AI TextQuick Glance (AI)Headnote
Issues: (i) Whether units booked after 30.06.2018 could be excluded from the anti-profiteering investigation; (ii) Whether the net profiteered amount was refundable to identified homebuyers or depositable in the Consumer Welfare Fund; (iii) Whether excess benefit passed to some buyers could be set off against liability owed to other buyers; (iv) Whether GST on the inflated base price formed part of the profiteered amount; (v) Whether interest was payable and the date from which it was to be computed; (vi) Whether penalty under Section 171(3A) was applicable.
Issue (i): Whether units booked after 30.06.2018 could be excluded from the anti-profiteering investigation.
Analysis: The ITC benefit is project-specific where construction commenced before GST and continued after its implementation. A post-GST purchaser is entitled to the ITC benefit attributable to post-GST inputs used in construction. Fresh price negotiation or maintenance of average prices, without documented evidence of a commensurate ITC reduction, does not establish that the benefit was passed on.
Conclusion: Post-GST booked units were not excludable; the finding is against the assessee.
Issue (ii): Whether the net profiteered amount was refundable to identified homebuyers or depositable in the Consumer Welfare Fund.
Analysis: Deposit in the Consumer Welfare Fund is a residuary measure applicable only where recipients genuinely cannot be identified. Buyer-wise project records identified the 128 eligible homebuyers, and absence of a complaint, current contact details, or transfer of project operations did not render them unidentifiable. The supplier's statutory liability to pass on the benefit survives project transfer.
Conclusion: The net profiteered amount must be returned to the identified homebuyers and cannot be deposited in the Consumer Welfare Fund; the finding is against the assessee.
Issue (iii): Whether excess benefit passed to some buyers could be set off against liability owed to other buyers.
Analysis: The obligation to pass on ITC benefit is owed separately to each recipient. Excess payment to one group of customers cannot discharge the obligation owed to different customers. The statutory framework does not empower recovery of alleged excess benefit from consumers or adjustment of that excess against liabilities due to other recipients.
Conclusion: Set-off of excess benefit passed to 1039 customers against the liability to the remaining 128 customers was refused; the finding is against the assessee.
Issue (iv): Whether GST on the inflated base price formed part of the profiteered amount.
Analysis: The excess amount paid by a homebuyer includes GST charged on the inflated base price. Even if that tax was remitted to the Government, it was an additional cost borne by the buyer and must be restored to place the buyer in the position that would have prevailed had the ITC benefit been passed on.
Conclusion: Inclusion of GST at 12% in the profiteered amount was upheld; the finding is against the assessee.
Issue (v): Whether interest was payable and the date from which it was to be computed.
Analysis: Rule 133(3)(b) validly provides for interest at 18% per annum on the amount not passed on to recipients. Since the project-wide computation did not permit identification of the exact date of collection of excess amount for each square foot, the date of payment of the last instalment by each buyer was adopted as the appropriate starting point.
Conclusion: Interest at 18% per annum is payable from the respective date of the last instalment paid by each eligible homebuyer until refund; the finding is against the assessee.
Issue (vi): Whether penalty under Section 171(3A) was applicable.
Analysis: The entire contravention period ended on 30.10.2019, before Section 171(3A) came into force on 01.01.2020. A penal provision cannot be applied retrospectively to a completed period of contravention.
Conclusion: No penalty under Section 171(3A) is payable; the finding is in favour of the assessee.
Final Conclusion: The developer remained liable to return the net unpassed ITC benefit of Rs. 40,99,917 to the 128 identified homebuyers, with interest, while no penal consequence could be imposed for the pre-enforcement contravention period.
Ratio Decidendi: In a transitional real-estate project, ITC benefit must be passed on project-wise to every eligible recipient, and liability owed to one recipient cannot be neutralised by excess benefit given to another.
Project-wise ITC benefit must reach every eligible homebuyer, without cross-buyer set-off or retrospective anti-profiteering penalties.
In transitional real-estate projects, input tax credit (ITC) benefit is project-specific and must be passed on to each eligible purchaser, including purchasers who booked units after GST implementation where post-GST construction inputs were used. Buyer-wise identified recipients must receive the unpassed benefit; deposit in the Consumer Welfare Fund is limited to genuinely unidentifiable recipients. Excess benefit given to some purchasers cannot be set off against amounts due to others. Profiteering includes GST charged on the inflated base price. Interest at 18% per annum is computed from each eligible buyer's last instalment payment until refund. Penalty cannot apply retrospectively to a contravention completed before the penal provision took effect.
Pass-through of input tax credit in ongoing real estate projects - Identification of recipients of profiteered amount - Set-off of excess benefit against recipient-specific liability - Inclusion of GST in profiteered amount - Interest on unpassed input tax credit benefit - Prospective operation of anti-profiteering penalty Pass-through of input tax credit in ongoing real estate projects - Post-GST bookings of flats under continuing construction - Units booked after 30.06.2018 in a project whose construction continued after the introduction of GST exclusion/inclusion from computation of the input tax credit benefit - HELD THAT: - Where construction commenced before GST and continued or was completed thereafter, a purchaser is entitled to the benefit of post-GST input tax credit availed on construction inputs. The benefit is project-specific and must be passed on to all eligible purchasers; a claim that post-GST prices were negotiated afresh cannot establish commensurate reduction without transparent supporting evidence. [Paras 15] The objection seeking exclusion of post-GST bookings was rejected. Identification of recipients of profiteered amount - Deposit in Consumer Welfare Fund - whether unpassed benefit attributable to identified homebuyers was required to be returned to them and could not be deposited in the Consumer Welfare Fund? - HELD THAT: - The Consumer Welfare Fund provision is residuary and applies only where eligible recipients genuinely cannot be ascertained or traced despite due diligence. Non-filing of a complaint, difficulty in contacting purchasers, or transfer of the project does not render them unidentifiable where buyer-wise records identify the original allottees. The registered person's obligation to pass on the benefit is not extinguished by transfer of the project. [Paras 16] The net profiteered amount was directed to be returned to the identified homebuyers. Set-off of excess input tax credit benefit - Recipient-specific anti-profiteering obligation - Excess benefit passed to certain homebuyers set off against the benefit due to other homebuyers - HELD THAT: - The obligation to pass on input tax credit benefit is owed to each recipient of the supply. An excess payment to one set of customers creates no right to reduce the supplier's liability towards distinct recipients. The statutory framework confers no power to direct recovery from consumers or permit such adjustment; the principle that a power to grant includes a power to withdraw is inapplicable to private recipients' rights under the anti-profiteering provision. [Paras 17] The plea for set-off or recovery of excess benefit from other customers was rejected. Inclusion of GST in profiteered amount - GST charged on the inflated base price formed part of the profiteered amount notwithstanding its deposit with the Government - HELD THAT: - The relevant question is whether the homebuyer paid an amount not payable absent profiteering, and not whether the supplier retained the tax. GST charged upon the inflated base price is an additional cost borne by the homebuyer; refunding the entire excess consideration, including such GST, restores the homebuyer to the position that would have obtained had the benefit been passed on. [Paras 18] Inclusion of GST in the profiteered amount was upheld. Interest on unpassed input tax credit benefit - Interest from last instalment payment - Interest payable on the amount to be returned to the homebuyers, commencing from payment of the last instalment by each homebuyer - HELD THAT: - The rule providing interest on the amount not passed on is a valid enabling provision within the scope of the anti-profiteering mandate. Since the benefit was computed on a project-wide completion basis and the precise date of collection of the higher amount from each purchaser could not be determined, the date of payment of the last instalment was adopted as a reasonable benchmark for commencement of interest. [Paras 19] Interest at the prescribed rate was directed from the respective dates of payment of the last instalments until actual refund. Prospective operation of anti-profiteering penalty - Penalty under the anti-profiteering provision inserted with effect from 01.01.2020 where the entire contravention had concluded before that date - HELD THAT: - The period of contravention stood completed before the penalty provision came into force. A penal provision cannot be retrospectively applied to conduct completed when the provision was not in operation. [Paras 20] No penalty was leviable. Final Conclusion: The investigation report was accepted and the respondent was held to have failed to pass on the full input tax credit benefit to eligible homebuyers. The unpassed amount, with applicable interest, was directed to be refunded to the identified recipients; no penalty was imposed.
TaxTMI 
of 23307
Join Channel
TaxTMI 