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TMI Blog2022 (10) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... period (July 2017 to March, 2019), it was 2.58% for the project U-FARIA . This confirms that post-GST, the Respondent has benefited from additional ITC to the tune of 1.74% (2.58% - 0.84%) of his turnover for the project U-FARIA and the same was required to be passed on to the customers/shop buyers/recipients. The DGAP had calculated the total profiteering amount as Rs. 24,78,383/- in respect of 90 shop buyers including the Applicant No. 1. The Authority finds no reason to differ from the computation of profiteering in the DGAP s Report dated 24.09.2019 and 29.10.2020 or the methodology adopted. The Authority finds that the Respondent has profiteered by Rs. 24,78,383/- during the period of investigation i.e. 01.07.2017 to 31.03.2019. The Authority determines an amount of Rs. 24,78,383/- (including 12% GST) under section 133(1) as the profiteered amount by the Respondent from his 178 /shop buyers/customers (as per Annexure A to this Order), including Applicant No. 1, which shall be refunded by him along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment as per the provisions of Rule 133 (3) (b) of the CGST Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Rules, 2017 and directed the DGAP to further investigate the present case on the following issues: i) Whether the ITC amounting to Rs. 1,77,50,478/- had been blocked by the State GST authorities on 28.03.2019. ii) Whether the above amount of ITC should be taken in to account while computing the profiteered amount during the period from 01.07.2017 to 31.03.2019. iii) Whether the Respondent had passed on the benefit of Rs. 9,61,130/- as ITC benefit to the shop buyers during the period from 01.07.2017 to 31.03.2019. iv) Whether the Respondent had passed on an amount of Rs. 95,205/- as ITC benefit to the Applicant No. 1. 2. The DGAP vide report dated 24.09.2019 reported that an application dated 29.11.2018 was filed before the Standing Committee on Anti-profiteering, under Rule 128 (1) of the CGST Rules, 2017 by the Applicant No. 1 alleging profiteering in respect of construction service supplied by the Respondent. The above Applicant had submitted that he had purchased Shop No. G-122 in the Respondent s commercial project U FARIA , situated at C-04A, Sector-16B, Greater Noida, Uttar Pradesh and had alleged that the Respondent had not passed on the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Amount 1. At the time of booking Basic 10.00% + Commercial PLC 10.00% 8,59,591.00 + 92,463.00 9,52,054.00 2. Within 30 days Basic 10.00% + Commercial PLC 10.00% 8,59,591.00 + 92,463.00 9,52,054.00 3. On casting of foundation Basic 10.00% + Commercial PLC 10.00% 8,59,591.00 + 92,463.00 9,52,054.00 4. On casting of Ground floor slab Basic 10.00% + Commercial PLC 10.00% 8,59,591.00 + 92,463.00 9,52,054.00 5. On casting of 2nd floor slab Basic 10.00% + Commercial PLC 10.00% 8,59,591.00 + 92,463.00 9,52,054.00 6. On casting of 4th Floor roof slab Basic 10.00% + Commercial PLC 10.00% 8,59,591.00 + 92,463.00 9,52,054.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods 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 was 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 was 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 DGAP claimed that the ITC pertaining to the unsold units would not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling prices of his shops to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST. iv. The DGAP also reported that the submissions of the Respondent in respect of the turnover have been examined and during the investigation, the turnover has been considered from the Home Buyers list submitted by the Respondent. The Respondent has also contended that the ITC utilized post-GST should be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,229,049 3,283,048 Ratio of ITC Post-GST [(G)=(F)/(C)] 0.84% 2.58% vi. The DGAP claimed from the Table- B that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 0.84% and during the post-GST period from July, 2017 to March, 2019, it was 2.58% which clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 1.74% [2.58% (-) 0.84%] of the turnover. vii. The DGAP also observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate was 12% for commercial shops. Accordingly, on the basis of the figures contained in Table- B above, the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base prices and the exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 and other shop buyers in respect of the commercial shops sold by the Respondent, during the period from 01.07.2017 to 31.03.2019, the benefit of ITC that needed to be passed on by the Respondent to the buyers of commercial shops came to Rs. 24,78,383/- which included 12% GST on the base amount of Rs. 22,12,842/-. The commercial shop buyer and unit no. wise break-up of this amount has been given in Annexure-14 by the DGAP. This amount was inclusive of the profiteered amount of Rs. 37,107/- in respect of the Applicant No. 1. The DGAP also intimated that on the basis of the details of the outward supplies of the construction service submitted by the Respondent, it was observed that the service has been supplied in the State of Uttar Pradesh only. x. The DGAP submitted that the benefit of additional ITC of 1.74% of the taxable turnover which has accrued to the Respondent was required to be passed on to the Applicant No. 1 and the other recipients. He has further submitted that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent inasmuch as the additional benefit of ITC @1.74% of the base prices received by him during the period from 01.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State GST authorities; details and documentary evidence of passing on of the benefit of ITC to the shop buyers including Applicant No. 1; and contact details (email address) of all shop buyers, for verification of amount of benefit of ITC passed on by the Respondent. c. The Respondent submitted his reply dated 02.06.2020, 09.07.2020 and 09.10.2020. The Respondent submitted the electronic credit ledger for the period 01.07.2017 to 31.03.2019 evidencing blockage of ITC of Rs. 1.77 Cr. by State Authorities and copies of Credit notes issued to shop buyers, for passing on of ITC benefit to shop buyers. The Respondent vide above mentioned replies submitted that the State Authorities had blocked the ITC, without in forming the reasons, therefore, he cannot state the reasons for the same and that there was no actual working of passing on of ITC to buyers, he had extended benefit of ITC @3% on a broader principle. d. As per the directions of NAA vide I.O. No. 16/2020 dated 20.04.2020, letter dated 21.07.2020 and further reminders dated 17.08.2020 and 14.09.2020 were written to the Deputy/ Assistant Commissioner, Sales Tax Office, Surajpur, Greater Noida, to provide the reasons of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.10.2020, 09.10.2020 and 12.10.2020 were sent to the Applicant No. 1 and 55 other shop buyers, randomly selected, to confirm the amount of benefit received from the Respondent. The Applicant No. 1 vide email dated 15.10.2020 submitted that he had received the total benefit of Rs. 1,95,915 (Rs. 37,107 as per Annexure) as an ITC benefit, from the Respondent. In response to the other 55 emails, which was more than 60% of 90 shop buyers (to whom the benefit was claimed to be passed on), only 09 shop buyers (i.e. 16.36% of sent) responded. Out of these 09 shop buyers, 05 had confirmed the amount of benefit (totaling to Rs. 26,515/-) received from the Respondent, while the other 04 had denied receipt of any benefit. Further, it was observed from the above replies that, the Applicant No. 1 alone received higher amount as ITC benefit then the total amount of other 05 shop buyers. On the basis of mixed replies submitted by the above shop buyers, the issue of passing on of the proper of ITC benefit cannot be confirmed. i. From the above discussions, it might be seen that the benefit of additional ITC to the tune of Rs. 24,14,761/- (Rs. 24,78,383 (-) Rs. 37,107/-(-) Rs. 26,515/-), can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department during the said period. b) The confirmations taken by the DGAP was malafide and erroneous. It could be noted that various customers had confirmed the passing on the credit. The Respondent had already passed on the credit to all the customers mentioned in the list. There should be no doubt in passing on of the ITC benefit when certain customers had confirmed. The customers denying passing on of the ITC benefit might not be, aware of such discount. The Respondent had rather passed on more benefit to the customers. The Respondent had passed on the ITC benefit of Rs 9.61 lacs to the buyers. 5. Copy of the above submissions dated 04.12.2020 filed by the Respondent was supplied to the DGAP for supplementary Report under Rule 133 (2A) of the CGST Rules, 2017. The DGAP filed his clarifications vide supplementary report dated 11.02.2021 wherein clarified that:- i. The contention of the Respondent was incorrect, as the ITC of Rs, 1.77 Crores was blocked from 28.03.2019 only. The investigation period was from 01.07.2017 to 31.03.2019 only. Thus, the ITC was effectively blocked for merely 3 days during the investigation period. Profiteering had been calculated on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DGAP s Report that there has been no reduction in the rate of tax in the post-GST period; hence the only issue to be examined is whether there was any net benefit of ITC with the introduction of GST. It is observed from the report 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 0.84%, whereas, during the post-GST period (July 2017 to March, 2019), it was 2.58% for the project U-FARIA . This confirms that post-GST, the Respondent has benefited from additional ITC to the tune of 1.74% (2.58% - 0.84%) of his turnover for the project U-FARIA and the same was required to be passed on to the customers/shop buyers/recipients. The DGAP had calculated the total profiteering amount as Rs. 24,78,383/- in respect of 90 shop buyers including the Applicant No. 1. 8. The Respondent has raised several contentions in the matter and the findings of the Authority are as under:- a) The Respondent has raised a contention that DGAP has exceeded his jurisdiction by calculating profiteering in respect of the customers other than the Applicant No.1. In this regard, the Authority notes that, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised a contention that instead of the value of relevant ITC availed post GST for the purpose of calculation of profiteering, the ITC utilized post GST should be considered. In this regard, the Authority finds that the contended ITC is legally available to the Respondent and hence, the same can be utilized as in the present case. The Respondent has benefited from the additional ITC, which was required to be passed on to the shop buyers. As regards to contention of the Respondent regarding blockage of the ITC by the State GST authority, the Authority find that contention/reply of DGAP is acceptable in as much as the ITC was available to the Respondent during the period 1.07.2017 to 28.03.2019 and nothing prevented them from passing on the benefit of ITC. Further as replied by the DGAP, ITC can be passed on by any means i.e. credit notes, lowering of instalment, etc. It is also a fact that said amount of the ITC was unblocked later on. In the given facts, the contention of the Respondent cannot be accepted. 9. For the reasons mentioned herein above, the Authority finds no reason to differ from the computation of profiteering in the DGAP s Report dated 24.09.2019 and 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above Act. Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 31.03.2019, therefore, penalty cannot be imposed on the Respondent retrospectively, i.e. for the period of investigation. 15. The concerned jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order. It may be ensured that the benefit of ITC has been passed on to each shop buyer/customer as per this Order along with interest @18%. In this regard an advertisement of appropriate size to be visible to the public at large may also be published in a minimum of two local newspapers/ vernacular press in Hindi/English/local language with the details i.e., Name of the builder (Respondent) - M/s Maheshwari Infratech Pvt. Ltd., Project- U- FARIA , Location- C-04A, Sector-16B, Greater Noida west, Uttar Pradesh and amount of profiteering Rs. 24,78,383/- so that the concerned shop buyers can claim the benefit of ITC if not passed on. Shop buyers/customers may also be informed that the detailed NAA Order is available on Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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