National Anti-Profiteering Authority Orders Refund & Price Reduction, Penalizes for GST Non-Compliance

The National Anti-Profiteering Authority (NAA) found the Respondent guilty of not passing on the benefit of Input Tax Credit (ITC) post-GST, resulting in profiteering of Rs. 13,35,79,636/-. The NAA ordered the Respondent to reduce prices, refund the profiteered amount with interest, and pass on future ITC benefits. A Show Cause Notice for penalty under Section 171(3A) of the CGST Act, 2017 was issued. The Commissioners of CGST/SGST Haryana were tasked with monitoring compliance. The order, delayed by the COVID-19 pandemic, was passed under the force majeure clause.

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Issues Involved:
1. Alleged profiteering by not passing on the benefit of Input Tax Credit (ITC) post-GST.
2. Validity of the investigation period and methodology used by the Director General of Anti-Profiteering (DGAP).
3. Inclusion of VAT and WCT (VAT) credits in pre-GST ITC calculations.
4. Constitutionality of the National Anti-Profiteering Authority (NAA) without a Judicial Member.
5. Inclusion of GST in the profiteered amount.

Issue-wise Detailed Analysis:

1. Alleged profiteering by not passing on the benefit of ITC post-GST:
The Applicant alleged that the Respondent did not pass on the benefit of ITC for a flat purchased in the "Emerald Floors Premier" project. The DGAP investigated and found that the ITC as a percentage of total turnover increased from 9.08% pre-GST to 20.98% post-GST, resulting in an additional benefit of 11.90%. The Respondent was found to have not reduced the basic prices of flats accordingly and charged GST on pre-GST prices, leading to profiteering of Rs. 13,35,79,636/-, including Rs. 1,04,734/- from the Applicant No. 1.

2. Validity of the investigation period and methodology used by DGAP:
The Respondent contended that the Standing Committee on Anti-Profiteering did not examine the complaint within the prescribed two-month period. However, the Standing Committee was not legally constituted between 22.01.2019 to 20.02.2019 due to the transfer or promotion of its members. The reconstituted Committee examined the complaint within 20 days of its formation, making the investigation valid. The DGAP's methodology of comparing the ratio of ITC to turnover pre and post-GST was deemed appropriate, as it accurately reflects the benefit of additional ITC.

3. Inclusion of VAT and WCT (VAT) credits in pre-GST ITC calculations:
The Respondent argued that VAT and WCT (VAT) credits should be included in pre-GST ITC calculations. However, the DGAP found that the Respondent did not claim VAT credits in his VAT Returns and did not provide evidence for WCT (VAT) credits. Therefore, these credits were rightly excluded from the pre-GST ITC calculations.

4. Constitutionality of the NAA without a Judicial Member:
The Respondent argued that the NAA's constitution was invalid without a Judicial Member, citing various Supreme Court judgments. However, the NAA's functions are highly specialized and technical, requiring knowledge of various tax laws, which can be performed by Technical Members. The NAA does not replace or substitute any judicial functions of the High Courts, making its constitution valid.

5. Inclusion of GST in the profiteered amount:
The Respondent contended that GST should not be included in the profiteered amount. The DGAP included GST in the profiteered amount as the Respondent charged additional GST on the inflated prices, which the buyers were not legally bound to pay. The inclusion of GST ensures that the buyers receive the full benefit of ITC.

Conclusion:
The NAA ordered the Respondent to reduce prices commensurate with the benefit of ITC and refund the profiteered amount of Rs. 13,35,79,636/- along with interest to the flat buyers. The Respondent was also directed to pass on any future ITC benefits. A Show Cause Notice was issued for imposition of penalty under Section 171 (3A) of the CGST Act, 2017. The Commissioners of CGST/SGST Haryana were directed to monitor compliance and submit a report within four months. The order was delayed due to the COVID-19 pandemic and was passed under the force majeure clause.

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