9911796707
TMI Blog2022 (9) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase of a flat in the Respondent's project "Bhagwati Eminence", situated at Plot 7/7A, Sector-13, Nerul, Navi Mumbai. The Applicant No. 1 alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price against payments due to him. The Applicant No. 1 also stated that on raising concern to the Respondent, he was informed that already a discount of 3% had been given to him on the 12% GST and remaining 4% of the ITC will be used by the promoters without passing it on to the customers on the reasoning that GST ITC refunds process was unclear, complex and uncertain. Further, on being asked about who keeps the remaining part of ITC after the 3% discount given to the customer from the 12% GST, the Applicant No. 1 received the following reply vide email dated 06.07.2019 which reads as "Before 31/03/2019 builder has already paid 12% on the due amount so obviously the amount goes to the government tax." The Applicant No. 1 submitted the following documents along with his application: (a) E-mails of correspondence with Respondent requesting to pass on the benefit of input tax credit. (b) Copy of Dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Tax Act, 2017 wherein it was provided that: "any time limit for completion or compliance of any action, by any authority, has been specified in, or prescribed or notified under section 171 of the said Act, which falls during the period from the 20th day of March, 2020 to the 29th day of November, 2020, and where completion or compliance of such action has not been made within such time, then, the time-limit for completion or compliance of such action, shall be extended up to the 30th day of November, 2020." 7. The Respondent even after several reminders and summons had not furnished all the required documents/information to DGAP to investigate the matter. Therefore, the DGAP vide letters dated 06.07.2020, 03.09.2020 and 07.09.2020 had requested the Jurisdictional CGST authorities to deploy an officer to collect requisite documents from the Respondent and forward the same to him to investigate the matter under section 171 of the CGST Act 2017. Accordingly, the aforesaid authorities had collected the documents as sought by DGAP, from the Respondent by visiting his premises and forwarded to the DGAP for necessary action. 8. The aforesaid documents of the Respondent has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity payable and input tax credit availed for the project "Bhagwati Eminence". (m) List of home buyers in the project "Bhagwati Eminence" reconciling with ST-3/GSTR-3B returns., and no information/documents was classified by the Respondent as confidential in terms of Rule 130 of the Rules 2017. 10. The DGAP had scrutinized the submissions/replies of the Respondent, Applicant No. 1 and the documents/evidences on record and submitted his Investigation Report dated 04.112020 to this Authority, wherein the DGAP has inter alia stated that:- (i). The main issues for determination were:- * Whether there was benefit of reduction in the rate of tax or input tax credit on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017 and if so. * Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. (ii). The Respondent had claimed CENVAT Credit of Rs. 3,58,20,322/- towards amount paid for one time lease premium for plot allotted to him through auction by CIDCO. In this regard, as per Rule 2 (1) of the CENVAT Credit Rules, 2004, 'input service' is any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input tax credit pertaining to the residential units and commercial shops which are under construction but not sold is provisional input tax credit which may be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the completion certificate, in terms of Section 17(2) & Section 17(3) of the Central Goods and Services Tax Act, 2017, which read as under:- Section 17 (2) "Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies". Section 17 (3) "The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Therefore, the input tax credit pertaining to the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 31/3/19 builder has already paid 12% on the due amount so obviously the amount goes to govt. tax." However, as mentioned, the Respondent has discharged his output liability @ 8% GST (along with 1/3rd abatement for land value), resulting into the short payment of tax. (vi). As per the demand letters & payment receipts submitted by the Applicant No. 1, the Respondent had collected 9% net GST (after giving 3% GST discount from 12%) from him and discharged the output effective GST @ 8% on the Applicant No. 1 's unit. Therefore, the Respondent appeared to have contravened the provisions of Section 76 of the Central Goods and Services Tax Act, 2017 Tax collected but not paid to Government which reads as "(1) Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .51% *Note: Excluding CENVAT Credit of Rs. 3,58,20,322/- towards Service tax paid to CIDCO as discussed in para 10 (ii) supra. (ix). In view of the above Table-'A', it is clear that the input tax credit as a percentage of the turnover during the pre- GST period (April, 2016 to June, 2017) and the post- GST period (July, 2017 to September, 2019), were 0.07% and 2.51% respectively were available to the Respondent which confirms that the Respondent had benefited from additional input tax credit to the tune of 2.44% (2.51% - 0.07%) of the turnover. Accordingly, the profiteering was examined by comparing the applicable tax rate and input tax credit available in the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.50% and VAT@ 1% were payable (total tax rate of 5.50%) with the post-GST period (July, 2017 to September, 2019) when the effective GST rate was 12% (GST @18% along with 1/3rd abatement for land value) on construction service, vide Notification No.11/2017-Central Tax (Rate), dated 28.06.2017. Accordingly, on the basis of the figures contained in table-'A' above, the comparative figures of the ratio of input tax credit availed/available to the turnover in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4% of the turnover, has accrued to the Respondent in post-GST and the same was required to be passed on by the him to the respective recipients. On this account, the Respondent is required to pass on the benefit of input tax credit amounting to Rs. 1,56,77,149/- to the Applicant No. 1 and 70 recipients other than Applicant No. 1 who are identifiable as per the documents provided by the Respondent. Therefore, this amount of Rs. 1,56,77,149/- is required to be returned to such recipients. (xiv). As the present investigation covers the period from 01.07.2017 to 30.09.2019 hence profiteering, if any, for the period post September, 2019, has not been examined as the exact quantum of input tax credit that will be available to the Respondent in future cannot be determined at this stage, when he is continuing in availing input tax credit in respect to the present project. (xv). In view of the above findings, the Section 171(1) of the Central Goods and Services Tax Act, 2017, requiring 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", has been contraven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade available to him the application filed by the Applicant No, 1 which could be a fake, motivated and malafide complaint, for verification nor examined the such applicant. Therefore entire proceeding is bad in law. * Denial of Cenvat Credit of Rs. 3,58,20,322/- towards service tax paid to CIDCO is incorrect and bad in law:- (a) The DGAP has excluded the Cenvat credit of Rs. 3,58,20,322/- while calculating the total credit availed by him (the Respondent) on the amount paid to CIDCO towards one lease premium on allotment of plot for the impugned project. (b) The DGAP has held that Service tax paid on lease premium was for procurement of land which is an immovable property, could not be treated as output service and further as per Section 17 (5) of the CGST Act 2017, ITC could not be claimed in respect of goods and services or both used by a taxable person for construction of immovable property. Therefore Service tax of Rs. 3,58,30,322/- paid by him, had not been considered while computing profiteering. Whereas DGAP has no jurisdiction to decide the eligibility of credit claimed under Service Tax Law. The denial of credit of Service Tax on allegation of non-taxability is beyo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culated. (d) The present Report of the DGAP presumed that no change in cost and rate of tax on inputs has occurred. The present Report had not led in any evidence in support its allegations. (vii). In terms of Section 17 (2) and 17 (3) of the CGST Act 2017, he was required to reverse the proportionate credit to the extent of flats sold after receipt of Completion Certificate and the same would be considered implication on the credit availed by him. Hence the actual benefit could be determined only at the stage of the receipt of Completion Certificate. (viii). The value of certain flats which were cancelled in post-GST, had been taken in turnover during calculation of benefit. The value of such flats sold in pre GST period, must be reduced from pre-GST turnover. (ix). The ITC availed by him in the Form GSTR-3B should be considered while computing benefit. (x). The availment of additional ITC did not conclude the accrual of additional benefit which depends upon various factors such as increase in cost or increase of rate of tax on inputs. Therefore, the computation of benefit derived on basis of comparing the ratio of ITC/Cenvat credit availed in pre and post-GST was incorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Act, 2017. (iii). Upon the contention mentioned at para 11 (iii) supra:- The above said Report dated 04.11.2020 submitted by the DG, DGAP in terms of Rule 129 (6) of the CGST Rules 2017, who is the proper officer in terms of Section 2 (91) of the CGST Act 2017 read with Section 3 of the said Act which inter alia includes Director General of Central Tax under clause (b). Further, the DGAP had submitted his finding/observations vide his aforesaid Report made during the investigation, he had not adjudicated the matter under section 73/74 of the CGST Act, 2017 as alleged by the Respondent. (iv). Upon the contention mentioned at para 11 (iv) supra:- The Respondent was afforded an opportunity to inspect the non-confidential evidences/information during the period from 24.10.2022 to 25.10.2022 but he had not availed the said opportunity. The said fact is duly mentioned at para 4 of above said DGAP's Report dated 04.11.2020. Further, the denial of claim for Cenvat credit of Rs.3,58,20,322/- towards Service Tax paid to CIDCO by the Respondent, DGAP has already covered vide para 17 of its aforesaid Report dated 04.11.2020 which is placed at paragraph 10 (ii) supra wherein it is clar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the unsold units was outside the ambit of the investigation and the respondent is required to recalibrated the selling price of such units to be sold the prospective buyers by considering the net benefit of additional input tax credit available to him post GST as per CGST Act 2017 and Rules made thereunder. Therefore the proportionate credit of GST on expenses incurred attributable to such unsold units was outside the scope of investigation. the DGAP had computed the benefit of ITC on the area sold and turnover received on such area. DGAP had neither computed the benefit on the unsold area nor the Respondent was asked to pass on the benefit on the unsold area and hence the ITC relevant to such area would remain intact with the Respondent which he can reverse at the time of receipt of CC. Hence the above contention of the Respondent is incorrect. (viii). Upon the contention mentioned at para 11 (viii) supra:- The value of flats cancelled in pre GST regime had been factored while making the final calculation by DGAP as mentioned in Table -A at para 10 (viii) supra. Therefore, the contention raised by the Respondent is wrong and hence denied. (ix). Upon the contention menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GAP, have been supplied to the Respondent as well as the Applicant No. 1 for their consolidated submissions on it. Accordingly the Respondent vide letters dated 02.04.2021 and 09.04.2021 has submitted his replies on the above said clarifications of the DGAP wherein the Respondent reiterating his previous arguments made vide his letter dated 10.02.2021, has stated that he had paid the GST @12% to the Government for the entire project and it is immaterial whether he had charged @8%/9% or 12% from the flat buyers. 14. The above said replies of the Respondent, were forwarded to the DGAP for clarifications under Rule 133 (2A) of the CGST Rules 2017. The DGAP vide his letter dated 28.06.2021 has submitted his clarifications stating that the issue of collection of 9% GST from buyers and discharge of 8%/12% GST to the Governments by the Respondent has already been dealt vide paras 19 to 22 of Report dated 04.11.2020 by the DGAP. Furthermore, the Respondent vide e-mail dated 23.09.2020 furnished the reconciliation of turnover as per list of home buyers and GSTR-3B for the period July, 2017 to September, 2019. The summary is given in Table-'A' mentioned at para 10 (viii) above. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,838 - 17,43,950 17,43,950 34,87,901 12.00% 27 Sep-19 131,78,073 - 7,90,684 7,90,684 15,81,369 12.00% TOTAL 5776,43,318 - 306,50,137 306,50,137 613,00,275 10.61% Therefore, the submission of the Respondent as he had paid 12% GST to the Government for the entire project is frivolous, misleading and incorrect. 15. In the interest of natural justice, hearing on 27.07.2022 was granted to the interested parties wherein the Respondent and Applicant No. 1 have re-iterated their arguments made by them vide their earlier submissions which are already been taken on record. 16. The Authority has carefully considered the Reports of the DGAP, the submissions filed by the Respondent, Applicant No. 1 and the other material placed on record including submissions made during hearings. The Authority finds that the Applicant No. 1 had filed a complaint against Respondent alleging that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price on the purchase a flat in the "Bhagwati Eminence" Project which was executed by the Respondent at Nerul, in Navi Mumbai. The said complaint was examined by the Standing Committee on Anti-Prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im for the period April 2016 to June 2017 and July 2017 to September 2019 respectively. Since, the ratios calculated by the DGAP are based on the factual record submitted by the Respondent; hence they can be relied upon while computing the profiteered amount. 18. The additional benefit of ITC availed by the Respondent during the period July 2017 to September 2019 which was required to be passed on to his flat/shop buyers, has been correctly calculated by the DGAP which is based on the factual records/information furnished by the Respondent, and according to the Methodology which has been approved by this Authority in all the cases where benefit of ITC, is required to be passed on under the provisions of Section 171 of the CGST Act, 2017. 19. The Respondents in their written submissions and during the course of the personal hearing has argued that he has already passed on 3% of GST by charging 9% instead of prescribed rate of 12% GST, to the Applicant No. 1 whereas it is observed that the Respondent had collected 9% GST from the Applicant No. 1 but discharged only 8% GST to the Government exchequer on the Applicant No. 1's flat. Moreover, as per the details of GSTR-3B (as mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration the provisions of the law and the submissions made by the Respondents, the issues to be decided are as under:- i. Whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent on implementation of GST w.e.f. 01.07.2017 and if so, ii. Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. 21. In view of the above facts and findings discussed in the earlier paras, the Authority determines that the Respondent has realized an additional amount of Rs. 1,56,77,149/- which includes both the profiteered amount @ 2.44% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 71 home buyers/shop buyers/ recipients of supply including Applicant No. 1 during the period from 01.07.2017 to 30.09.2019 which was required to be passed on the eligible home buyers of his impugned project. The details of eligible home buyers/shop buyers/ recipients of supply to whom supply has been made by Respondent in the impugned Project and from whom additional amount on account of benefit of ITC had been realized by the Respondent during the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner may also be advertised through the said advertisement. A report in compliance of this Order shall be submitted to this Authority and the DGAP by the Commissioners CGST /SGST within a period of 4 months from the date of receipt of this Order. 25. For the reasons mentioned hereinabove and in the given facts and circumstances and also stated position of law we find that the Respondent has denied the benefit of ITC to the buyers of his flats/customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 30.09.2019, and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.09.2019. Hence, the said penalty under Section 171 (3A) cannot be imposed on the Respondent retrospectively i.e. with respect to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
