ITC benefit passing obligation extinguished after NCLT approved resolution plan but new management liable for ongoing collections under Section 171

The CCI held that profiteering proceedings under Section 171 of CGST Act, 2017 against the original developer could not continue after NCLT approved the resolution plan under IBC, as all liabilities were extinguished except those specifically included in the plan. The ITC benefit passing obligation was not incorporated in the approved resolution plan. However, the new management taking over the project remains liable for passing ITC benefits to homebuyers for ongoing collections and was directed to be investigated for potential Section 171 violations regarding the incomplete project.

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Issues Involved:
The judgment involves determining whether the proceedings against the Respondent should be continued after a specific NCLT order and whether investigations should be initiated against a new management entity.

Issue No. 1:
The Commission held that the claim of not passing on the benefit of Input Tax Credit (ITC) to recipients under Section 171 of the CGST Act would not survive due to the NCLT order dated 01.06.2021, which extinguished all liabilities, including the liability of passing on ITC benefits. The new management, M/s One Group Developers, cannot be held liable for the previous management's actions. Consequently, proceedings against the Respondent, M/s. Puma Realtors Pvt. Ltd., regarding the project 'Ireo Rise' shall be discontinued.

Issue No. 2:
The judgment revealed that M/s One Group Developers took over the management of M/s. Puma Realtors Pvt. Ltd. as per the NCLT order. It was found that the new management is collecting payments from homebuyers for the project 'Ireo Rise' and is also collecting GST. As the Completion Certificate has not been issued yet for the project, M/s One Group Developers is directed to investigate for any violation of Section 171 of the CGST Act and Rules regarding the benefit of ITC.

Separate Judgment:
The Commission's findings were based on the DGAP's Report dated 31.01.2023 and the Respondent's submissions. The Commission decided to discontinue proceedings against the Respondent and directed an investigation into M/s One Group Developers for potential violations of Section 171 of the CGST Act and Rules. The order was to be supplied to the DGAP and the Respondent, with the file to be closed upon completion.

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