2020 (1) TMI 306 - NAPA - GST

Respondent Violates CGST Act: Fails to Pass Tax Credit Benefit to Buyers

The Respondent failed to pass on the additional Input Tax Credit (ITC) benefit to buyers, violating Section 171 of the CGST Act, 2017. The profiteered ... Profiteering - purchase of the apartments - benefit of reduction in rate of tax or ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 - allegation that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices of the apartments purchased by them, on implementation of the GST w.e.f. 01.07.2017 - contravention of provisions of section 171 of CGST Act - HELD THAT:- The Respondent has neither produced the acknowledgement receipts from the recipients nor he has furnished the tax invoices to prove that he has passed on the above amount as benefit of ITC. The Respondent has also not furnished the above details to the DGAP during the course of the investigation. Hence, there is hardly any doubt that the above record has been prepared by the Respondent subsequently to mislead the present proceedings. Therefore, the claim of the Respondent of his having passed on the benefit of ITC to the eligible buyers cannot be accepted as no reliable and irrebutable evidence has been furnished by the Respondent to prove his above claim. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project (Supertech Basera’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section - Accordingly, a notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Issues Involved:1. Whether the Respondent availed the benefit of additional Input Tax Credit (ITC) during the period between 01.07.2017 to 31.12.2018 which he was liable to pass on to his buyers.2. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent.3. If yes, what was the quantum of profiteering.Detailed Analysis:1. Whether the Respondent availed the benefit of additional ITC during the period between 01.07.2017 to 31.12.2018 which he was liable to pass on to his buyers:The investigation by the Director General of Anti-Profiteering (DGAP) revealed that the ITC as a percentage of the turnover available to the Respondent during the pre-GST period (April 2016 to June 2017) was 0%, and during the post-GST period (July 2017 to December 2018), it was 2.68%. This confirmed that post-GST, the Respondent benefited from additional ITC to the tune of 2.68% of his turnover. The Respondent was required to pass on this benefit to the buyers, which he failed to do.2. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent:Section 171(1) of the CGST Act mandates that any reduction in the rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. The DGAP's report indicated that there was no reduction in the rate of tax in the post-GST period. However, the Respondent did benefit from additional ITC, which he did not pass on to the buyers. Hence, the Respondent violated the provisions of Section 171(1) of the CGST Act, 2017.3. Quantum of Profiteering:The DGAP calculated the amount of ITC benefit to be passed on to all the flat buyers as Rs. 3,32,61,809/-, which included GST. This amount was based on the information supplied by the Respondent and was not challenged by him. The Respondent contended that he had reversed the CENVAT Credit of Rs. 1,62,78,213/- on 06.08.2019 and Rs. 15,15,360/- on 31.08.2019, totaling Rs. 1,77,93,573/-, and requested this amount be adjusted. However, the Authority held that the additional availability of ITC in the pre-GST and post-GST periods was relevant for computing the profiteered amount, not the subsequent reversal of ITC. Therefore, the reversal of ITC did not alter the computation of profiteering by the DGAP.The Respondent also claimed to have passed on the ITC benefit of Rs. 3,30,91,398/- to his buyers and furnished copies of Journal Vouchers. However, the Authority found these vouchers to be issued on the same date, making their genuineness doubtful. No reliable evidence was provided to prove the claim, and thus, it was not accepted.Conclusion:The Authority determined the profiteered amount as Rs. 3,32,61,809/- in terms of Rule 133(1) of the CGST Rules, 2017, during the period from 01.07.2017 to 31.12.2018. The Respondent was ordered to reduce the prices commensurate with the benefit of ITC received and refund the profiteered amount to the buyers along with interest. The Respondent was also liable for a penalty under Section 171(3A) of the CGST Act, 2017, and a notice was issued to explain why the penalty should not be imposed.The jurisdictional Commissioners of CGST/SGST Haryana were directed to monitor the order's compliance and ensure the profiteered amount was passed on to all eligible buyers, with a compliance report to be submitted within four months.