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TMI Blog2023 (12) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... he DGAP to address identified discrepancies and ordered the Respondent No. 1 to provide complete documentation. X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) In case of flats pertaining to landowners in the project 'Omkar 1973 Worli' the DGAP stated that the Respondent No. 2, 3 & 4 had not submitted the copies of sale agreements and documentary evidence of payments received in 02 flats sold by Mr. Nakul Arya. Hence, the DGAP was not in position to verify whether the said flats had been sold before Occupancy Certificate or not. Accordingly, the DGAP had sent letter to the jurisdictional Commissionerate to verify Respondent No. 2, 3 & 4's assertions and to inquire into the tax liability involved in sale of those flats. iv) The DGAP stated that the Respondent No. 1 had not provided project- wise figures for ITC of VAT availed by the Respondent No. 1 in respect of projects "Omkar 1973 Worli" and "The Summit Business Bay Andheri". The Respondent No. 1 vide email dated 14.12.2022 submitted figures of CENVAT/ITC pertaining to the projects certified by Chartered Accountant as reconciled with statutory returns. However, the Respondent No. 1 had not bifurcated CENVAT/ITC figures pertaining to the Rehab building and Sale building in the respective projects. Accordingly, the figures provided has been cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goods and Services Tax Act, 2017 has been contravened by the Respondent No. 1. x) The Respondent No. 1 has supplied construction services in the State of Maharashtra only. The present investigation covered the period from 01.07.2017 to 31.07.2022. 5. The Commission carefully considered the Report dated 15.02.2023 of the DGAP and the other material placed on record and in the projects "Omkar 1973 Worli" and "The Summit Business Bay Andheri" issued Notices dated 12.07.2023 to the Respondent No. 1, 2, 3 & 4 to explain why the Report dated 15.02.2023 furnished by the DGAP should not be accepted and their liability for profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. 6. The Respondent No. 1 vide his written submissions dated 30.09.2023 has inter-alia submitted the following:- i) The Respondent No. 1 claimed the saleable area mentioned in DGAP's report for both projects was incorrect. As DGAP has arrived at profiteering on the basis of wrong saleable area hence, alleged profiteering determined by DGAP was also incorrect. The Respondent claimed that in Table A and B of the DGAP's Report dated 15.02.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GAP lacked validity, logic and hence was erroneous. vi) For passing on the profiteering, there has to be a profit at first place. Post introduction of GST the prices of various goods and services have been increased which has resulted into additional cost burden. The ITC benefit alleged is miniscule as compared to the increase in costs of construction materials. Hence, without receiving any benefit, the Respondent No. 1 was unable to pass on any benefit to the end customers. vii) There was no contravention of any of the provisions of Section 171 of the CGST Act as alleged in the DGAP's report and the alleged benefit has already been passed. Thus the entire report was liable to be quashed. 7. Copy of the above submissions dated 30.09.2023 filed by the Respondent No. 1 was supplied to the DGAP for clarification under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications dated 21.11.2023 on the Respondent No. 1's submissions and inter-alia clarified as under:- i) As regards the Respondent No. 1's claim that in Table A and B of the DGAP Report dated 15.02.2023, the area of the project is actually the carpet area and not saleable area of the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her such extra tax collected from the recipient has been deposited in the Government account or not. Besides, any extra tax returned to the recipients by the supplier by issuing credit note can be declared in the return filed by such supplier and his tax liability shall stand adjusted to that extent in terms of Section 34 of the CGST Act, 2017. Therefore, option is always open to the Respondent No. 1 to return tax amount to the recipients by issuing credit notes and adjusting his tax liability for the subsequent period to that extent. Therefore, any excess amount collected from recipients, even in the form of tax, must be returned to the recipients. By not reducing the price commensurately the Respondent No. 1 has forced his customers to pay extra tax which they were not liable to pay. Further, no imposition of any levy or taxes have been made by the DGAP. Only the amount of profiteering made by the Respondent No. 1 has been calculated. Hence, the contention of the Respondent No. 1 is erroneous. iv) The Respondent No. 1 claimed that the methodology adopted by the DGAP is subject to various glaring issues. a. As regards the Respondent No. 1's contention that there is no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is required to be passed on by him to the recipients/buyers by way of commensurate reduction in price, in terms of Section 171 of GST Act, 2017. d. As regards the Respondent No. 1's contention that the DGAP report has missed out on the input credit available to the Respondent No. 1 on input goods in the VAT regime, the DGAP submitted that during the investigation, the Respondent No. 1 was requested to provide the project-wise figures of input tax credit availed by him in both pre-GST (both Service Tax and VAT) and post-GST regime. In his replies, the Respondent No. 1 never mentioned that he had availed ITC of VAT under the MVAT Act and rules. e. The DGAP stated that the Respondent No. 1's contention that the DGAP formula does not factor increase in prices due to inflation was wrong and hence denied. In this regard, the DGAP submitted that the increase in the cost of inputs and input services may be a factor for determination of price but this factor is independent of the output GST rate. The increase in cost, if any, is a kind of business risk which must have been factored in by the Respondent No. 1 at the time of entering into agreements with the prospective fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been observed in the DGAP's report that :- i) As per Annexure No. 21 attached with the DGAP report dated 15.02.2023, the total saleable area of project 'Omkar 1973 Worli' is 21,02,641 Sq. Ft. and for project 'The Summit Business Bay' it is 5,37,474 Sq. Ft. as contended by the Respondent No. 1. However, according to Para No. 24 and Para No. 26 of DGAP Report, as per Table A and Table B at S.No. 6 total saleable Area of project 'Omkar 1973 Worli' has been taken as 9,26,567 Sq. Ft. and for project 'The Summit Business Bay' it has been taken as 2,14,224 Sq. Ft. The difference in the area is required to be reconciled for which further investigation needs to be made by the DGAP. ii) Further, the DGAP has also stated that in case of project "Omkar 1973 Worli", the land was contributed by (i) M/s Kash Foods Pvt. Ltd. (ii) Mr. Nakul Ravi Arya and (iii) Mr. Varun Ravi Arya (Respondent No. 2, 3 & 4 respectively) who were also entitled to sell flats. On these flats the benefit of ITC has to be passed on by the Respondent No. 1 to the landowners who would further pass on the ITC benefit to the homebuyers. However, no profiteered amount has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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