9911796707
TMI Blog2022 (10) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ST w.e.f. 01.07.2017 and the Respondent was required to pass on such benefit to the buyers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act, 2017 during the period 01.07.2017 to 31.05.2020. The Respondent has not been able to provide any methodology whereby such amount of Rs.15,48,92,888/- was passed on whereas the DGAP has calculated amount of Rs. 9,03,74,981/- in scientific manners as mentioned in the Annexure-24 of said Report. Hence, this Authority determines that the Respondent has realized an additional amount of Rs. 9,03,74,981 /- which includes both the profiteered amount @ 5.69% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 395 buyers/recipients [including the amount of Rs.2,72,720/- (including GST @12%) from the Applicant No. 1] during the period from 01.07.2017 to 31.05.2020 which was required to be passed on such home buyers/customers/recipients of supply of his impugned project - this Authority agrees with the methodology adopted by the DGAP in its Report to calculate the profiteered amount. This Authority has taken note of claim of the Respondent regarding transfer of benefit of Rs.15,48,92,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him against payment. He submitted that the price of above said flat was Rs. 1,03,93,300/-(Inclusive of GST @ 12%) as per "Agreement to Sale". As he had paid 3 installments with old rate of tax however, he was claiming for the benefit of reduction in tax w.e.f. 01.04.2019 which was not given on current demand notice dated 08.11.2019. Further he submitted copy of Tax invoice dated 08.11.2019 along with his application. 2. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the CGST Rules 2017, was issued on 26.06.2020 by the DGAP, calling upon the Respondent to reply as to whether he admitted that the benefit of input tax credit had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all documents in support of his reply. 3. The Respondent was afforded an opportunity by the DGAP to inspect the non-confidential evidences/information during the period 16.07.2020 to 17.07.2020 however, the Respondent through his authorized representative, had availed of the said opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price at the time of booking and on tax invoices to certain buyers. 8. The Respondent vide aforementioned letters/e-mails, has furnished the following documents/information:- a. Copies of GSTR- I & 3B Returns for the period July, 2017 to May, 2020. b. Copies of GSTR-9 & 9C Returns for FY 2017-18 and 2018-19. c. Copies of ST-3 and VAT Returns for the period April, 2016 to June, 2017. d. Copy of Trans-1. e. Tax rates - pre-GST and post-GST. f. Copy of Audited Balance Sheet for FY 2016-17, 2017-18 & 2018- 19. g. Copies of Sale agreement/Contract, all Demand Letters issued to the Applicant No. 1. h. Copy of Electronic Credit Ledger for the period July, 2017 to May, 2020. i. Declaration in Annexure-IV to the Notification No. 3/2019-CT (Rate) dated 29.03.20219. j. CENVAT/ ITC register for the period April, 2016 to May, 2020. k. Details of VAT, Service Tax and GST turnover, output tax liability payable and ITC availed by the Respondent. I. Copy of Land Allotment Agreement dated 06.09.2016. m. Copy of Project Report submitted to RERA. n. List of home buyers in the project "ATS Rhapsody" along with details of benefit passed on. o. Copies of all documentary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement towards land) to discharge his tax liabilities. Therefore there was no reduction in rate of tax w.e.f. 01.04.2019 with regard to Applicant No. 1's unit. 13. As per Para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) which reads as "Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Further, clause (b) of Paragraph 5 of Schedule II of the CGST Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration had been received after issuance of completion certificate, where required, by the competent authority or after his first occupation, whichever was earlier". Thus, the ITC pertaining to the residential units and commercial shops which was under construction but not sold was provisional ITC which might 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 CGST Act, 2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Rs.) S.No. Particulars April, 2016 to June, 2017 (Pre-GST) July, 2017 to May, 2020 (Post-GST) (1) (2) (3) (4) 1. CENVAT of Service Tax Paid on Input Services (A) 86,76,657 - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) - - 3. Input Tax Credit of GST Availed as per GSTR-3B (C) - 12,77,65,959 4. Total CENVAT/Input Tax Credit Availed (D)- (A+B) or (C) 86,76,657 12,77,65,959 5. Total Turnover as per List of Home Buyers (Net of Cancellation) (E) 18,07,53,727 1,23.00,60,167 6. Total Saleable Area (in SQF) (F) 11,74,546 11,74,546 7. Total Sold Area relevant to Turnover (G) 1,54,092 8,12,856 8. Relevant CENVAT/ITC [(H)= (D)*(G)/(F)] 11,15,204 8,84,21,676 Ratio of CENVAT/Input Tax Credit to Turnover [(I)= (H)/(E) 0.63% 7.19% 16. In view of the above Table- 'B', it is 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 0.63% whereas during the post- GST period (July, 2017 to May, 2020), the percentage was 7.19%, which confirms that post-GST, the Respondent had benefited from additional ITC to the tune of 6.56% [7.19% (-) 0.63%] of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 981/- including GST @12% on the base amount of Rs. 8,06,91,947/-. The buyers and unit no. wise break-up of this amount was given in Annex-24 to the above said DGAP's Report dated 24.02.2021. This amount is inclusive of Rs. 2,72,720/-(including GST on the base amount of Rs. 2,43,500/-) which was the benefit of ITC required to be passed on to the Applicant No.1 19. The Respondent has supplied such construction services in the State of Uttar Pradesh only. 20. The above profiteering has been computed for 395 home buyers. The Respondent had booked 475 units till 31.05.2020 out of total 579 units and out of which 80 customers who had booked the units had not paid any consideration during the post-GST period 01.07.2017 to 31.05.2020 (period under investigation). Therefore, if the ITC in respect of these 80 units was considered to calculate profiteering in respect of 395 flats where payments had been received after GST, the ITC as a percentage of turnover might be erroneous. Therefore, the benefit of ITC in respect of these 80 units might be calculated when the consideration was received from such units by taking into account the proportionate ITC in respect of such units. 21. The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 to 31.05.2020. 6. 87 1,96,640 - - - Unsold Flats 7. 17 10,958 - - - Unsold Commercial Shops Total 579 11,74,546 9,03,74,981 15,48,92,888 23. In view of the above Table 'D', the DGAP has observed that the benefit passed on by the Respondent to 135 buyers (mentioned at S.No. 3 of the above table) was less by an amount of Rs. 29,14,810/- than what he ought to have passed on to them. Further, the benefit passed on by the Respondent to 245 buyers (mentioned at S.No. 2 of the above table) was higher by an amount of Rs. 7,02,82,782/- than what he should had passed on to them. Such excess benefit passed on to 245 buyers, cannot be set off against the additional benefit required to be passed on to the other recipients and it could only be adjusted against any future benefit that might accrue to such recipients. 24. On conclusion, the DGAP has submitted that the benefit of additional ITC to the tune of Rs. 9,03,74,981/- (including GST) which is 6.56% of the turnover, accrued to the Respondent in post-GST period which was required to be passed on by him to the respective buyers. The DGAP has observed that the Respondent had passed on the benefit of ITC of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules 2017 should not be imposed. The Respondent was directed to file his reply to the allegations levelled in the aforesaid DGAP's Report dated 24.02.2021. Accordingly the Respondent has filed his written submissions dated 05.07.2021 wherein the Respondent has inter alia stated that:- (a). The Report dated 24.02.2021 provides that the benefit of ITC has been passed on to 135 buyers (mentioned in Annexure-29 of the said Report) was short by Rs. 29,14,810/- which. is still required to be passed on to them by him whereas he has claimed that he had passed on ITC benefit to 129 buyers was short by Rs. 16,27,543/- and in respect of remaining 06 buyers, he has passed on total ITC benefit to such buyers which was required to be passed on. (b). The Report dated 24.02.2021 shows that the benefit of ITC has been passed on to 14 buyers (mentioned in Annexure-30 of the said Report) was short by Rs. 25,77,345/- which is still required to be passed on to them by him whereas he has claimed that he had passed on total ITC benefit to such buyers which was required to be passed on. (c). He had passed on the benefit of Rs. 2,72,720/- to the Applicant No. 1 even though the ITC benefit of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 23.08.2021 of the Respondent and Applicant No. 1 respectively were forwarded to the DGAP for clarification under Rule 133(2A) of the CGST Rules, 2017. Therefore, the DGAP vide his letter dated 11.03.2022, has furnished his clarifications on the contentions of the Respondent and Applicant No. 1 placed at paras 27 and 28 supra, given as under:- (i). Upon contention mentioned at para 27 (a) supra:- In respect of 129 buyers, the Respondent has not provided any documentary evidence for any subsequent benefit transferred and hence could not be verified during investigation by DGAP. Further in respect of 06 buyers, the claim of the Respondent has not been considered as the such buyers vide their emails, have denied the receipt of benefit. (ii). Upon contention mentioned at para 27 (b) to (d) supra:- The Report has been prepared on the basis of denial of such claim by these 14 buyers via emails. Accordingly, the Report has prepared as per the responses received. (iii). Upon contention mentioned at para 27 (f) supra:- DGAP vide Report dated 24.02.2021 considered the period from April, 2016 to June, 2017 (15 months) in the pre-GST Regime with the purpose to cover a reasonable peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Governments, which got subsumed in the GST. Out of these taxes, the input tax credit (ITC) of some taxes was not being allowed in the erstwhile tax regime. For example, the input tax credit of Central Sales Tax, which was being collected and appropriated by the States, was not admissible. Similarly, in case of construction service, while the input tax credit of Service Tax was available, the input tax credit of Central Excise duty paid on inputs was not available to the service provider. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST with effect from 01.07.2017, all these 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. This additional benefit of input tax credit in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 171 of GST Act, 2017. (v). Upon contention mentioned at para 28 supra:- The Respondent has opted 12 % Tax rate in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation Report dated 24.02.2021 furnished to this Authority, had stated that the Respondent is engaged in the construction of residential projects, has constructed/developed the impugned project "ATS Rhapsody" containing 579 flats/shops. The Respondent has opted 12% Tax rate in the light of Notification 03/2019 CT(R) dated 29.03.2019 w.e.f. 01.04.2019 to discharge his GST liabilities towards the said project. The Respondent has not received Occupancy Certificate for the impugned project. As the input Tax Credit (ITC) @ 7.19 % and 0.63% of the turnover were available to the Respondent during the post-GST period and pre-GST period the respectively as per the Table- B mentioned at para 15 supra, therefore, the DGAP has concluded that the Respondent had benefited from the additional ITC to the tune of 6.56% (7.19 % - 0.63%) of the turnover during the period from 01.07.2017 to 31.05.2020, which was required to be passed on to buyers of the impugned Project. As the Respondent has not reduced the basic prices of his flat/shops by 6.56% due to the additional benefit of ITC. Accordingly, he has contravened the provisions of Section 171 of the CGST Act, 2017 and Rules made thereunder. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP; hence these can be relied upon while computing the profiteered amount. The above methodology had been approved by this Authority in all such cases where the benefit of ITC was required to be passed on to the flat buyers/recipients of construction service. 36. In view of the above discussion and findings and after taking into consideration the provisions of the law and the submissions made by the Respondent, the issues to be decided are as under:- * 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, * Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017 and whether various issues raised by the Respondent sustainable ? And also, whether the Respondent is liable to be penalize in terms of Section 171 (3A) of the CGST Act 2017. 37. In the instant case, there is no reduction of rate of tax during the relevant period and the only issue which is required to be decided by the Authority is as to whether Respondent is required to pass on the benefit of input tax credit. As mentioned in earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % 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) to above said buyers/recipients, 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. 41. 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/shops/units 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) and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. As the said provision which has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019, the Respondent is liable to penalty for the amount profiteered by him from 1.01.2020 onwards. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/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 Uttar Pradesh State Screening Committee in case the remaining benefit of ITC is not passed on to them. 46. In view of facts discussed hereinabove and the findings thereof, the Authority has reason to believe that since the Respondent has been found to have contravened the provisions of Section 171 of the CGST Act 2017 in respect of the subject Project "ATS Rhapsody" and hence there is every possibility that similar contravention may has taken place with his other projects. This Authority in terms of Rule 133 (5)(a) of the CGST Rules 2017 also directs the DGAP to investigate profiteering in relation to other Projects executed by the Respondent, if any, under the provision of section 171 of the CGST Act 2017. 47. The Hon'ble High Court of Delhi, vide its Order dated 10.02.2020 in the case of Nestle India Ltd. & Anr. Vs. Union of India has held that:- "We also observe that prima facie, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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