AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2019 (6) TMI 1170
X X X X Extracts X X X X
X X X X Extracts X X X X
....profiteering under Rule 128 of the CGST Rules, 2017. The Applicant No. 1 had stated that the Respondent had resorted to profiteering in respect of supply of construction service related to purchase of Villa No. B-02 in the Respondent's project "City Park Township", Lodhipur, Shahjahanpur, Uttar Pradesh- 242001. The Applicant No. 1 had also alleged that the Respondent had increased the price of the Villa after implementation of the Goods & Service Tax (GST) w.e.f. 01.07.2017 and had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the Villa purchased by him. He had also claimed that the Respondent had committed contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. 2. The Standing Committee on Anti-profiteering vide the minutes of its meeting held on 25.05.2018 had requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and collect evidence necessary to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients or not? 3. After examination of the application ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igation has been carried out from 01.07.2017 to 30.06.2018. 6. The Respondent had submitted replies to the notice issued by the DGAP vide his letters dated 30.06.2018, 09.07.2018, 17.07.2018, 27.07.2018, 14.08.2018, 28.08.2018, 07.09.2018, 11.09.2018, 03.10.2018, 1 1.10.2018, 15.10.2018 and 26.10.2018 and stated that there were complexities in construction business and he was in the process of computing the benefit of additional ITC available to him after implementation of the GST and he had assured his customers that any benefit which would accrue to him post-GST, after completion of the project, shall be duly passed on at the time of giving possession, so that accurate benefit could be passed on to the customers. 7. The Respondent further stated that he was involved in a single project, viz., "City Park" which comprises of both Villas and Plots (Land), the details of which are given in the Table-'B' below:- Table- 'B' S.No. Type Total No. of Plots (Land) Total Plot Area (SQ. MTR) Total No. of Villas Total Area of Villas (SQ. MTR) 1 A 79 13,199.32 4 663.32 2 B 78 10,874.40 24 3,320.38 3 C 105 10,691.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... GSTR-1 returns for the period July, 2017 to June, 2018, Copies of GSTR-3B returns for the period July, 2017 to June, 2018, Copies of VAT & ST-3 returns for the period April, 2016 to June, 2017, Copies of all demand letters and tripartite agreement along with allotment letter issued to the applicant, Copy of statutory Audit Report for the FY 2016-17 including Director's Report, Copy of provisional Financial Statement for FY 2017-18, Tax rates - pre-GST and post-CST, Copy of Electronic Credit Ledger for the period 01.07.2017 to 30.06.2018, Copy of Electronic Cash Ledger for the period 01.07.2017 to 30.06.2018, CENVAT/lnput Tax Credit register for the period April, 2016 to June, 2018, Project Report submitted to RERA and the list of home buyers in the project "City Park". 11. The DGAP vide his Report dated 29.10.2018 has further informed that the main issue for determination in the present case was whether there was reduction in the rate of tax or the benefit of ITC was available to the Respondent on the supply of construction service after implementation of the GST w.e.f. 01.07.2017 and if so, whether any benefit was required to be passed on to the recipients by him in terms of S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laint and hence, investigation should be closed/dropped. Upon examining this submission carefully, the DGAP found that while the present proceedings must flow from an application but there was no statutory provision for its withdrawal. Also, in terms of Rule 129 of the CGST Rules, 2017, the DGAP was under statutory obligation to complete the investigation in case of receipt of any reference from the Standing Committee on Anti-profiteering. For these reasons, the subsequent withdrawal of an application was not a legally valid ground to discontinue the proceedings, the DGAP has claimed. 15. The Respondent had also contended that all the Villas of the project had not been sold and there were uncertainties regarding the sale of these units before receiving the completion certificate from the competent authority. In case completion certificate was received prior to entering into sale agreements and remaining payment of such unsold Villas, proportionate ITC would be required to be reversed in terms of Para 5 of Schedule III of the CGST Act, 2017 read with Section 17 of the said Act and Rule 42 of the CGST Rules, 2017. In this regard, He has noted that para 5 of Schedule-III of the CGS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....luding on the sub-contracts. The DGAP has claimed that from the data submitted by the Respondent which has been verified from the invoices pertaining to the pre-GST period (April, 2016 to June, 2017) and the post-GST period (July, 2017 to June, 2018), the details of the input tax credit availed by the Respondent and the Respondent's taxable turnover during the said periods were furnished in Table-D below. Table- 'D' (Amounts in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) July, 2017 to March, 2018 April, 2018 to June, 2018 Total (Post-GST) (1) (2) (3) (4) (5)=(3)+(4) (6) (7) (8)=(6)+(7) 1 Total Service Tax Credit availed as per Returns (A) 2,91,284 - 2,91,284 - - - 2 Input Tax Credit of GST availed as per Returns (B) - - - 1,50,37,397 18,65,260 1,69,02,657 3 Total Taxable Turnover as per Returns (C) 3,96,49,001 3,92,74,231 7,89,23,232 6,53,08,955 1,03,83,432 7,56,92,387 4 Total Saleable Area of Villas in the project (Sqaure Mtr) (D) 8,993.05 8,993.05 5 Area Sold relevant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 Recalibrated Base Price K=H*(1-E) or 90.32% of H 6,80,42,792 12 GST @ 12% L=K*12% 81,65,135 13 Commensurate demand price M=K+L 7,62,07,927 14 Excess Collection of Demand or Profiteering Amount N=J-M 81,67,546 19. The DGAP has further claimed that it was clear from Table- 'E' given above that the net additional input tax credit of 9.68% of the taxable turnover should have resulted in commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the Central Goods and Services Tax Act, 2017, the benefit of the additional input tax credit that had accrued to the Respondent, was required to be passed on to the recipients. Whereas the Respondent had not contested that any such benefit would eventually be passed on to the recipients at the time of giving possession of the Villa, it was a fact that this had not been done so far. The payments received from the Applicant No. 1 and other recipients did not reflect the benefits available to the Respondent, which meant that the Respondent, had retained the benefits on account of GST. In other words, by not reducin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from the other recipients who were not applicants in the present proceedings. These recipients were identifiable as per the documents on record as the Respondent has provided their names and addresses along with unit nos. allotted to them. Therefore, this additional amount of Rs. 77,89,157/- is required to be returned to such eligible recipients. As observed earlier, the Respondent has supplied construction services in the State of Uttar Pradesh only. 22. The above Report was considered by the Authority in its sitting held on 13.11.2018 and it was decided to hear the Applicants and the Respondent on 28.11.2018. 23. The first hearing was held on 28.11.2018 wherein the Applicant No. 1 was not present; Applicant No. 2 was represented by Ms. Gaytri, Deputy Commissioner and the Respondent was represented by Sh. Adeep Veer Jain, Counsel. The Second hearing was held on 26.12.2018 wherein the Applicant No. 1 was not present; Applicant No. 2 was represented by Sh. Rana Ashok Rajneesh, Assistant Commissioner and the Respondent was represented by Shri Adeep Veer Jain, Counsel. 24. The Respondent has filed written submissions on 28.11.2018 & 26.12.2018 through which he has mentioned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....king full payment as per the demand notice but making the payment as per their convenience resulting in short payment as against the demand notice. Hence, they were not entitled to the interest. The Respondent also submitted that out of the 36 home buyers from whom the Respondent had received payment in the post GST period till 30.06.2018, only 17 home buyers had made the full & final payment against their Agreement Value and rest of the 19 home buyers had not paid their dues in full as per the demand notice/agreement till 30.06.2018. The Respondent added that since these 19 home buyers had not paid the full amounts due from them, they were only eligible to get the commensurate benefit of the ITC but were not eligible for the interest on the same. The Respondent also claimed that Applicant No. 1 had short paid Rs. 6,62,650 (including GST@12% Rs. 78,918/- on basic value of Rs. 5,91,652/-) till 20.11.2018 and hence, as per the calculation of GST benefit he was eligible for GST refund of Rs. 3,78,389/- which he had been credited in his running account but since his dues as on 20.11.2018 were more that the eligible GST benefit he was not eligible for interest on his payment. The Respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ht from the DGAP for verification of payments alongwith interest @18% made to 17 home buyers. On the issues raised by the Respondent through his submissions dated 30.01.2019, the DGAP vide his Report dated 05.04.2019 has intimated that the issues raised by the Respondent had already been covered in the Investigation Report itself. 33. We have carefully perused the DGAP's Report, the written submissions of the Respondent and all the other material placed on record. The issues to be decided by this Authority in this case are as under:- 1) Whether there was any violation of the provisions of Section 171 (1) of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 34. Perusal of Section 171 of the CGST Act shows that it provides as under:- (1). "Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." 35. It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as has been detailed above. The above amount of profiteering includes an amount of Rs. 3,78,389/- including GST @12% on the base amount of Rs. 3,37,847/- which has been profiteered by the Respondent from the Applicant No. 1. The Respondent has already refunded Rs. 3,78,389/- to the Applicant No. 1 through credit note. The Respondent has also refunded Rs. 81,67,546/- to 36 Home buyers through credit notes and cheques. He has also paid an amount of Rs. 3,00,126/- as interest @18% to only 17 home buyers who have made the full & final payment against their Agreement Value and rest of the 19 home buyers have not been paid as interest. However, he has not paid interest @18% to the Applicant No. 1 from the date from which the above amount was profiteered by him. Therefore, the Respondent is directed to pay interest to the Applicant No. 1 @18% from the above date. He is also directed to refund interest @18% of part payment made by the homebuyers from the date when the above amount was profiteered by him till the date of payment as per the provisions of Rule 133 (3) (b) of the above Rules. The interest shall be paid by the Respondent within a period of 3 months from the date of this order f....