TaxTMI 
TaxTMI 
2018 (9) TMI 1107
X X X X Extracts X X X X
X X X X Extracts X X X X
....ender Kumar* [email protected] 4 Deepak Kumar* [email protected] 5 Gaurav Rohilla, Nitesh Rohilla, Surender Rohilla* [email protected] 6 Razia [email protected] 7 Aarek Mehrotra* [email protected] 8 Neeraj Dale* [email protected] 9 Kuldeep Maan [email protected] 10 Alok Tyagi* [email protected] 11 Mayank Saxena [email protected] 12 Yogesh Upadhyay [email protected] 13 Parteek Sharma* [email protected] 14 Kamal Valecha* [email protected] 15 Narottam Singh* [email protected] 16 Rahul Kapoor* [email protected] 17 Vinod Khanduja* [email protected] 18 Pradeep Jangra* [email protected] 19 Amarjeet Kumar* [email protected] 20 Badri Narayan Meena* [email protected] 21 Harsh Awasthi [email protected] 22 Saurav Kumar Aggarwal* [email protected] 23 Ravi Verma [email protected] 24 Sanjeev Chadha* [email protected] 25 Sangam Shukla [email protected] 26 Udayan Kishore M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed these applications to the Director General of safeguards (DGSG) now redesignated as Director General of Antiprofiteering(DGAP) for detailed investigation. 102 additional applications against the Respondent were also received by the Standing Committee which were also forwarded to the DGAP for investigation. The following are the names of the additional Applicants who had filed applications with the Standing Committee:- S.No. S/Sh. E-mail ID 1 Rohit Yadav [email protected] 2 Bharat Bhushan* [email protected] 3 Deepak Fialok* [email protected] 4 Rajender Kumar* [email protected] 5 Sukhbir Rohilla/Surinder Kumar* [email protected] 6 Aarekh Mehrotra* [email protected] 7 Neeraj Dale* [email protected] 8 Alok Tyagi* [email protected] 9 Kamal Valecha* [email protected] 10 Narottam Singh* [email protected] 11 Vinod Khanduja* [email protected] 12 Amarjeet Kumar* [email protected] 13 B N Meena* [email protected] 14 Saurav Kumar Aggarwal* [email protected] 15 Udayan kishore ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....com 62 Gaurav Kumar* [email protected] 63 Rohit Chopra [email protected] 64 Ashutosh Fotedar [email protected] 65 Kapil Aggarwal [email protected] 66 Gaurav Singla [email protected] 67 Pankaj Kumar [email protected] 68 Sandeep Sharma [email protected] 69 Kiran Mishra [email protected] 70 Saurabh Jain [email protected] 71 Nitesh Rohilla* [email protected] 72 Rajdeep Yadav [email protected] 73 Sachin Batheja [email protected] 74 Souvik Ghosh [email protected] 75 Rajendra Singh Chahar/ Anuraj Singh [email protected] 76 Rajesh Kumar Jain [email protected] 77 Vikas Gupta* [email protected] 78 Rahul Kapoor* [email protected] 79 Anil Dwivedi* [email protected] 80 Amit Kumar Thakur [email protected] 81 Deepak Gupta [email protected] 82 Bansi Lal Mahlawat [email protected] 83 Dharam Narayan Tiwari/ Shashi Vir Singh shashivir@yaho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2016-17. 3. VAT-R1 (Jan-Mar) and CST Form-1 (Jan-Mar) for the period 2016-17. 4. VAT-R1 (Apr-Jun) and CST Form-1 (Apr-Jun) for the period 2017-18. 5. Service Tax Return (ST-3) for the period Oct-Mar, 2016. 6. GSTR-1 Return for the period July, 2017. 7. GSTR-3B Return for the period July, 2017. 8. Two sample copies of demand letters. 9. Purchase invoices of various materials purchased during Apr-Sept., 2017. 10. Annexure-1 (Pre-GST impact of Input Tax Credit on Cost). 11. Annexure-2 (Cost Sheet Performa for Goods/Services). 12. Input Tax Credit (VAT) Ledger Account for the period 2016-17. 13. Summary of purchased materials/inputs. 14. VAT and GST Returns 15. Project Report submitted to RERA 5. The report further states that the Respondent had admitted that the ITC was not available during the year 2016-17 but it was available from 01.07.2017 after introduction of the GST. The Respondent had also submitted the following data as has been depicted in the Table below to show that the ITC on Excise Duty, Countervailing Duty (CVD) and capital goods which was not availab....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... against him. 7. The DGAP's report also states that two of the Applicants viz. S/Sh. Sukhbir Singh and Ashutosh Fotedar vide their joint letter dated 07.05.2018 had submitted that the Respondent could charge maximum allotment rate of Rs. 4,000/- per sq. ft. carpet area which was inclusive of all costs as was prescribed under the Policy. The DGAP has also informed that one of the Applicants viz. Shri Bharat Bhushan Badesara vide his e-mail dated 12.03.2018 had submitted a copy of the 'Buyer's Agreement' executed with the Respondent along with the copies of the demand letters and payment details which have been detailed below:- (Amount in Rs.) S.No. Payment stages Date Basic % Amount Service Tax VAT CGST SGST Total 1 At the time of application 10-04-2015 5% 103182 3189 5417 0 0 111788 2 within 15 days of allotment 15-09-2015 20% 412728 14445 21668 0 0 448841 3 Within 6 months of allotment 15-03-2016 12.50% 257955 0 13543 0 0 271498 4 Within 12 months of allotment 15-09-2016 12.50% 257955 0 13543 0 0 271498 5 Within 18 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2016-17 was Rs. 1,64,52,87,429/- on which VAT liability on him was Rs. 14,91,04,173/-, the DGAP has estimated the VAT liability of the Respondent as 9% of the net taxable value (abated value) and 5.098% of the gross amount of Rs. 2,92,49,55,429/- received from the Applicants. 11. The DGAP has also reported that on examination of the GSTR-3B Returns filed by the Respondent it was revealed that the ratio between the taxable turnover and the ITC availed by him in the post-GST era w.e.f. July 2017 to February 2018 was 7.20%. 12. The DGAP has also mentioned that the Central Government had imposed 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the Construction Service vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and the GST rate on the above Service in respect of the Affordable Housing Schemes was reduced to 8% vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. The DGAP has also analyzed the issue of profiteering for the pre-GST period from April 2016 to June 2017 when VAT was payable @ 5.25% and the post-GST period from July 2017 to January 2018 when the effective GST rate was 12% w.e.f. 01.07.2017 and 8% w.e.f. 25.01.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion when the GST was reduced to 8% w.e.f. 25.01.2018 to February, 2018 as the Respondent had not passed on the net benefit of ITC to the Applicants which had accrued to him. He has also reported that the profiteered amount came to Rs. 7,20,398/- which included the profiteered amount @ 3.35% and GST @ 8% on the profiteered amount. He has also reported that the Respondent had profiteered an amount of Rs. 1,67,25,103/- from the other allottees who had not filed complaints and this amount was required to be deposited in the Consumer Welfare Fund as they were not identifiable. 14. After perusal of the DGAP's report the Authority in its meeting held on 5.07.2018 had decided to hear the Applicants and the Respondent on 23.07.2018. Accordingly notices were issued to all the interested parties. On behalf of the Applicants Sh. Rajesh Kumar Jain, Bharat Bhushan and 6 other Applicants appeared and the DGAP was represented by Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs). On the request of the parties another hearing was held on 01.08.2018 wherein S/Sh. Bharat Bhushan and R. K. Jain along with 12 other Applicants had appeared. During both t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....82/- while the ITC amounted to only Rs. 3,97,12,844/- which was much less than the increase in the price of Steel, hence, the benefit which had accrued due to ITC of GST was set off on account of increase in the price of Steel, which should be taken into consideration before dwelling into the benefit of ITC. 17. Another plea taken by the Respondent is that his sub-contractors were also exempt from Service Tax earlier, but after the implementation of the GST, the sub-contractors had been registered and they had to discharge their tax liabilities, which were being passed on to the Respondent. He has also started that during the period from 1st July, 2017 to 28th February, 2018, sub-contractors were liable to pay Rs. 1,19,14,407/- as GST which was passed on to the Respondent. He has also claimed that this extra amount charged by subcontractors had not been considered as the part of the cost in the post-GST period. 18. The Respondent has also alleged that while he had received 62.50% of the payment due during the pre-GST period, the amount spent on construction during this period was only 25% of the total cost and hence he would receive 37.50% of total payment due during the post....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- per sq. ft. carpet area was fixed and any escalation in the cost had already been taken into account at the time of fixing of the above rate. They also submitted that any increase or decrease in the raw material prices was a market phenomenon which was not related to the GST and therefore, the cost escalation factor was not required to be considered by the Authority. 23. The Applicants have also argued that the extra liability claimed by the Respondent on account of GST Charged by the sub-contractors couldn't be taken in to account since they were also availing ITC on the purchases made by them resulting in reduction of cost of the material purchased by the subcontractors. They further argued that during pre-GST era Composition Scheme was available in the State of Haryana under which 1% VAT was payable which couldn't be passed on to the Applicants. They also alleged that the Respondent had opted to burden the Applicants by collecting VAT @ 5.25%, which had benefited him. They also claimed that during the same period other builders in the State of Haryana had charged 4.5% VAT which could be substantiated with the demand letters issued to the buyers by such builders. Accordingly....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the period before 01.07.2017 the output rate of VAT on the Respondent was 5.25% with an ITC of 1.1% and during the period between 01.07.2017 to 24.01.2018, the output rate of GST was 12% but an additional ITC of 6.1% (7.2%-1.1%) was available to the Respondent, which should have been passed on to the Applicants and 12% GST should have been charged on such reduced amount and therefore, the effective output rate of tax for the Respondent would be 12% of 93.9 (100-6.1) =11.27%. He has also submitted that similarly, for the period after 25.01.2018, the output rate of GST was 8% but additional ITC of 6.1% (7.2%-1.1%) was available to the Respondent which should have been passed on to the Applicants and 8% GST should have been charged on such reduced amount and hence the effective output rate of GST for the Respondent would be 8% of 93.9 (100-6.1) =7.51%. The DGAP has admitted that the effective rate of tax had gone down for the Respondent by 4.15% before 01.07.2017, 4.07% during the period between 01.07.2017 to 24.01.2018 and by 0.31% for the period w.e.f. 25.01.2018 onwards. His report also stated that the provisions of Section 171 of the CGST Act, 2017 were attracted in respect o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 171 that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. In the instant case though rationalization of tax had not resulted in the reduction in the tax rate, the benefit of ITC had been extended to all the goods and services which were utilized by any builder which was not available in the pre-GST era. This fact has not been denied by the Respondent. Since Section 171 not only deals with passing on the benefit of reduction in the rate of tax but also deals with passing on the benefit of ITC therefore the contention made by the Respondent is legally not correct to the extent that there had been increase in the rate of tax from 5.25% to 12% and then 8% and no benefit could be passed on by him to the Applicants as the Respondent had become entitled to claim ITC the benefit of which was required to be passed on by him to the Applicants as per the provisions of Section 171. The Respondent has also admitted that he had become eligible to claim ITC after coming in to force of the GST and hence he was liable to pass on the benefit to the Applicants. 31. It i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... charges, statutory dues or cess whatsoever including Value Added Tax (VAT), G.S.T. Service Tax, etc. on the rates as applicable including any enhancement or increase thereof, even if it is retrospective in effect. The Allottee(s) undertakes to pay such proportionate amount, if any, promptly on demand by the Developer". Therefore the Respondent was obligated to pass on the benefit of ITC in terms of reduction in tax and hence he cannot appropriate the ITC which had become available to him on the GST which had been paid by the Applicants. 32. It is also revealed from the VAT returns filed by the Respondent that he had paid an amount of Rs. 14,91,04,173/- as VAT for a taxable turnover of Rs. 1,64,5287,429/- during the year 2016-17 and his VAT liability was 9% of the net taxable value and his liability was 5.098% of the unabated gross value of Rs. 2,92,49,55,429/-. During the year 2017-18 for the first quarter the taxable turnover was Rs. 7,69,35,214/- while the output tax liability was Rs. 39,21,893/-. Thus the total taxable turnover of these two periods was Rs. 30,01,89,06,44/- while the output tax liability was Rs. 15,30,26,066/- and the ratio of ITC to the taxable turnover was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... there had been rate rationalization and all the raw material was available without CST across the country. Since he has claimed that 75% construction had been done in the post-GST era there was all the more scope for reduction in the cost of construction. Moreover as seen from para 2.2 of the Buyer's Agreement "The allottee shall pay to the Developer 5% of the total cost at the time of application and shall make payment of 20% at the time of allotment i.e. 25% of total sale consideration at the time of signing of this agreement. The allottee agrees and undertakes to pay 75% balance of the total cost in six equated six monthly installments spread over three years period with no interest falling from the due date of payment" (emphasis supplied). Thus every Applicant has paid 5% of the total cost at the time of application, 20% at the time of allotment and 75% balance of the total cost shall be paid in equated six monthly installments spread over three year period. One of the grievances of the Applicants is that 25% of total sale consideration which had been paid at the time of signing of the Buyer's Agreements had earned interest for the Respondent, which had not been taken into con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the subsequent table:- Particulars Amount (in Rs.) Basic Sale Price Collected for both the projects (Rs.) Jul-17 A - Aug-17 B 72,49,48,683 Sep.17 C 1,59,171 Oct,17 D - Nov.17 E 2,58,475 Dec.17 F 2,54,237 Jan.18 G - Total Basic Sale Price Collected for both the projects during July, 2017 to January, 2018 (Rs.) H= Total of A to G 72,56,20,566 GST @ 12% Collected I=H*12% 8,70,74,468 Actual Amount Collected J=H+I 81,26,95,034 Benefit of 6.10% of Basic Sale Price K=H*6.10% 4,42,62,855 Recalibrated Basic Sale Price L=H-K 68,13,57,711 GST@12% to be collected M=L*12% 8,17,62,925 Total Amount to be collected N=L+M 76,31,20,637 Profiteering Amount to be passed on O=J-N 4,95,74,397 S.No. Particulars Period Total Profiteering Amount (Rs.) 1 Profiteering for all Home Buyers July, 2017 to January, 2018 4,95,74,397 2 Profiteering for Applicants Only February, 2018 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....before us but to all the 2476 buyers as they are identifiable. Respondent is further directed to refund or reduce the amount, to the extent calculated above to each and every buyer at the time of collecting the last installment along with the interest @ 18% per annum to be calculated from the date of the receipt of the excess amount from each buyer, within a period of 3 months from the date of receipt of this order. 41. It is evident from the above that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled them to pay more GST than that they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of the CGST Act, 2017 and therefore, he is liable for imposition of penalty. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 122 of the above Act read with rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. ....