GST. the Respondent has been benefited from additional ITC to the tune of 12.36% [13.52% (-) 1.17%] of his turnover for the said project. A comparison of the GST amounts in Row no 8 and 11 of Table B supra shows that the Respondent has charged and collected an additional Rs. 4,38,694/- as GST which is required to be returned by him to his homebuyers/customers/recipients and such amount is included on the said total amount of Rs. 40,94,480/-. Hence, this contention of the Respondent is not tenable. 15. It is clear from a 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; h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP's Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 30.04 2020. in the instant case, as Rs. 40,94,480/- for the Project Axis Vedam . 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 customers/flat buyers/recipients commensurate with the benefit of ITC received by him as has been detailed above. 18. The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 40,94,480/- for the project Axis Vedam . 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 of passing on/payment, as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017. 19. This Authority also orders that the profiteering amount of Rs. 40,94,480/- for the project Axis Vedam along with the interest @ 18% from the date of receiving of the profiteered amount from the customers/flat buyers/recipients till the date of passing the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Order along with interest @ 18% as prescribed. if not already paid, 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 Axis Concept Construction Pvt. Ltd., Project- Axis Vedam , Location- Bangalore, Karnataka and amount of profiteering i e. Rs.. 40,94,480/- so that the concerned homebuyers/customers/recipients can claim the benefit of ITC if not passed on, Homebuyers / customers/recipients 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 Commissioner may also be advertised through the said advertisement. 23. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of this Order to this Authority and the DGAP within a period of 4 months from the date of receipt of this Order. 24. Further, the Hon'ble Supreme Court, vide its Order dated 23.03,2020 in Suo Moto Writ Petition (C) no. 3/2020, while taking suo-moto cognizance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 223,066,14 6. Mrs. Jayasharma Mr. Vivek Kumar 107 113,738.50 7. Mr. Birendra Jha Mrs Mamta Ala 109 118,093.71 8. Mr. G K Venkatesh 201 7,360.15 9. Mr. Bablu Dutt K 203 42,313.54 10. Mr. Ravi Karthik Ramesh 206 128,276.21 11. Mr. R Ramanathan 207 93,808.44 12. Mr. Ajoy Saha Mrs. Saheli Saha 209 846.93 13. Ms. Kavitha Chander 210 988,799.84 14. Mr. Mithun Vashist 303 73,570.38 15. Mr. Sebin Jhony 305 58.816.71 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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