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TMI Blog2022 (9) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... etails of such additional amount is given in Annexure- A to this Order. Since, all the home buyers/shop buyers/ recipients of supply are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the profiteered amount along with the interest @ 18% per annum (from the dates from which the said profiteered amount was collected by him from each of them till the date such amount is passed on/returned/refunded), if not already passed on / returned / refunded, within a period of 3 months from the date of passing of this Order as per the details mentioned in Annexure- A , failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017 - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondents shall reduce the prices to be realized from the home buyers/shop buyers/ recipients of supply in the above Project commensurate with the benefit of ITC received by him. Penalty - HELD 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 Demand Letters and receipts. 2. On receipt of the aforesaid reference from the Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit 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 summed up by the DGAP as under:- (a) He is a partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r . Thus, the 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 cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bhagwati Infra informed that Before 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,618 4. Total CENVAT/lnput Tax Credit Available (D)=(A+B) or (C) 1,67,625 28,851 1,96,476 1,80,61,618 5. Total Turnover as per list of Home Buyers (Net of Cancellation) (E) 4,00,65,553 68,40,053 4,69,05,606 57,36,66160 6. Total Saleable Area (in Sq. mtr.) (F) 4,812 4,812 7. Total Sold Area (in Sq. mtr.) relevant to turnover (G) 747 3,842 8. Relevant ITC [(H)=(D)*(G)/(F)) 30,503 1,44,20,660 9. Ratio of CENVAT/ Input Tax Credit [(I) -- (H)/(E)] 0.07% 2.51% *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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Recalibrated Base Price H=(E)*(1-D) or 97.56% of (E) 55,96,68,705 10. GST @ 12% I=H*12% 6,71,60,245 11. Commensurate demand price J=H+I 62,68,28,950 12. Excess Collection of Demand or Profiteering Amount K=G-J 1,56,77,149 (x). In view of the above Table- B , it appears that the additional input tax credit of 2.44% of the turnover should have resulted in the commensurate reduction in the base price as well as cum-tax price which was required to be passed on by the Respondent to the respective recipients accordance with the provisions of Section 171 of the CGST Act, 2017. Accordingly, on the basis of the aforesaid CENVAT/input tax credit availability in the pre and post-GST periods and the details of the amount raised/collected by the Respondent from the Applicant No. 1 and other home buyers during the period 01.07.2017 to 30.09.2019, he had benefited by addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued to the Respondent to explain why the Report dated 04.11.2020 submitted by the DGAP should not be accepted and his liability for profiteering in violation of the provisions of Section 171 of the CGST Act 2017 should not be determined. The Respondent was directed to file his reply to the allegations levelled in the aforesaid DGAP s Report dated 04.11.2020. Accordingly the Respondent has filed his written submissions dated 10.02.2021 wherein the Respondent has inter alia stated that:- (i) The present Report was on incorrect factual and legal basis, he denied every allegation made by the DGAP in subject Report. (ii). The provisions enshrined under Section 171 of the CGST Act, 2017 were made for those cases where certain ITC was not available earlier and now became available under GST regime and for those exempted supplies which became taxable or where Tax rate was reduced by introduction of GST. The said provisions are transitional which provide the ITC occurred to the supplier due to introduction of GST that should be passed on by way of commensurate reduction in price to the customers. Section 171 will apply only in those cases which are governed by 01.07.2017 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (218) ELT 488 (SC). It was assumed that he (the Respondent) was not eligible for such credit even though no investigation, proceeding and Show Cause Notice have been issued against him towards denial of such credit. If the Cenvat credit of Rs. 3,58,20,322/- formed part of the calculation, the ratio of credit would be more than 11.92% for pre-GST period. (v). Without prejudice, Respondent has passed on the benefit of 3% to the applicant. The DGAP vide his aforesaid Report, had alleged that the Respondent had availed additional input tax credit @ 2.44% which was required to pass on to the flat buyers. Whereas the DGAP has observed that the Respondent had collected 9% instead of 12% GST rate on construction services. Thus 3% benefit was passed on to the Applicant No. 1, is more than the alleged additional ITC benefit. Since the Respondent had passed on the additional benefit to the Applicant No. 1 even though no benefit was occurred with the Respondent. Therefore the present Report of DGAP is liable to be withdrawn. (vi). The Report is vague and cryptic. Hence, the Report is liable to be dropped:- (a) The DGAP had not covered the entire tenure/period upto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28% ITC 28 For reasons above, the report requiring him to pass on the alleged benefit of input tax credit amounting to Rs.1,56,77,149/- should be withdrawn. 12. The above said submissions dated 10.02.2021 of the Respondent were forwarded to the DGAP for clarification under Rule 133 (2A) of the CGST Rules, 2017. The DGAP vide his letter dated 24.02.202, has furnished his clarifications on the contentions of the Respondent placed at para 11 supra, given as under:- (i). Upon the contention mentioned at para 11 (i) supra:- The DGAP has carried out a thorough investigation in terms of Section 171 of CGST Act 2017, on the basis of the documents and information submitted by the Respondent. (ii). Upon the contention mentioned at para 11 (ii) supra:- Section 171 of the CGST Act 2017 envisaged that any reduction in rate of Tax or the benefit of ITC has to be passed on to the recipient by way of commensurate reduction in price. The provisions made under the said Section, have to be interpreted as whole and cannot be interpreted by restricting it merely to reduction in rate of Tax. The benefit of ITC is an integral parent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, was not an eligible input service credit and hence had not been considered while computing profiteering. (v). Upon the contention mentioned at para 11 (v) supra:- The contention of the Respondent had already been replied by the DGAP vide para 28 of its aforesaid Report dated 04.11.2020 which is placed at para 10 (xii) supra. Moreover, the Applicant No. 1 vide his email dated 20.02.2021 to DGAP, has denied to receive any benefit of ITC from the Respondent. (vi). Upon the contention mentioned at para 11 (vi) supra:- Section 171 of the CGST Act 2017 mandates passing of additional ITC benefit which had accrued to the Respondent during construction of the project before issuance of occupancy certificate. Further, the Respondent had availed ITC every month by filing his GSTR-3B returns in spite consisting a long gestation period in a housing project. The Respondent could not enrich himself at the expense of the flat buyers by denying them the benefit of ITC till completion of the project while he used the same in his business for discharging his output tax liability every month. Therefore the Respondent has to make periodical assessment of the ITC benefit and pass it on to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of GST availed by the Respondent in his GSTR-3B, as mentioned in Table-A at para 10 (viii) supra. Further, as stated in para-8 of the said Report, the investigation covers the period from 01.07.20217 to 30.09.2019 and any transaction expected to occur post 30.09.2019 is outside the scope of present investigation. (x). Upon the contention mentioned at para 11 (x) supra:- The increase in the cost of inputs and input services might be a factor for determination of price but it is independent of the output GST rate. As there is no cost escalation clause in the agreement entered by the Respondent with the home buyers, the increase in the cost, if any was a kind of business risk which must have been factored by the Respondent at the time of entering into agreement. The Respondent could not claim to set off such increase in his cost with the benefit of ITC which is the sacrifice of precious tax revenue made from the kitty of the Central and the state government and required to be passed on to the end consumers who bear the burden of tax . Further, no extra liability on the Respondent on the account of increase in rate of GST as compared to the Service Tax rate. The supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself submitted that he has discharged GST liability @ 8% on the demand of Rs. 25,18,10,095/- raised or advance received during the period 25.01.2018 to 30.09.2019. in case of discharging output GST liability @ 12%, the total Output tax liability would have been computed amounting to Rs. 6,88,39,939/- (Rs. 57,36,66,160/- @12% GST) whereas, total output liability as per GSTR-3B during the period 01.07.2017 to 30.09.2019 is only 6,13,00,275/- which is below the actual liability resulting into short payment of GST to the Central and State Government. Month-wise summary of GSTR-3B is given in Table- B below: Table - B S. No. Period Taxable Value Output Tax Liability Output Tax as % of Turnover IGST CGST SGST Total 1 Jul-17 - - - - - - 2 Aug-17 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,03,264 20,06,528 10.12% 15 Sep-18 146,96,923 - 8,33,086 8,33,086 16,66,172 11.34% 16 Oct-18 140,42,423 - 7,56,450 7,56,450 15,12,900 10.77% 17 Nov-18 774,01,002 - 39,88,831 39,88,831 79,77,662 10.31% 18 Dec-18 84,38,675 - 3,98,547 3,98,547 7,97,094 9.45% 19 Jan-19 881,04,733 - 41,96,515 41,96,515 83,93,030 9.53% 20 Feb-19 67,49,001 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant 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-Profiteering and forwarded to the DGAP for detailed investigation on 09.10.2019, who vide his investigation Report dated 04.11.2020 furnished to this Authority, had stated that the Respondent is a partnership firm consisting of 06 partners who are registered under Indian Partnership Act, 1932 has constructed/developed his project Bhagwati Eminence at Plot No. 7A, situated at Sector-13, Nerul, Navi Mumbai, which was allotted to the Respondent by CIDCO, containing 76 residential flats and 19 commercial shops, out of which 65 flats and 6 shops were sold as on 30.09.2019. As the input Tax Credit (ITC) @ 0.07% and 2.51% of the turnover was available to the Respondent during the pre-GST period and the post-GST period respectively as per the Table- A mentioned at para 10(viii) supra, therefore, the DGAP has concluded that the Respondent ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 mentioned in Table- B above), the Respondent had discharged GST of Rs. 6,13,00,275/- on the taxable value of Rs. 57,36,66,160/- for the period from 01.07.2017 to 30.09.2017 whereas the total Output tax liability @ 12% would amount to Rs. 6,88,39,939/- on the said taxable value for the aforesaid period. The DGAP has also observed that even after the impugned project Bhagwati Eminence was an other than affordable housing project , the Respondent had discharged 8% GST on 38 flats/units having area of 47.01 sq. mfrs. which were covering only 35.59% of total FSI. Therefore, in view of the above, this Authority observes that Respondent has actually collected higher amounts of GST from the buyers/recipients of supply than the amounts paid to the Government. In addition, this Authority finds that, it is evident from such calculation base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 aforesaid period along with details of such additional amount is given in Annexure- A to this Order. Since, all the home buyers/shop buyers/ recipients of supply are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the profiteered amount along with the interest @ 18% per annum (from the dates from which the said profiteered amount was collected by him from each of them till the date such amount is passed on/returned/refunded), if not already passed on / returned / refunded, within a period of 3 months from the date of passing of this Order as per the details mentioned in Annexure- A , failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017. 22. Accordingly, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the period to which this Order relates. 26. The present investigation has been conducted up to 30.09.2019 only. However, the Respondent is liable to pass on the benefit of ITC which would become available to him till the date of issue of Completion Certificate. Accordingly, the concerned jurisdictional Commissioner CGST/SGST are directed to ensure that the Respondent passes on the benefit of ITC to the eligible home buyers/shop buyers/ recipients of supply as per the methodology approved by this Authority in the present case and submit report to this Authority through the DGAP. The Applicant No. 1 or any other interested party/person shall also be at liberty to file complaint against the Respondent before the Maharashtra State Screening Committee in case the remaining benefit of ITC is not passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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