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TMI Blog2022 (8) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case, as Rs.4,52,79,754/- and the same was required to be passed on by the Respondent to their customers/home buyers/recipients. It is also evident from the Report of the DGAP that during the investigation, the Respondent has claimed that he has passed on benefit of ITC amounting to Rs.1,78,71,200/- to the customers/home buyers/recipients. To verify the claim of the Respondent, the DGAP sent e-mails to 177 customers/home buyers/recipients asking them to confirm whether they have received the benefit of ITC as claimed by the Respondent. Out of 177 customers/home buyers/recipients. only 36 customers/home buyers/recipients replied. Out of these 36 customers/home buyers/recipients, only 32 customers/home buyers/recipients confirmed the receipt of benefit of ITC from the Respondent. Hence, the verification of passing on the benefit of additional ITC done by the DGAP is not conclusive and it cannot be confirmed that the Respondent has passed on an amount of Rs.1,78,71,200/- to his customers/home buyers/recipients. Therefore. the profiteered amount required to be passed on to the customers/home buyers/recipients by the Respondent is determined to be Rs.4,52,79,754/-. Penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upporting documents. Further, in terms of the said notice dated 04.08.2020, the Respondent was also given an opportunity to inspect the nonconfidential evidences/information between 18.08.2020 to 20.082020. However, the Respondent did not avail of the said opportunity. 3. The DGAP has submitted that vide e-mail dated 08.10.2020, the Applicant No. 1 was given an opportunity to inspect the nonconfidential documents/reply furnished by the Respondent on 14.10.2020 to 16.10.2020, which the Applicant No. 1 did not avail of. 4. The DGAP has mentioned that the period covered by the current investigation was July, 2017 to July, 2020 and that the time limit to complete the investigation was upto 16.01.2021, 5. The DGAP has repotted that the Respondent submitted his replies to the said notice, vide letters and e-mails dated 26.08.2020, 07,09.2020, 03.102020, 07.10.2020. 15.10.2020 06.11.2020 and 2411.2020. Vide the aforementioned letters/e-mails, the Respondent submitted: i) That he was engaged in the business of construction of residential complexes. ii) That he had units which was allotted/ acquired under Credit Linked Subsidy Scheme. iii) That he had executed project Swa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipients in terms of Section 171 of the Central Goods and Services Tax Act, 2017. 8. The DGAP has also mentioned that the Respondent vide letter dated 07.09.2020, submitted copy of OC dated 28.09.2018, wherein it had been mentioned that the impugned project was Residential Affordable Housing. The Respondent vide reply dated 24.11.2020 submitted that he had sold 24 units under Credit Linked Subsidy Scheme (CLSS) in the FY 2019-20 and 2020-21. The Respondent had also submitted the copies of Certificate issued by the banks to the home buyers, evincing payment of subsidy under CLSS Scheme of Government of India. 9. The DGAP has submitted that the Government of Gujarat, Urban Development and Urban Housing Department, vide Resolution No. AFH/102013/808/Th-I dated 15.01.2014 had specified parameters for affordable housing, which was stated as:- Parameter EWS LIG-1 LIG-2 MIG-1 Carpet area (Sq. mtr.) 25-30 31-40 41-50 51-85 Maximum selling price per unit (that include all costs of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the VAT turnover was not considered for computation of the ITC ratio to taxable turnover for the pre-GST period, as mentioned above. Further post-GST, the Respondent could avail ITC of GST paid on inputs and input services including the sub-contracts. From the information submitted by the Respondent duly verified from the GSTR-1 and GSTR-3B Returns for the period July, 2017 to July, 2020, the details of the ITC availed by him and his taxable turnover for the project Swati Florence during the said periods has been furnished by the DGAP in Table-B below:- Table- B (Amount in Rs.) S.No. Particular Total (Pre-GST) Total (Post-GST) (1) (2) (3) (4) 1 CENVAT of Service Tax paid on Input Services as per ST-3 (A) 92,39,727 - 2 Input Tax Credit of VAT Paid on purchase of Inputs as per VAT Returns (B) - - 3 Total CENVAT /Input Tax credit Available (C) = (A+B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.No. Particulars Pre-GST Post-GST 1 Period A April, 2016 to June, 2017 July, 2017 to July, 2020 2 Output tax rate (%) B 4.5% 12.00% 3 Ratio of CENVAT/Input Tax Credit to Taxable Turnover as per Table C above (%) C 2.31% 8.64% 4 Increase in tax rate post-GST (%) D=12% less 4.5% - 7.5% 5 Increase in input tax credit availed post-GST (%) E=8.64% less 2.31% - 6.33% 6 Analysis of Increase in input tax credit: 7 Base Price collected during July, 2017 to July, 2020 (excluding turnover related to units sold post OC) F 63,86,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs.4,04,28,352/-. The home buyer and unit no. wise break-up of this amount was given in Annex-12 of the report. This amount was inclusive of Rs. 71.031/- which was the profiteered amount in of the Applicant No. 1, mentioned at serial no. 29 of the report. 16. The DGAP has further submitted that the basis of the details of outward supplies of the construction service submitted by the Respondent it was observed that the service had been supplied in the State of Gujarat only. 17. The DGAP has stated that it was pertinent to mention here that the Respondent had claimed that he had passed on the benefit of Rs.1,78,71,200/- to the home buyers. On-going through the home buyers list, it was observed that the cheque was not cleared for 04 home buyers, including the Applicant No. 1, who had not accepted the benefit passed on by the Respondent. Thus, the benefit of Rs.2,36,217/- to these 04 home buyers had not been passed on by the Respondent and hence, this amount was reduced from the total benefit claimed to be passed on by the Respondent. 18. The DGAP has claimed that to substantiate the Respondent claim, the Respondent was asked to provide email addresses of the home b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 217 16275 63,86,76,836 4,52,79,753 1,75,16,110 2,77,63,643 20. The DGAP has also mentioned that as per above Table D , it was also observed that the benefit already passed on by the Respondent was less than what he ought to had passed on in case of 217 residential flats by an amount of Rs.2,77,63,643/-. The details of this amount was given in Annex-12. To support his claim of benefit already passed on, the Respondent had submitted sample copies of 05 agreements sign d by the customers regarding receiving of the benefit. 21. The DGAP has also stated that the basis of above discussions, it was found that the benefit of additional ITC of 6.33% of the taxable turnover had in fact accrued to the Respondent and the same was required to be passed on to the Applicant No. 1 and other recipients. Thus, the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017 in as much as the additional benefit of ITC @ 6.33% of the base price received by the Respondent during the period 01.07.2017 to 31.07.2020, had not been passed on to the Applicant No. 1 and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 @ 2.80%. b. That while calculating the profiteered amount, the DGAP has not considered the Cess on Service Tax amounting to Rs. Rs.3,00,902/- in the pre-GST period. Considering the above fact, the Ratio of CENVAT to turnover would increase from 2.31% to 2.38% and profiteering may reduce from 6.33% to 6.26%. Further, the DGAP has also accepted the above and reduced the profiteering ratio from 6.33% to 6.26% in their letter dated 12.02.2021. c. That internally he has calculated that an amount of Rs.1,80,71,648/- was the benefit of ITC required to be passed on to homebuyers and that he had passed on the above amount to his homebuyers except the 4 buyers who denied to accept the benefit. d. That as per his calculations, there were variation of figures while comparing the same with the calculation done by the DGAP and the same has been illustrated in the Table mentioned below:- Sl. No. Particulars As per DGAP As per Swati Realty Difference 1 CENVAT credit of Service Tax Paid on Input Services as per ST-3 (A) 95,40,629 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up Area, Super Built-up Area (also known as Common Area), Among these words. Carpet area and Common areas are defined in Real Estate (Regulation and Development) Act, 2016, which are reproduced below:- carpet area means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment. Explanation:- For the purpose of this clause, the expression exclusive balcony or verandah area means the area of the balcony or verandah, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and exclusive open terrace area means the area of open terrace which is appurtenant to the net usable floor area of an apartment. meant for the exclusive use of the allottee; common areas mean - i. the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase; ii. the staircases, lifts, staircase and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount executed by the Respondent is provided in the Table mentioned below:- S. No. Particulars Pre GST Post GST 1 CENVAT credit of service Tax Paid on Input Services as per ST-3(A) 16,489,728 - 2 Input tax credit of VAT Paid on Purchase of Input as per VAT returns (B) - - 3 Total CENVAT/Input Tax Credit (pre-GST) C=A+B 16,489,728 - 4 ITC Availed of GST availed as per GST Returns-D - 67,388,672 5 Total Taxable Turnover as per homebuyer list (excluding turnover related to units sold post OC) (E) 196,404,028 638,678,536 6 Lees : units Cancelled (F) - - 7 Net Taxable Demands (G) 196,404,028 638,678,536 8 Tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (Inc. GST) L=H-K 16,452,359 24. Clarifications under Rule 133(2A) of the CGST Rules, 2017 were also sought from the DGAP on the submissions dated 21.01.2021 and 25.03.2021 filed by the Respondent. The DGAP has filed his clarifications dated 12.02.2021 and 11.06.2021 vide which he has stated:- a. That the details/data has been collated from the statutory documents/ information submitted by the Respondent. However, on re-verification it was found that the amount of Cess on S. Tax has not been added in the pre-GST period which is Rs.3,00,902/-. Considering the above fact, the Ratio of CENVAT to turnover would increase from 2.31% to 2.38% and profiteering may reduce from 6.33% to 6.26%. b. That the main focus for the calculation of profiteering is to pass on the additional benefit of ITC accrued to the Respondent and the profiteering, if any, is determined at a point of time when demand is raised from the customer, and benefits of additional ITC as available should be passed on to the customers at that point itself c. That there has been no comparison of periods for calculation of profiteering. The whole purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes got subsumed in the GST and the input tax credit of GST is available in respect of all goods and services, unless specifically denied. The method adopted is to find out the ratio of CENVAT/ITC to taxable turnover in the pre-GST era as well as post-GST era, which is nothing but an exercise to find out the accrual of additional amount of ITC. if any, in the post-GST era h. That as per Rule 126 of the CGST Rules, 2017, this Authority has been empowered to determine the methodology and procedure for determination as to whether the reduction in the rate of tax or the benefit of ITC has been passed on by the registered person to the recipients by way of commensurate reduction in prices. i. That the Authority in exercise of power delegated to it under the Rule 126 has notified the Methodology Procedure vide Notification dated 28.03.2018 which is also available on the website. However, it is submitted that no fixed/uniform mathematical methodology can be determined for all the cases of profiteering as the facts and circumstances of each case as well as the nature of goods or services supplied in each case differ. Therefore. the determination of the profiteered amount has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the home buyer list, as submitted by the Respondent during the investigation. In the homebuyer list, size for each flat is mentioned as 75 Sq. Mt. and the same was considered for calculation of profiteering. Hence, there was no error in calculation of area of the project. Therefore, the contention of the Respondent was not acceptable. n. Further, from the perusal of details given by the Respondent, it is observed that the entire exercise taken by the Respondent is to increase the ratio of turnover and CENVAT in pre-GST and to decrease the ratio of turnover and CENVAT in post GST period. To achieve this goal, they have given a new range of area of fiats varying between 79.78 sq. mt. to 79.96 sq. mt. The DGAP has calculated the profiteering as given by the Respondent and has been kept as same in pre and post GST era. o. That as per the home buyer list submitted by the Respondent, the saleable area was mentioned as 75 sq. mt. The Respondent had not made any submission regarding different areas of a flat during the investigation. Those are the new facts submitted by the Respondent The saleable area mentioned in the home buyer list was considered for calculation of profiteer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submissions dated 6.04.2022, 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. 29. On this issue it has been reported by the DGAP as tabulated above 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 2.31% and during tie post-GST period (July-2017 to July-2020), it was 8.64%. Hence, according to the DGAP, post-CST. the Respondent has been benefited from additional ITC to the tune of 6.33% [8.64% (-) 2.31%] of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. Therefore, the amount of ITC benefit to be passed on to all the flat/shop buyers/customers is Rs. 4,52,79,754/-. 30. The Respondent has contended that while calculating the profiteered amount, the DGAP has not considered the CENVAT Credit of VAT amounting to Rs.69,49,098/- availed by him in his TRAN-1 Returns. The Respondent has also submitted a copy of the TRAN-1 Returns filed by him. With regard to the above contention, this Authority finds that whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f additional ITC required to be passed on by any Construction Services provided to his customers/home buyers/recipients. Hence, if 'Built-up Area' is considered in place of 'Carpet Area', we would arrive at incorrect amount of profiteering. Hence, the above contention of the Respondent is not correct and cannot be accepted. 32. It has also been contended by the Respondent that the DGAP has adopted incorrect figures of Area Sold Relevant to Turnover in the pre and post GST period as 9.750 sq. mt and 16,275 sq, mt. respectively, whereas as per his calculations, it should have been 9,958 sq. mt. and 16.559 sq. mt. respectively. With respect to the above contention of the Respondent, we find that the DGAP has taken the figures of the Area Sold Relevant to Turnover' from the data provided by the Respondent during the investigation. Hence, the same has been taken from the home buyers list provided by the Respondent. Any such claim regarding the incorrect figures of Area Sold Relevant to Turnover is an afterthought and cannot be considered. Hence, the above contention of the Respondent is not tenable. 33. The Respondent has argued that while calculating the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there 34. The Respondent has also submitted his own calculations and arrived at profiteered amount of Rs.1,64,52,359/-. The above profiteered amount was arrived at by including the CENVAT/ITC of VAT amounting to Rs.69,49,098/- and considering the Build-up Area of 39,599.57 sq. mt. as the Total Saleable Area in place of the Area of 19,875 sq. mt. considered from the homebuyers list. In this regard, this Authority finds that the above profiteered amount calculated by the Respondent is incorrect as the inclusion of the CENVAT Credit of VAT amounting to Rs. 69,49,098/- is not possible as the Respondent has not produced any VAT Return/VAT Assessment Order evidencing that he was eligible to avail the above credit of VAT. Further, the exact quantum of profiteering cannot be computed by considering the Build-up Area in place of the Area from the homebuyers list. Hence, the calculations to arrive at profiteering amount carried out by the Respondent is not correct and cannot be accepted as discussed in paras above. 35. Hence, the Authority finds no reason to differ from the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. 38. This Authority under Rule 133 (3) (a) of the CGST Rules. 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the customers/home buyers/recipients commensurate with the benefit of ITC received by him as has been detailed above. 39. The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs.4,52,79,754/-. 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 provisions of Rule 133 (3) (b) of the CGST Rules 2017. 40. We also order that the profiteering amount of Rs. 4,52,79,754/- along with the interest @ 18%. from the date of receiving of profiteered amount from the customers/home buyers/recipients till the date of passing the benefit of ITC/profiteered amount: shall be paid/passed on by the Respondent within a period of 3 months from the date receipt of this order failing which it shall be recovered as per the provisions of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those prescribed under Rule 133(1) of the CGST Rules, 2017, as is clear from the said Order which states as follows:- A period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. Further, the Hon ble Supreme Court, vide its subsequent order dated 10.01.2022 has extended the period(s) of limitation till 28.02.2022 and the relevant portion of the said order is as follows:- The Order dated 23.03.2020 is restored and in continuation of the subsequent Orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall excluded for the purposes of limitation as may be prescribed under any general of special laws in respect of all judicial or quasi-judicial proceedings. Accordingly this Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. 46. Copy of this order be sent, free of cost to the Applicant No. 1, the DGAP. the Respondent, Commissioners CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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