TaxTMI 
TaxTMI 
2019 (11) TMI 818
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....ng by the Respondent, in respect of purchase of Flat No. 2204 in Tower B2, in the Respondent's project. "Runwal My City" situated on Diva Manpada Road, Kalyanshil Road, Dombivili, Thane, Maharashtra - 400612. The above Applicant had stated in his application that the benefit of Input Tax Credit (ITC) had not been passed on to him by the Respondent by way of commensurate reduction in the price of the above flat and the Respondent had also charged from him GST 12% w.e.f. 01.07.2017. 2. The Maharashtra State Screening Committee on Anti-profiteering had examined the said application and found that the Respondent had not passed on the benefit of input tax credit to the above Applicant as the ITC available to the Respondent should have been apportioned against the instalments towards the price of the flat. The above Committee had forwarded the application with its recommendation to the Standing Committee on Anti-profiteering on 15.06.2018 for further action, in terms of Rule 128 (2) of the above Rules. The above recommendation was examined by the Standing Committee on Anti-profiteering in its meeting held on 02.07.2018 and it was decided to forward the complaint to the DGAP, for conduct....
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....K flat in Tower B2 which formed part of Phase I of the above Project. In Phase I, there were 10 towers namely, Tower A1, A2, A3, A4, B1, B2, Cl, 02, C3 and 04. These 10 towers were divided into sub-phases with Towers A2, A4, B2, 03, 04 as My City Phase I- Part 1 (Betawade-1) and Towers A1, A3, B1, C1, C2 as My City Phase I- Part 2 (Betawade-2). Both the phases i.e. My City Phase I- Part 1 (Betawade-1) & My City Phase I- Part 2 (Betawade-2) were registered with the Maharashtra Real Estate Regulatory Authority vide Registration No. P51700000528 & P51700009168 respectively. As the investigation proceedings had been initiated on the application received from the above Applicant, the current investigation proceedings should be strictly restricted to Tower B2 of the Project, as the Applicant had purchased a flat in the above Tower. ii. That with respect to the tax on the construction activity under the GST, construction of a complex or building intended to be sold to a buyer, except where the entire consideration has been received after issuance of the completion certificate from the competent authority or its first occupation, whichever is earlier, is regarded as supply of service and....
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....le- 'A' below:- Table- 'A' (Amount in Rs.) Nature of input tax credit availed in Tran-01 Amount as per Tran 01 Whether pertaining to the Applicant Amount pertaining to Applicant Carry forward of closing balance of Service Tax lying in CENVAT credit account as on 30 June 2017 in terms of Section 140 (1) of CGST Act 35,95,056 No [since it was CENVAT Credit already availed by the Company in the pre-GST regime] - Availment of input tax credit in terms of Section 140 (3) of CGST Act in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to prescribed conditions 47,17,204 Yes, proportionately to the extent of area of unit purchased by him in Phase I [Tower B2] 1,334 Availment of input tax credit in terms of Section 140 (6) of CGST Act in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day subject to prescribed conditions 1,14,37,104 Yes, Proportionately to the extent of area of unit purchased by him in Phase I [Tower B2] 4,308 Availment of input tax credit under Section 142 (11) (c) of CGST Act in respect of tax paid on a....
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.....2018. The Respondent had also assured that the balance amount of benefit would be passed on to the customers along with the demand to be raised subsequently by the Respondent. xi. That the above Applicant had erroneously filed the present complaint against the Respondent for profiteering on account of implementation of the GST and the proceedings initiated on the basis of the said complaint were liable to be dropped. xii. That since the nature of business of the Respondent was providing construction service which was typically provided over a project lifecycle of 3-4 years, there was always a mismatch between the cost incurred on construction and the instalments realized. It was difficult to compute the actual GST benefit due to the reason that the actual purchases of goods or services which eventually would form part of the cost of construction. could vary from the budgeted cost of construction. Further, all the units were not sold at the time of launch of each project/tower and even the payment milestones agreed with each customer varied depending upon factors such as negotiation between the parties and the stage of completion etc. Therefore, adopting a uniform approach in t....
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....st to be incurred, i.e., procurements to be made on or after 01.07.2017 towards the said project and identified such costs towards non-creditable taxes in the pre-GST era which had been factored in the cost of construction and had arrived at the aggregate value of such non-creditable taxes which needed to be passed on to the customers, to the extent of construction services to be provided on or after 01.07.2017. However, for the purpose of passing on the benefits of such non-creditable taxes, the Respondent had considered the total saleable area of the impugned Tower for the following two categories of customers:- (a) Existing customers - to the extent of saleable area of units purchased by them in the pre-GST regime (b) Potential customers - to the extent of saleable area of the units that will be sold under the GST regime xiv. That the benefit, if any, on account of availment of ITC pursuant to the introduction of GST, required to be passed on by way of commensurate reduction in prices, should not be computed in the manner laid down in the recent decision by this Authority in the case of Sukhbir Rohilla and others vs M/s Pyramid infratech Private Limited (Case No. 07/2018 d....
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....rvice Tax, SBC & KKC VAT GST Total 1. EMR 03-01-2015 1.11% 54,000 1,668 - - 55,668 2. Booking 02-02-2015 17.89% 8,67,690 26,812 - - 8,94,502 3. On Commencement of Plinth 01-06-2015 10.00% 4,85,100 16,979 - - 5,02,079 4. On Commencement of 1st & 2nd slab 15-03-2016 3.44% 1,66,874 6,049 - - 1,72,923 5. On Commencement of 3rd & 4th slab 10-10-2016 3.44% 1,66,874 7,509 - - 1,74,383 6. On Commencement of 5th & 6th slab 09-05-2017 3.44% 1,66,874 7,509 - - 1,74,383 7. On Commencement of 7th & 8th slab 10-07-2017 3.44% 1,66,874 - - 20,025 1,86,899 8. On Commencement of 9th & 10th slab 30-08-2017 3.44% 1,66,874 (6,064) - - 19,297 1,80,107 9. On Commencement of 11th & 12th slab 14-09-2017 3.44% 1,66,874 (6,064) - - 19,297 1,80,107 10. On Commencement of 13th & 14th slab 08-10-2017 3.44% 1,66,874 (6,064) - - 19,297 1,80,107 11. On Commencement of 15th & 16th slab 08-10-2017 3.44% 1,66,874 (6,064) - - 19,297 1,80,107 12. On Commencement of 17th & 18th slab 09-11-2017 3.44% 1,66,874 (6,064) - - 19,297 1,80,107 13. On Commen....
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....ted for every supply of goods or services. It was also for the suppliers of the goods and services to determine the benefit to be passed on by reducing their prices. 13. The DGAP has also stated that the present project did not entirely pertain to the 'Affordable Housing Scheme' which was the issue in respect of the case of Sukhbir Rohilla and others v. M/s. Pyramid Infratech Private Limited = 2018 (12) TMI 707 - NATIONAL ANTI-PROFITEERING AUTHORITY. It was also submitted by the DGAP that in the above case, all the units were sold at the time of launch of the project before the issuance of completion certificate, whereas in the present case the Respondent had not sold all the units till the period of the investigation. It was further submitted by him that other facts like cap on per sq. ft. rate to be charged from the customers, manner of raising demands/invoices and eligibility of credit of the VAT amount paid on the purchases of inputs consequent to opting of State VAT scheme were different in the present case as compared to the Pyramid's case and hence both the cases were clearly distinguishable on facts. 1 4. The DGAP has also noted that para 5 of Schedule-III of the CGST Act....
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....ndent had passed on benefit amounting to Rs. 84,896/- to the above Applicant during the period from July, 2017 to June, 2018 which worked out to 3.20% of the basic amount collected post-GST. The Respondent had also submitted that the balance benefit of Rs. 34,452/-[Rs. 1,19,347/-(as per para-9(h) supra) (-) Rs. 84,896/-] would be passed on to the above Applicant along with the demand letter to be raised subsequently. However, the correctness of the amount of benefit so passed on by the Respondent had to be determined in terms of Rule 129 (6) of the above Rules. Therefore, the ITC available to the Respondent and the taxable amount received by him from the Applicant No. 1 and other recipients post implementation of GST had to be taken into account for determining the benefit of ITC required to be passed on, the DGAP has claimed. 16. Further, the DGAP has also found that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail CENVAT credit of Service Tax paid on input services only. However, the credit of the MVAT paid on the purchase of inputs and CENVAT credit of the Central Excise Duty paid on inputs was not admissible as per the CENVAT Rules....
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.... He has further observed that in view of the change in the GST rate after 01.07.2017, the issue of profiteering had been examined by him in two parts, i.e., by comparing the applicable tax rate and the ITC available for the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.50% and VAT@ 1% were payable (total tax rate of 5.50%) with (1) the post-GST period from July, 2017 to 24.01.2018 when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 30.06.2018 when the effective GST rate was 8%. Accordingly, on the basis of the figures contained in Table-C' above, the comparative figures of ITC availed/available during the pre-GST period and the post-GST period have been furnished by him as per the Table- 'D' below:- Table-'D' (Amount in Rs.) S. No. Particulars Pre*GST Post-GST 1. Period A April, 2016 to June, 2017 01.07.2017 to 24.01.2018 25.01.2018 to 30.06.2018 Total Affordable/Non-Affordable Affordable/Non-Affordable Non-Affordable Affordable 2. Output tax rate (%) B 5.50% 12.00% 12.00% 8.00% 3. Ratio of CENVAT/ Input Tax Credit to Taxable Turnover as per Table - C above (%) C 1.50% 5.27% 5.27% 5.27% ....
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....-) which was the profiteered amount in respect of the above Applicant, as mentioned at Serial No. 359 of Annexure-27. It was also observed by the DGAP that the Respondent had supplied the construction service in the State of Maharashtra only. 21. The above Report was considered by the Authority in its meeting held on 11.12.2018 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 04.01.2019 for hearing. Since, the Respondent had asked for adjournment of the hearing scheduled on 04.01.2019, it was decided to grant next hearing on 11.01.2019. The Respondent again requested for the adjournment vide his e-mail dated 05.01.2019 accordingly next hearing was granted on 17.01.2019. The Respondent further requested for the adjournment vide his letter dated 16.01.2019 accordingly next hearing was fixed on 31.01.2019. During the course of the hearing the Applicant No. 1 did not appear, the DGAP was represented by Sh. R. A. Rajneesh, Assistant Commissioner and the Respondent was represented by Sh. Vidyasagar V., Director (Finance), Sh. A. V. Rajan, Chief Finance Officer, Sh. Rohit Jain, Sh. Gaurav Sogani, Sh. Pratik Shah, Advocates and Sh. Mayur....
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....AP was without sanction of law. He has also argued that it was well settled that in the absence of machinery for assessment of tax, the levy itself was illegal and was liable to be struck down as unconstitutional. He has placed reliance on the judgement of the Hon'ble Supreme Court passed in the case of Commissioner Central Excise and Customs Kerala v. Larsen and Toubro Limited (2016) 1 SCC 170 = 2015 (8) TMI 749 - SUPREME COURT wherein it was held that in the absence of machinery provisions for computation of taxable value in case of composite works contract, levy of Service Tax would become non-existent. 25. The Respondent has also argued that prescribing a methodology for anti-profiteering measures was a legislative function which required that the same should be enshrined in the CGST Act or the Rules, however, no such provision had been made in them nor any mechanism or guiding principles had been framed. The Respondent has also pleaded that Rule 126 of the above Rules had delegated the power to this Authority to frame methodology which was unconstitutional as such delegation was vague and arbitrary as it was settled law that important legislative functions could not be delega....
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.... that a legislation was required to be read in entirety and no part of it could be made otiose or redundant. He has also placed reliance on the decision of the Honble Supreme Court in the case of VoItas Limited v. State of Gujarat 2015 VIL 23 (SC) = 2015 (4) TMI 427 - SUPREME COURT. The Respondent has also contended in the case of Union of India vs. Adani Exports Limited [2001 (134) ELT 596 (SC)] = 2001 (10) TMI 321 - SUPREME COURT it was held that the adjudicating authority was required to pass an order deciding the preliminary objections raised by the assessee and hence the objections raised by him were required to be decided at the outset. 29. The Respondent has further contended that unlike any other manufacturing business or one-time service contract, in a real estate business, the project life-cycle was spread over a period of 3-4 years and at the start of a project, the developer prepared his budget based on his experience and market conditions which was bound to change over the project life cycle due to change in the market conditions, tax laws and prices etc. and therefore the actual cost incurred on the project was known only after the completion of the project and there....
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....n to account the peculiarities of the real estate industry, he had considered the benefit of non-creditable taxes embedded in the construction cost pending as on July 1, 2017 and computed the benefit and distributed the same to all the customers although in the real estate sector where the project itself took 3-4 years for completion it was difficult to accurately compute in advance the benefit which should be passed on to the customers and has accordingly passed on the same and hence, he has complied with the requirements of Section 171 of the CGST Act, 2017. 31. The Respondent has also argued that the DGAP in his Report had completely ignored the genesis of Section 171 of the above Act as the intention of the legislature was to determine the benefit of ITC which was available to a registered person post introduction of GST and pass on the same to the customers by way of commensurate reduction in prices however, in the case of the Real Estate Sector, the output tax liability under the GST regime had increased as it attracted tax (c) 12%, whereas in the erstwhile regime the outward tax liability was 5.5% only and later on the rate of GST was reduced to 8% in the case of specified ....
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....here is cascading of input taxes on constructed flats, etc. 3. As a result, incidence of Central Excise duty, VAT, Entry Tax, etc. on construction material is also currently borne by the builders, which they pass on to the customers as part of the price charged from them. This is not visible to the customer as it forms a part of the cost of the flat. ............................................. 5. This will change under GST. Under GST, full input credit would be available for offsetting the headline rate of 12%. As a result, the input taxes embedded in the flat will not (8, should not) form a part of the cost of the flat..... 6. The builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/ installments..." On the basis of the above press release, the Respondent has contended that every developer was required to pass on the benefit of Excise Duty and VAT as he was able to avail ITC of the GST. The Respondent has also submitted that the approach prescribed by the Central Board of Indirect Taxes & Customs (CBIC) had further substantiated the basic fundamentals laid down in Section 171 of the CGS....
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....vailable even under the erstwhile regime, any incremental increase in the credit due to increase in the rate of tax could not be considered as part of the benefit. He has also claimed that the ratio of CENVAT/ITC to turnover considered by the DGAP had completely ignored the above fact and hence it should not be accepted. He has further claimed that without admitting, the methodology adopted by the DGAP to determine the profiteered amount for the period upto 30.06.2018 without taking in to account the increase in the rate of tax was incorrect and if the above increase in the rate of tax was considered the ratio of benefit would be reduced to 2.64% as opposed to 3.51%. 34. The Respondent has also urged that the DGAP had compared the percentage of credit availed to taxable turnover for the period from April, 2016 to June, 2017 (pre-GST) with July, 2017 till June, 2018 (post GST) as was mentioned in the returns filed by the Respondent to arrive at the additional ITC, however, unlike other supplies which were one-time transactions, the construction service was continuous, the cost of which was spread over a long period and therefore, the amount of expenditure and the selling time and v....
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....iew the nature of the business and the several amendments which had been made since introduction of the GST and therefore, the insistence of the DGAP to pass on the benefit immediately was not tenable. 37. The Respondent has also argued that the DGAP, despite accepting that the facts of the present case were different than those of the Pyramid Infratech case, had proceeded to determine profiteering in the manner laid down in the above case and had only provided the benefit of unsold inventory while computing the benefit in terms of the provisions of Section 171 of the CGST Act, 2017. 38. The Respondent has also filed additional submissions dated 11.02.2019 vide which he has submitted Service Tax Returns (Annexure-A), GSTR-3B Returns (Annexure-B), Revised Table C (Annexure-C). Revised Estimated Cost of the project (Annexure-D). Copy of RERA Certificate (Annexure-E), Affidavit of unsold area (Annexure-F) and list of customers to whom benefit of ITC had been passed on (Annexure-G). 39. The Respondent has also filed submissions on 22.02.2019 in which the following additional objections have been raised by him:- a) That in a Real Estate Project, the credit availed in a particular ....
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....the GST regime, the said taxes and duties did not remain as costs in the transactions and hence, in terms of Section 171 of the CGST Act, this benefit to the Respondent was required to be passed on to the customers accordingly, he had appropriately computed such non-creditable taxes and had started passing on these benefits to the customers including the above Applicant. c) That the methodology adopted by the DGAP in Table C of the impugned Report to compute the additional benefit needed to be revised on account of the turnover considered for the said purpose. The turnover considered by the DGAP in Table C was the gross value of demand letters issued by the Respondent to his customers whereas the ratio should be based on the taxable turnover (i.e. Gross Turnover less abatement) on which the Respondent was liable to pay tax. The taxable turnover would be determined as follows - * Pre-GST Regime - The taxable turnover to be considered for pre-GST regime should be the abated value i.e. gross demand less 70% abatement * Post-GST Regime - Under the GST regime, the turnover on which the Respondent is liable to pay tax in respect of an under-construction unit would be the 2/3rd of t....
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....e had already dealt with the statutory provisions covering the issue in his earlier Report. As regards, constitutionality or otherwise of the provisions, the DGAP has offered no comments as this was a legal issue to be decided in the adjudication. c. On the issue of period of Investigation: The DGAP has submitted that the investigation Report covered the period from 01.07.2017 to 30.06.2018. Therefore, the estimated project cost and the ITC that would be available in future, had not been taken into account. d. On the issue of computation to be applied for calculation of profiteering:- The DGAP has stated that in terms of the provisions of Section 171 (1) of the above Act, the benefit of ITC availed by the Respondent needed to be quantified and passed on to the recipients, which had been quantified in his Report dated 10.12.2018 and the methodology adopted by him was in consonance with the provisions of the above Section. e. On the issue of base of profiteering and period of profiteering: The DGAP has submitted that, in his Report dated 10.12.2018, the increase in the ITC availed by the Respondent as a percentage of the Respondent's total turnover in the post GST period had be....
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....ST) and for the period from July, 2017 to June, 2018 (post-GST), as has been furnished in the table below:- (Amount in Rs.) S.No. Particulars April,2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) July, 2017 to June, 2018 (Post-GST) (1) (2) (3) (4) (5)=(3)+(4) (8)=(6)+(7) 1 CENVAT of Service Tax Paid on Input Services (A) 32,73,146 22,75,091 53,48,237 - 2 Input Tax Credit of GST Availed (B) - - - 5,67,30,715 3 Total Turnover (before adjusting benefit of Input tax credit passed on by the Respondent (C) 10,41,83,200 9,17,49,459 19,59,32,659 82,78,03,642 4 Total Saleable Area of flats in the project (Square Ft.) (D) 3,26,638 3,26,638 5 Area Sold relevant to Taxable turnover as per Home buyers List (E) 2,11,100 2,51,342 6 Relevant CENVAT/lnput Tax Credit (F)= [(A)*(E)/(D)] or [(B)*(E)/(D)] 34,56,462 4,36,53,263 7 Ratio of CENVAT/ Input Tax Credit to Taxable Turnover [(I)=(H)/(E)] 1.76% 5.27% 43. The DGAP has stated from the above Table that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 1.76% and during the post-GST period (July, 20....
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....rued to the Respondent, was required to be passed on to the recipients. 46. The DGAP on the basis of the aforesaid CENVAT/ITC availability in the pre-GST and the post-GST periods and the details of the amount collected by the Respondent from the above Applicant and the other home buyers during the period from 01.07.2017 to 30.06.2018 has computed the amount of benefit of ITC that had not been passed on by the Respondent to the recipients or in other words, the profiteered amount as Rs. 3,15,96,095/- which included GST (@ 12% or 8%) on the base profiteered amount of Rs. 2,86,44,653/-. The home buyer and unit no. wise break-up of this amount has been given in Revised Annexure-27 by him. This amount was inclusive of Rs. 98,808/- (including GST on the base amount of Rs. 89,418/-) which was the profiteered amount in respect of the Applicant No. 1. 47. The DGAP has further stated that the above computation of the profiteered amount was with respect to the 495 home buyers, whereas the Respondent had booked 537 flats till 30.06.2018. Out of these 537 flats, 42 customers had not paid any consideration during the period from 01.07.2017 to 30.06.2018 (post-GST period under investigation), t....
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..../- from the above Applicant which included both the profiteered amount (c) 3.35% of the basic price and GST on the said profiteered amount, however, the Respondent had claimed to have suo-moto passed on Rs. 93,875/- to the Applicant No. 1 which has been duty verified by the DGAP from the demand letters issued by the Respondent to the above Applicant, therefore, the Respondent as per Annexure-28 had profiteered an amount of Rs. 4,933/- [Rs. 98,808/- (-) Rs. 93,875/-] from him. The DGAP has also claimed that the investigation appeared to indicate that the Respondent had also realized an additional amount of Rs. 60,81,718/-(Annexure-28) which included both the profiteered amount @ 3.35% of the basic price and GST on the said profiteered amount from 332 other recipients who were not Applicants in the present proceedings. He has further claimed that these recipients were identifiable as the Respondent had provided their names and addresses along with the unit no. allotted to them, therefore, this additional amount of Rs. 60,81.718/- was required to be returned to such eligible recipients. The DGAP has also intimated that the Respondent had profiteered an amount of Rs. 1,22,79,124/- from....
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....lementation of the GST. He has further submitted that DGAP had admitted that the Respondent had passed on benefit of Rs. 3,00,75,576 to his customers which established that the Respondent had not retained the benefit and had passed on the same. The Respondent has also stated that nowhere it was provided that an equal amount of benefit was required to be passed on to the customers as it was difficult to do so in the real estate sector and hence it needed to be decided on case to case basis. He has further stated that once it was proved that the registered person had correctly computed the benefit and had not retained but passed on the same to the customers, he had complied with the provision of the Section 171 of the CGST Act although some customers might have benefitted more than the others. He has accordingly, contended that the additional amount required to be passed on to the customers was only Rs. 15,20,519 (3,15,96,095 - 3,00,75,576) and not Rs. 60,81,718. 55. The Respondent has also argued that Rs. 34,44,408/- had already been passed on by way of credit notes in the month of March, 2019 as per the details given vide Annexure-2 of his submissions and the balance amount of Rs.....
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....objections raised by the Respondent had been addressed in his previous Reports. 57. We have carefully considered all the Reports filed by the DGAP, submissions of the Respondent and the other material placed on record and find that the Applicant No. 1 had purchased Flat No. 2204 in Tower-B2 in "My City Phase I-Part 1 (Betawade-1) project" floated by the Respondent comprising of Towers A3, A4, B2, 03 and C4 which was registered with MRERA vide Registration No. P51700000528. The above project formed part of his "Runwal My City" project located in Dombivili, Thane, Maharashtra and the Applicant No. 1 had purchased the above flat for total consideration of Rs. 48,51,000/-(Excluding Taxes) as per the details furnished by the DGAP vide Table B of his Report dated 10.12.2018. It is also revealed from the record that the above Applicant vide his complaint dated 31.05.2018 had alleged that the Respondent was not passing on the commensurate benefit of ITC to him in spite of the fact that he was availing ITC on the purchase of the inputs at higher rates of GST which had resulted in benefit of additional ITC to him and was also charging GST from him @ 12%. The above complaint was examined by ....
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....in abeyance. However, this contention of the Respondent is not tenable since any recommendation made by the GOM would be effective prospectively only and would have no impact on the eligibility of the Respondent to avail benefit of ITC and pass on the same to his customers pertaining to the period of the current investigation w.e.f. 01.07.2017 to 30.06.2018 and therefore, there is no ground to keep the present proceedings in abeyance. 60. The Respondent has also claimed that under the GST laws no mechanism or methodology has been provided for implementing anti-profiteering measures in the absence of which the investigation carried out by the DGAP was without sanction of law. In this connection it would be pertinent to mention that Section 171 (1) of the CGST Act, 2017 clearly states that Any reduction in the 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". Therefore, the intention of the legislature is amply clear from the above provision which requires that the benefit of tax reduction or ITC is required to be passed on to the customers by commensurate reduction in pr....
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....ed on this Authority. Hence, the objections raised by the Respondent in this regard are frivolous and without legal force. 61. The Respondent has also argued that it was well settled that in the absence of machinery for assessment of tax, the levy itself was illegal. However, perusal of Section 171 (2) of the above Act and the Rules framed under it shows that the Central Govt. has been empowered to constitute an Authority to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of goods or services or both supplied by him. In exercise of the above power the Central Govt. has constituted this Authority vide Office Order No. 343/2017 dated 28th November, 2017 to ensure that both the above benefits are passed on to the customers. Vide Rule 123 of the above Rules it has also been provided to constitute the Standing Committee and the State level Screening Committees to prima facie establish the veracity of the complaints made against non-passing of the above benefits. Under Rule 129 a full-fledged investigating machinery has been provided by creating the office of DGAP to enqui....
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....d and others 2015 (9) SCC 209 = 2015 (7) TMI 1130 - SUPREME COURT in his support. However, in this case the issue involved was fixing of the maximum retail price of the gas on which it could be sold, however in the present case no such direction has been sought to be passed by the DGAP through his present Reports and hence the argument advanced by the Respondent on the basis of the above judgement cannot be accepted. 65. The Respondent has also relied on the case of British India Corporation Ltd. v. CCE 1978 (2) ELT J307 (SC) = 1962 (8) TMI 2 - SUPREME COURT and stated that the entire concept of passing on the benefit of tax to the customers was not envisaged through a tax law as the levy of tax under the GST was on the supplier and it was for him to choose the method of passing it on to the customers or to bear the burden himself. In this connection it would be appropriate to mention that no tax has been levied on the Respondent to pass on the benefit of ITC rather he is required to pass on the amount which he has received as ITC on the tax which he has paid on his inward supplies of goods and services, from the public exchequer. As per the provisions of Section 171 he has no cho....
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.... claims that the provisions of the above Section were not clear and the same were to be read in entirety and could not be made redundant. 68. The Respondent has also submitted that in the case of Union of India v. Adani Exports Limited 2001 (134) ELT 596 (SC) = 2001 (10) TMI 321 - SUPREME COURT it was held that the adjudicating authority was required to pass an order deciding the preliminary objections raised by the assessee and hence the objections raised by him were required to be decided at the outset. Perusal of the facts of the above case shows that the issue raised in this case pertained to the territorial jurisdiction of the Hon'ble High Court of Gujarat to entertain the appeals filed by the above Respondent. However, in the present case the Respondent has raised no preliminary objection against the territorial jurisdiction of this Authority and therefore, it is respectfully submitted that the above judgement is not being followed. 69. The Respondent has vehemently argued that unlike any other manufacturing business the project life-cycle in the Real Estate -Sector was spread over a period of 3-4 years and therefore, the actual ITC benefit could be computed only at the fin....
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.... has been computed by the DGAP on the unsold units and no benefit is required to be passed on such units. Therefore. all the claims made by the Respondent on the above grounds are not tenable. 70. The Respondent has also contended that under the GST regime the rate of tax had been increased to 12% and then reduced to 8% for affordable housing whereas in the erstwhile regime the outward tax liability was 5.5% and therefore, there has been no reduction in the rate of tax and on the contrary the tax liability of the Respondent had increased. In this connection it is mentioned that as per the provisions of Section 171 (1) of the above Act both the benefits of tax reduction and additional ITC are required to be passed on. It is apparent from Table D supra that the increase in the rate of tax post-GST was 6.50% for general housing and 2.50% in respect of affordable housing and therefore, no benefit on account of tax reduction is required to be passed on in the present case. However, there has been increase in the benefit on account of additional ITC of 3.51% of the turnover which is required to be passed on by the Respondent. This benefit would not be reduced to 2.64% as has been claime....
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....that the benefit of additional ITC availed by the Respondent should be passed on to the recipients which cannot be done unless comparison of the pre-GST CENVAT/ITC availed on the taxes paid is made with the benefit of ITC availed post-GST. Further, the above computation does not take into account the benefit of CENVAT available on the services which was being availed by, the Respondent during the pre-GST period as is apparent from the perusal of Table C supra but it takes into account the difference between the above two ITCs. It is also clear that the above benefit has been calculated on the basis of the net difference in the ITC pre-GST and post-GST which does not get affected due to increase in the rate of the Service Tax. Hence, the computation of benefit made by the DGAP is correct and the argument advanced in this behalf by the Respondent is not correct. 74. The Respondent has also claimed that the DGAP has wrongly compared the percentage of ITC availed to taxable turnover to arrive at the additional ITC. He has further claimed that due to the long period taken for completion of the project the ratio calculated by the DGAP would invariably differ from project to project and ....
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....ted. However, the above claim of the Respondent is not correct as the profiteered amount has been calculated by computing the ratio of the CENVAT/ITC to the turnover keeping in view the area sold relevant to the turnover as per the list of home buyers supplied by the Respondent as well as the relevant CENVAT/ITC availed during the pre and post-GST period as is clear from Table C of the Report of the DGAP dated 10.12.2018. The DGAP has computed the ratio of ITC to the turnover for the period from 01.07.2017 2017 to 30.06.2018 and compared it with the ratio of ITC to the CENVAT/ITC availed in the pre-GST period from 01.04.2016 to 30.06.2017 therefore, the period considered by him in his Report is reasonable and comparable. Hence, there is no question of computation of distorted amount of profiteering. It is also clear from the above Table that the above ratio has been calculated w.e.f. 01.07.2017 to 30.06.2019 only and final computation of the profiteered amount shall be done by the Respondent after issue of the OC and hence in case any under or over payment of the ITC benefit has been made the same can be adjusted by the Respondent. 77. The Respondent has also stated that the metho....
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....s passed on an excess benefit of Rs. 8,26,069/-(Rs. 8,21,511+4558) However, the Respondent has repeatedly claimed in his submissions that this amount has been passed as a discount and any amount passed as a discount cannot be considered to be the passing on of the benefit of ITC as the discount is passed from the profit margins. Similarly he has also claimed that the above amount has been passed on by way of price negotiations and hence the same cannot be treated to have been passed as a benefit of ITC. The above amount except the amount which has been passed on to the Applicant No. 1 has also not been verified by the DGAP. Due to the above reasons the above amount cannot be taken to have been passed on account of the ITC benefit. 80. Perusal of Annexure-G of the submissions dated 11.02.2019 filed by the Respondent shows that it contains the details of the ITC benefit of Rs. 3,23,60,080/- and Rs. 3,00,75,576/- which the Respondent has claimed to have passed on 31.01.2019 and 30.06.2018 respectively, however, both the above amounts have not been verified by the DGAP in his original or the revised Report and also have been claimed to have been passed as discount of due to price nego....
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....he post-GST period he has computed the ratio of CENVAT/ITC to the turnover as per Table A supra of his revised Report. Perusal of Table A shows that it contains the same figures which have been taken by the DGAP while calculating the above ratio in Table C of his first Report dated 10.12.2018 except for the figure of the total turnover for the post-GST period. In Table A this turnover has been taken as Rs. 85,50,64,279/- whereas in Table C it was taken as Rs. 82,78,03,642/- thereby showing an increase of Rs. 2,72,60,637/- due to inclusion of the amount of benefit of ITC which the Respondent has claimed to have passed on post implementation of GST, as has been mentioned against Serial No. 6 of the Table B of the revised Report. However. Table C of the revised Report dated 11.03.2019 shows the amount of benefit of ITC passed on as Rs. 3,00,75,576/-. The amount of turnover mentioned against Serial No. 3 of Table C of the Report dated 10.12.2019 has been taken by the DGAP from the GSTR-3B Returns as Rs. 82,78,03,642/- whereas the same amount has been taken as Rs. 85,50,64,279/- as has been mentioned against Serial No. 3 of Table A of his revised Report, as per the information supplied ....
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.... Rs. 3,15,96,095/- can not be held to be correct and accordingly, the details of the above amount mentioned in revised Annexure-27 can also not be taken in to account to pass on the benefit of ITC. 84. The DGAP has also submitted that the computation of the profiteered amount was with respect to the 495 home buyers, whereas the Respondent had booked 537 flats till 30.06.2018. Out of these 537 flats, 42 customers had not paid any consideration during the period from 01.07.2017 to 30.06.2018 therefore, if the ITC in respect of these 42 units was taken into account to calculate the profiteered amount in respect of the 495 units where payments had been received post GST, the ITC as a percentage of taxable turnover would be erroneous. Therefore, the profiteering in respect of these 42 units should be calculated when the consideration would be received in the post-GST period, by taking into account the proportionate ITC in respect of such units. The above contention of the DGAP is justified and hence the same can be taken to be correct. 85. The DGAP has also stated that the Respondent has claimed that he has passed on the benefit of Rs. 3,00,75,576/- to the home buyers who had booked t....
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....t had provided their names and addresses along with the unit no. allotted to them, therefore, this additional amount of Rs. 60,81,718/- was required to be returned to such eligible recipients. The DGAP has also intimated that the Respondent had profiteered an amount of Rs. 1,22,79,1241- from the rest 162 flat buyers and claimed to have passed on benefit of Rs. 1,68,45,255/- to them (Annexure-29) which was in excess of the benefit which he was required to pass on which the DGAP has claimed that the same could not be set off against the additional benefit to be passed on to the above recipients. However, as per the detailed reasons given above the benefit of ITC claimed to have been passed on by the Respondent as has been mentioned by the DGAP in Annexures-28 and 29 of his Report is not correct and hence the same can not be taken in to account while computing the benefit of ITC which is required to be passed on to the flat buyers. 87. The DGAP has also stated that the present investigation covered the period from 01.07.2017 to 30.06.2018 only and profiteering, if any, for the period post June, 2018, had not been examined as the exact quantum of ITC that would be available to the Res....
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....uo-moto passed on the benefit of ITC of Rs. 93,875/- to him and hence the balance amount of Rs. 4,9331- only was required to be passed to him. However, since the details of the computations of the benefit of ITC given in the revised Report have not been held to be correct and hence the above Applicant is held entitled to an amount of Rs. 15,336/- as benefit of ITC. Accordingly, the balance amount of Rs. 3,19,49,275/- is directed to be passed on to the flat buyers, who are identifiable as per the details given in Annexure-27 of the Report dated 10.12.2018, without taking in to account the benefit of ITC which has been claimed to have been passed on by the Respondent to his recipients except in the case of the above Applicant in respect of whom the benefit of ITC passed has been duly verified by the DGAP. Needless to mention that the above amount of benefit of ITC shall be passed on along with interest (c) 18% per annum payable from the date from which the additional amount was collected by the Respondent from the flat buyers till the payment is received by them. The above amount shall further be passed within a period of 3 months from the date of this Order failing which the same sh....