2019 (11) TMI 1331 - NAPA - GST

Respondent found guilty of profiteering in tax case, ordered to refund Rs. 85,97,436

The Respondent in the case was found to have profiteered by not passing on the benefit of additional Input Tax Credit (ITC) to buyers, violating Section ... Profiteering - purchased of a Flat in the Respondent's project “Palm Wood Royal Gulmohar Green” - benefit of input tax credit not passed on - contravention of provisions of Section 171 of the CGST Act, 2017 - HELD THAT:- It is evident that the respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of provisions of section 171(1) of CGST Act, 2017 and has thus profiteered an amount of ₹ 85,97,436/- as per the explanation attached to section 171 of CGST Act, 2017. It is also established from the facts of the present case that the respondent in constructing two projects viz. 'Gulmohar Green' as a residential project and 'Andaman Square' as the commercial project. It is further established from the record that the respondent has availed benefit of ITC on the above commercial project also which he has himself admitted during the course of the present proceedings and he has also furnished the details of the area sold and the turnover realised by him on the above project. Therefore there are sufficient grounds to believe that the respondent is liable to pass on the benefit of additional ITC to the buyers of the commercial area as per the provisions of section 171 of CGST Act. Application disposed off. Issues Involved:1. Allegations of profiteering by the Respondent.2. Non-passing of Input Tax Credit (ITC) benefits.3. Methodology and calculations of profiteering.4. Compliance with Section 171 of the CGST Act, 2017.5. Penalty imposition under Section 171(3A) of the CGST Act, 2017.6. Future actions and monitoring of compliance.Detailed Analysis:Allegations of Profiteering:The Applicant No. 1 alleged that the Respondent did not pass on the benefit of ITC while charging GST at 12% for a flat purchased in the 'Palm Wood Royal Gulmohar Green' project. The Uttar Pradesh State Screening Committee examined the complaint and referred it to the Director General of Anti-profiteering (DGAP) for investigation.Non-passing of ITC Benefits:The DGAP's investigation revealed that the Respondent had benefited from additional ITC post-GST implementation but did not reduce the basic prices of the flats accordingly. The ITC as a percentage of the total turnover increased from 3.23% pre-GST to 6.52% post-GST, indicating a benefit of 3.29% that was not passed on to the buyers.Methodology and Calculations of Profiteering:The DGAP calculated the profiteered amount by comparing the ITC ratios pre and post-GST. The initial profiteered amount was determined to be Rs. 91,53,904, including GST. Upon further scrutiny and revised calculations, the profiteered amount was adjusted to Rs. 85,97,436. The Respondent's objections regarding the methodology and figures used by the DGAP were largely dismissed. The DGAP's calculations were based on the turnover and ITC figures provided by the Respondent, and discrepancies in the Respondent's claims were noted.Compliance with Section 171 of the CGST Act, 2017:The Respondent was found to have contravened Section 171 by not passing on the benefit of additional ITC to the buyers. The Respondent's claim of having passed on benefits through rebates and discounts was not substantiated with reliable evidence.Penalty Imposition:The Respondent is liable for a penalty under Section 171(3A) of the CGST Act, 2017, for profiteering an amount of Rs. 85,97,436. A Show Cause Notice is to be issued to the Respondent for explaining why the penalty should not be imposed.Future Actions and Monitoring:The Respondent is directed to pass on the profiteered amount of Rs. 85,97,436 to the eligible buyers, including Rs. 2,01,472 to Applicant No. 1, within three months, along with applicable interest. The Commissioners of CGST/SGST Uttar Pradesh are tasked with ensuring compliance and monitoring the order. The DGAP is also directed to investigate the 'Anandam Square' commercial project for similar profiteering issues.Conclusion:The judgment establishes that the Respondent has profiteered by not passing on the benefit of additional ITC to the buyers, violating Section 171 of the CGST Act, 2017. The Respondent is ordered to refund the profiteered amount with interest and is subject to further investigation and potential penalties.