TaxTMI 
TaxTMI 
2019 (11) TMI 818
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....17 the Applicant No. 1 had alleged profiteering 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....
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....ity" was being constructed in a phased manner in which the Applicant No. 1 had purchased a 2 BHK 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 c....
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....espondent had availed and carried forwarded ITC at the Company level out of which, the details of input tax credit attributable to the above Applicant were furnished in Table- '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 1,1....
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....passed on to the above Applicant. The details of benefits along with the break-up of the amount of benefit passed on to the above Applicant till date along with sample demand letter evidencing the same, was enclosed with Respondent's letter dated 21.08.2018. 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 un....
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....e procurements to be made in the GST regime for which ITC was now available, should be passed on to the customers by way of commensurate reduction in the price of the construction of residential complex services. For that purpose, the Respondent had considered the total cost 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 pu....
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....ed copies of demand letters and the payment schedule to the DGAP for the purchase of an apartment measuring 541.45 Sq.ft. at the basic sale price of Rs. 8,959/- per sq. ft. by the above Applicant. The details of amounts and taxes paid by the Applicant to the Respondent are furnished in the Table-'B' below:- Table-'B' (Amount in Rs.) Sr.No. Payment Stages Due Date Basic % BSP Benefit Passed on Service 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 ....
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....ule 129 (6) of the above Rules. Therefore, the ITC available to the Respondent and the taxable amount received by him from the above Applicant and the other recipients post implementation of the GST had to be taken into account for determining the benefit of ITC required to be passed on. 12. The Respondent had contended before the DGAP that neither the GST Act nor the Rules had provided any mechanism for computation of the above benefits, in the absence of which, nature of his business was required to be considered for computing the relevant benefits. However, the DGAP has stated that the provisions of Section 171 were very clear which provided that any reduction in the rate of tax or the benefit of ITC had to be passed on to the recipients by way of commensurate reduction in the prices, which implied that every person who was a recipient of supply of goods or services must get such benefit and the same had to be calculated 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 'Afforda....
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....nclude supplies on which the recipient is liable to pay tax on reverse charge basis. transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". The DGAP has concluded from the above that the ITTC pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST. 15. The DGAP has also observed that the Respondent had claimed in his letter dated 20.08.2018 that the above Applicant had been informed from time to time that the benefit of ITC accruing to him, if any, on account of introduction of GST would be passed on to him. It was further seen from the payment schedule and demand letters raised post-GST, furnished as a part of the letter dated 20.08.2018 of the Respondent, that the Respondent 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....
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....nbsp; 4,36,53,263 7 Ratio of CENVAT/ Input Tax Credit to Taxable Turnover [(I)=(H)/(E)] 1.76% 5.27% 17. The DGAP has further found 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, 2017 to June, 2018), it was 5.27% which clearly confirmed that post-GST, the Respondent had benefited from additional input tax credit to the tune of 3.51% [5.27% (-) 1.76%] of the taxable turnover. 18. The DGAP has also observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 113rd abatement on value) on construction service vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable and low-cost houses up to a carpet area of 60 square metres per house was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. He has further observed that in view of the change in the GST rate after 01.07.2017, the issue of profiteering ....
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....hat the additional ITC of 3.51% of the taxable turnover should have resulted in the commensurate reduction in the base prices as well as cum-tax prices. Therefore, in terms of Section 171 of the above Act, the benefit of the additional ITC was required to be passed on to the recipients. He has further noted that the Respondent had not contested that this benefit would have to be passed on to the recipients and the Respondent had submitted that he had passed on an amount of Rs. 84,896/- (i.e. 3.20% of the basic amount collected post-GST) to the above Applicant which had been duly verified by the DGAP from the demand letters submitted by the Respondent. 20. The DGAP has also claimed on the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the above Applicant and the other home buyers that during the period from 01.07.2017 to 30.06.2018, the amount of benefit of ITC not passed on, or in other words, the profiteered amount was Rs. 3,20,49,507/- which included GST on the base profiteered amount of Rs. 2,90,55,908/-. The home buyer and unit no. wise break-up of this amount have been given in Annexure-27 of th....
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....by the Applicant No. 1 who had purchased a 2 BHK flat in Tower B2 of the project alleging that he had profiteered by not passing on the benefit of ITC. 23. The Respondent has further stated that the GST Council had constituted a Group of 7 Ministers (GOM) as per the Press Release dated January 15, 2019 to analyse the tax rates of the Real Estate Sector for suggesting a Composition Scheme, to examine the various aspects of levy of GST on Transfer of Development Rights (TDSR) and Development Rights in a joint Development Agreement, to examine the legality of inclusion/exclusion of land or any other ingredient, to suggest valuation mechanism and to examine and suggest any other aspect relevant to boost the Estate Sector. The Respondent has also claimed that the entire dynamics of the GST implication on the above Sector might change radically after the recommendations of the GOM were received and therefore, the present proceedings should be kept in abeyance till his project was completed as the GST Law was still evolving and any assumptions made while computing the benefits might significantly change. 24. The Respondent has further claimed that under the GST laws no mechanism or ....
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.... (8) TMI 2 - SUPREME COURT which states as under:- "The contention that this duty does not amount to a duty of excise because it cannot be passed on by the petitioner to the consumer was not raised before us. It was mentioned in the petition. An Excise Duty is a duty on production and though according to the economists. it is an indirect tax capable of being passed on to the consumer as part of the price yet the mere passing on of the duty is not its essential characteristic. Even if borne by producer or manufacturer it does not cease to be a duty of excise. The nature of such a duty was explained in the very first case of the Federal Court and subsequently in others of the Federal Court, the Privy Council and this Court, but this ground continues to be taken and we are surprised that it was raised again." 28. The Respondent has also claimed that the DGAP had made it mandatory for him to pass on the credit availed by him to the consumers and such interpretation of the anti-profiteering provisions made by the DGAP was unconstitutional and against the tenant of taxation laws. He has further claimed that if the exercise was only a mathematical calculation then the legislat....
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....t this Authority was required to examine whether ITC availed by a registered person or reduction in the rate of tax had actually resulted in commensurate reduction in the price, however, the above Act was silent on the modus operandi to be adopted for the computation of the benefit, the methodology to be adopted and the timing of passing on the said benefit. He has also contended that the intention of the legislature was to provide rules with regard to the computation of benefit accruing on account of transitioning into GST regime however, there was no mechanism in place to compute commensurate reduction in prices as there was no methodology for determining the meaning of the term "commensurate reduction in prices." More importantly, the CGST Act did not provide any time frame within which such commensurate reduction in prices was to be passed on. The Respondent has further contended that Rule 122 to 137 of the above Rules also did not provide any methodology for determining the meaning of the term 'commensurate reduction' in prices and in the absence of any prescribed methodology it was important to adopt a logical method which could satisfy the intention of the legislature and ra....
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....reditable costs and had started passing on the benefit to the customers including the above Applicant. The Respondent has further claimed that in respect of the flat buyers who had purchased them in the pre-GST regime, the benefit of ITC payable to them had been passed on by way of discount at the time of raising of the invoices and in respect of the customers to whom units had been sold under the GST regime, the benefit of ITC had been passed on by way of price negotiations, at the time of execution of the sale agreements. He has also stated that he always had the intention to pass on the above benefit even though the same would actually be known to him only at the end of the completion of the project. The Respondent has also referred to the Press Release No. F. No. 296/07/2017-CX.9 dated 15 June 2017 which reads as below:- "2. Central Excise duty is payable on most construction material @12.5%. It is higher in case of cement. in addition. VAT is also payable on construction material @12.5% to 14.5% in most of the States. In addition, construction material also presently suffer Entry Tax levied by the States. Input Tax Credit of the above taxes is not currently allowed fo....
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....LR 527." On the basis of the above observation, the Respondent has stated that the tax authorities and the adjudicating authorities while interpreting the issues pertaining to the anti-profiteering measures may primarily infer the true intention of the legislature while interpreting these measures. He has also stated that in the present case, the DGAP had computed the amount of benefit by merely arriving at the difference of ratio of CENVAT Credit availed to taxable turnover in the pre-GST regime vis-a-vis the ratio of ITC to taxable turnover during the period from July 2017 to June 2018, which was clearly not in line with the intention of Section 171 of the CGST Act, 2017. The Respondent has also argued that the term 'Anti-Profiteering' used in Section 171 connoted that no registered person should make additional profits on transition to the GST in respect of the taxes which were not available as credit under the pre-GST regime however, the taxes paid on services were available as credit even under the erstwhile regime and the price was accordingly determined hence, such taxes should not be considered for the purpose of computing benefit under the Anti-Profiteering measures. Th....
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....the discounts already adjusted in the taxable value (basic figure in Table D) leading to a situation wherein the Respondent would be passing the same discount twice to the customers and hence the methodology adopted by the DGAP needed to be revised on account of the double counting of the benefits. 36. The Respondent has also submitted that in terms of Table-D of the impugned Report the total profiteered amount came to Rs. 3,20,49,5071- which included GST amount of Rs. 29,93,599/-. He has further submitted that the GST amount collected from the customers had been duly paid to the Government and therefore the allegation of profiteering was completely absurd and should be ruled out. The Respondent has also claimed that the intention of the Respondent had always been to be law abiding person and he had duly computed the benefit and had also started passing on the same to his customers by way of reduction in the prices including the Applicant No. 1 which was in line with the percentage calculated by the DGAP and was in fact, more than what had been computed by the DGAP. The Respondent has further claimed that the above Act or the Rules did not provide any time frame within which suc....
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....rofiteering ratio would be more distorted since credit availed would be higher during the construction period and much lower in the completion phase of the project. Accordingly, it could be observed that in a real estate business, a ratio based on part of the project lifecycle would never reflect the actual savings to be passed on to the customers and more likely than not provide an incorrect amount of the additional credit as envisaged under Section 171 of the CGST Act. b) That the intention of the legislature was to determine the benefit of ITC on goods or services or both which was available to the registered person post introduction of GST which hitherto was not available as credit (i.e. "non-creditable taxes"), and that such benefit of ITC should be passed on to the customers by way of commensurate reduction in prices. The question of passing on the benefit on account of reduction in the rate of tax did not arise as the tax rate on under-construction units had increased under GST. Under the erstwhile regime, the Respondent had opted for abatement scheme under the Service Tax and the Composition Scheme under MVAT and therefore, was not eligible to avail the credit of t....
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....respect of the taxes not available as credit under the erstwhile regime and hence included in the cost which however, on implementation of GST, did not remain as cost and accordingly such benefit of non-creditable taxes should be passed on to the end customer. The taxes paid on services were available as credit to the Respondent even under the erstwhile regime and the prices were accordingly determined. Since taxes pertaining to services were available as credit under both the regimes, considering such credit while computing the additional benefit on account of Section 171 of the CGST Act would reflect an incorrect profiteered amount. Consequently, credit of taxes paid on services should be excluded for the purpose of computing benefit under the Anti-Profiteering measures. 40. The submissions dated 31.01.2019, 11.02.2019, and 22.02.2019 filed by the Respondent were forwarded to the DGAP for his Report. The DGAP, after taking into consideration all the submissions of the Respondent, has submitted revised investigation Report dated 1 1.03.2019, the brief facts of which are as follows:- a. On the issue of entire investigation/proceeding being without the authority of law a....
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....Revised figures of turnover have been submitted by the DGAP in the subsequent paras. g. On the issue of GST on the profiteered amount: The DGAP has submitted that the price included both the basic price Andy the tax charged on it. Therefore, any excess amount collected from the recipients amounts to profiteering which must be returned to the them. In case the recipients are not identifiable, such amount was required to be deposited in the Consumer Welfare Fund. Moreover, the tax already paid by the Respondent could be adjusted by issuing credit notes, in terms of Section 34 of the CGST Act, 2017. h. On the issue of ITC benefit already passed on to the buyers: The DGAP has submitted that this was a new fact which was not submitted to him during the course off investigation. Revised computations were submitted by the DGAP in the subsequent paras. 41. The DGAP has claimed that on examination of the documents submitted by the Respondent on 31.01.2019, he had sent an e-mail to the Respondent on 07.02.2019, seeking home buyer-wise details of the benefit passed on to the recipients along with the documentary evidence thereof. The Respondent had submitted further docum....
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....12.00% 8.00% 3. Ratio of CENVAT/ Input Tax Credit to Taxable Turnover as per Table - B above (%) C 1.76 5.11 5.11 5.11 4. Increase in input tax credit availed post-GST (%) D=5.11 less 1.76 3.35 3.35 3.35 Analysis of Increase in input tax credit: 5. Net Base Price collected during July, 2017 to June, 2018 E 44,44,07,780 3,21,78,403 35,12,17,460 82,78,03,643 6. Add: Input tax credit benefit passed on by reducing the above instalments F 1,58,53,634 0 1,14,07,003 2,72,60,637 7. Total Base price collected (before adjusting ITC benefit passed on) G=E+F 46,02,61,414 3,21,78,403 36,26,24,463 85,50,64,280 8. GST over Basic Price H=G*12% or 8% 5,52,31,370 38,61,408 2,90,09,957 8,81,02,735 9. Total Demand raised (before adjusting ITC benefit passed on) I=G+H 51,54,92,784 3,60,39,811 39,16,34,420 94,31,67,015 10. Recalibrated Basic Price J=G*(1-D) or 96.65% of G 44,48,42,657 3,11,00,4....
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....ervice had been supplied in the State of Maharashtra only. 48. The Respondent has also claimed that he had passed on the benefit of Rs. 3,00,75,576/- to the home buyers who had booked their flats upto 30.06.2018. A summary of category-wise profiteering and the ITC benefit passed on, was furnished by the DGAP as has been given below:- S.No. Category of Customers No. of Units Area (in Sq.ft.) Amount Received Post GST Profiteered Amt. as per Annex-27 Benefit claimed to have been Passed on by the Respondent Difference Remarks A B C D E F G H=F-G I 1 Applicant 1 541.45 26,69,195 98,808 93,875 4,933 Further Benefit to be passed on as per Annex-28 2. Other Than Applicant 332 1,71,978 51,95,42,421 1,92,18,164 1,31,36,446 60,81,718 Further Benefit to be passed on as per Annex-28 3. Other Than Applicant 162 78,823 33,28,52,663 1,22,79,124 1,68,45,255 (45,66,131) Excess Benefit passed on. List Attached as Annex-29 4. Other Than Applicant 42 20,127 - - - - No Consideration Paid Post-GST, No benefit to be passed on 5. Other Th....
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....d 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 Respondent in future could not be determined at this stage, when the construction of the project was yet to be completed. 51. The revised Report filed by the DGAP was considered by the Authority in its meeting held on 03.04.2019 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 23.04.2019. Since, the Respondent had asked for adjournment of the hearing scheduled on 23.04.2019, the Authority decided to accord next hearing on 02.05.2019. The Respondent did not attend the hearing but filed written submissions dated 02.05.2019 on the DGAP's revised Investigation Report dated 11.03.2019. 52. It was observed that most of the objections raised by the Respondent vide his submissions dated 02.05.2019 have been taken on record vide his previous submissions. However, new submissions made by the Respondent are mentioned in the subsequent paras. 53. The Respondent has submitted that vide Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 the ra....
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....prices of the units at the time of execution of the sale agreements. Consequently, Rs. 26,42,243/- had already been passed on to the customers at the time of execution of the Agreements for sale as per Annexure-3 and the allegation of profiteering by the DGAP was not tenable. The Respondent has also submitted his calculations as has been given in the Table below:- Particulars Amount in Rs. Benefit passed on to the customers by way of credit note 34,44,408 Units sold after July 1, 2017 - Benefits passed on while deciding the agreement value of the unit at the time of execution of sale agreement 26,42,243 TOTAL 60,86,650 56. The above submissions of the Respondent were forwarded to the DGAP vide order dated 02.05.2019 and the DGAP vide his final Report dated 15.05.2019 has submitted that the ITC availed by the Respondent needed to be quantified and passed on to the recipients, which had been quantified in his revised Report dated 11.03.2019. He has also submitted that the amount of benefit of ITC required to be passed on to the recipients as per his Report was Rs. 3,15,96,096/- which pertained to only 495 home buyers who had paid the consideration during th....
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....of the total turnover which was available to the Respondent during the pre-GST period was 1.76% and during the post-GST period this ratio was 5.27% as per the Table C mentioned above and therefore, the Respondent had benefited from the additional ITC to the tune of 3.51% (5.27% - 1.76%) of the total turnover which he was required to pass on to the flat buyers of this project. However, the Respondent has not reduced the basic prices of the flats by 3.51% due to additional benefit of ITC and by charging GST at the increased rate of 12%/8% on the pre-GST basic price, he has contravened the provisions of Section 171 of the of the CGST Act, 2017. The DGAP has further submitted that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to Rs. 3,20,49,507/- which included 12%/8% GST on the basic profiteered amount of Rs. 2,90,55,908/-. The DGAP has also intimated that the above amount was inclusive of Rs. 1,00,232/-(including GST) which the Respondent has profiteered from the Applicant No. 1. He has also supplied the details of all the buyers who have purchased flats from the Respondent along with their unit numbers and the profiteered ....
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....However, the mathematical methodology for determination of the profiteered amount has to be applied on case to case basis depending on the facts of each case and no fixed formula can be set for calculating the same as the facts of each case are different. The mathematical methodology applied in the case where the rate of tax has been reduced and ITC disallowed cannot be applied in the case where the rate of tax has been reduced and ITC allowed. Similarly, the mathematical methodology applied in the case of Fast Moving Consumer Goods (FMCGs) cannot be applied in the case of construction services. Even the methodology applied in two cases of construction service may vary on account of the period taken for execution of the project, the area sold and the turnover realised. The Respondent has himself admitted that the same methodology could not be applied in each case and hence he should have no objection on the methodology which had been adopted by the DGAP in his case, based on the ITC availed, area sold and the instalments received after 01.07.2017. It would also be appropriate to mention here that this Authority has power to 'determine' the methodology and not to 'prescribe' i....
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.... measures provided under the above Act and the Rules, therefore, the above contention of the Respondent is untenable. 62. The Respondent has also 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. However, it is respectfully submitted that in the above case the issue involved was pertaining to the lack of machinery for enforcing the levy of Service Tax however, in the present case no tax has been levied and hence the law settled in the above case does not apply. 63. The Respondent has also contended that if the Report of the DGAP was accepted then the provisions of Section 171 of the above Act would amount to price regulation. However, perusal of the Report dated 10.12.2018 filed by the DGAP and his subsequent Reports shows that the DGAP has nowhere recorded any finding which can be construed as price regulation. He has only computed the ratio of the ITC to the turnover and calculated the benefit which the Respondent should have passed on by commensurate reduction in the prices of the flats which is well within the p....
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....on the ITC availed by him to the consumers. However, the above plea of the Respondent is incorrect as it are the provisions made under Section 171 of the above Act and not the DGAP which require him to pass on the benefit of ITC and rightly so as this is a concession granted to him by the State and the Central Govt. out of their own scarce revenue resources which the Respondent cannot appropriate at the expense of the vulnerable section of house buyers. The Respondent has himself claimed to have computed the benefit of ITC and passed on the same which shows that the same has been calculated by him by applying a mathematical methodology and hence he is estopped from claiming that no mathematical methodology was required to be applied while computing the benefit of ITC. Rule 126 of the above Rules has been enacted only to determine the methodology and procedure to be adopted by the Authority while determining the above two benefits however, no mathematical methodology can be determined as it has to be applied on the basis of facts of each case. The power to determine methodology and procedure given under Rule 126 to this Authority has been conferred on all the judicial and quasi-judi....
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....o get reflected in the ITC available to him every month and it has no connection with his final cost of construction for computation of the ITC benefit. Further, there should be no extra liability on the Respondent on account of the GST charged by the suppliers as the said suppliers were also enjoying benefit of ITC on the purchases made by them resulting in reduction in the prices of the materials purchased by them which they should have passed on to the Respondent. Accordingly, all the invoices submitted by the Respondent which have been issued by his suppliers and break ups of the construction cost which have been attached by the Respondent with his submissions along with the revised Tables C and D cannot be taken in to consideration for computation of the ITC benefit as all the non-creditable taxes have not been taken in to account by him and such computations are based on the assumed/estimated figures. It is also abundantly clear from the perusal of the GST-3B Returns filed by the Respondent that he has been availing the benefit of ITC w.e.f. 01.07.2017 every month since coming in to force of the GST to discharge his output tax liability and as per the provisions of Section 17....
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....e Service Tax and the Composition Scheme under the MVAT and therefore, he was not eligible to avail the ITC in the pre-GST period whereas under the GST regime he was availing benefit of ITC which was required to be passed on to the customers. The Respondent has also claimed that he had appropriately computed and passed on the above benefit by way of discount at the time of raising of the invoices and in respect of the customers to whom units had been sold under the GST regime, the benefit of ITC had been passed on by way of price negotiations-, at the time of execution of the sale agreements in terms of the press release issued by the CBIC vide F. No. 296/07/2017-CX.9 dated 15 June 2017. However, the above claim of the Respondent is not borne out from the perusal of the Reports filed by the DGAP which shows that the Respondent has not passed on the benefit of ITC and has profiteered an amount of Rs. 3,20,49,507/- from the flat buyers as per the details given in Table D supra as well as from the reasons mentioned in the subsequent paras. 72. The Respondent has also cited the case of United Bank of India Calcutta v. Abhijit Tea Co. Pvt. Ltd. and others decided on 05.09.2000 = 2000....
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....in the above ratio as it is to be computed on the basis of the actual figures of the ITC and the turnover which are available every month as per the GST-3B Returns filed by the Respondent himself. Therefore, the above claim of the Respondent is unjustified. 75. The Respondent has also submitted that as per Table D of the Report dated 10.12.2018 the total profiteered amount was Rs. 3,20,49,507/-which included GST amount of Rs. 29,93,599/- which had been duly paid to the Government and therefore the allegation of profiteering was completely absurd. However, on the contrary the above contention of the Respondent is absurd as by compelling his customers to pay more prices than what they should have paid and by collecting tax @ 12/8% on this additional realisation he has not only denied the benefit of additional ITC to his customers by not reducing the prices of the flats commensurately but has also collected additional GST on this amount. Had he not collected this additional amount of GST his buyers would have paid less price and by doing so he has denied them the benefit of additional ITC which amounts to violation of the provisions of Section 171 of the above Act. Both the Central....
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....fit is required to be calculated on the basis of the additional ITC which the Respondent has availed post-GST which has no connection with the abatement on the Service Tax and the value of land. Hence, the methodology adopted by the DGAP is correct. 78. The Respondent has also argued that the rate of tax on the services has been increased from 15% to 18% post-GST and therefore, there could not be any profiteering by the Respondent on the incremental ITC. In this context it would be appropriate to mention that the benefit has to computed on the basis of the entire additional ITC which has become available to the Respondent on the purchase of the goods also not only on the ITC available on account of purchase of services. Moreover, the Respondent is also availing full benefit of ITC on the 18% tax which he is paying on the services and is not bearing any burden of tax. Therefore, the above argument advanced by the Respondent is untenable. 79. The Respondent has also argued that he has passed the benefit of ITC as per Annexure-2 and Annexure-11 of his submissions date 31.01.2019. Perusal of Annexure-2 shows that it comprises of 5 'Tax Invoices' issued to S/Sh./Smt. Dalvi Sanjay ....
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....e been made on account of benefit as it does not show the computation of the above benefit and the percentage of benefit has also been shown @ 0.000000%. 81. Perusal of Annexure-2 attached by the Respondent with his submissions dated 02.05.2019 shows that it contains details of the credit notes through which the Respondent has claimed to have passed on the benefit of ITC however, no date has been mentioned on them which creates serious doubts about their genuineness. Moreover, neither the relevant entries made in the GSTR-3B Returns filed by the Respondent on account of these credit notes have been shown nor the certified copies of the entries made in the books of account of the Respondent have been produced. There is also no evidence to the effect that the above credit notes have been debited to the flat buyers as there is no acknowledgment/recipient on record issued by them. These credit notes have also not been produced by the Respondent before the DGAP nor have been verified by him. On the basis of the above reasons these credit notes cannot be construed to have been issued on account of passing on of the benefit of ITC. Perusal of Annexure. -3 of his submissions dated 02.05....
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....espondent has claimed to have passed on the benefit of ITC of Rs. 3,00,75,576/- to his customers however, the DGAP has neither verified the above amount nor any evidence has been quoted by him to support his above contention, As per the reasons given in the paras mentioned above also there is no evidence that the Respondent has passed on the benefit of ITC to his customers as has been claimed by him. Therefore, the amount of Rs. 85,50,64,279/- taken as turnover before adjusting the benefit of ITC passed on by the Respondent as has been mentioned in Table A of the revised Report cannot be relied upon. Accordingly, the ratio of 5.11% computed by the DGAP for the period w.e.f. 01.07.2017 to 30.06.2018 can also not be taken cognizance of. Consequently, the amount of turnover of Rs. 82,78,03,642/- mentioned in Table C of the Report dated 10.12.2018 is taken to be correct as it is based on the Returns filed by the Respondent and the ratio of CENVAT/ITC to turnover mentioned as 5.27% in Table C supra is also taken to be correct and the percentage of additional benefit of ITC availed by the Respondent post-GST is held to be 3.51% as per the Report dated 10.12.2018 instead of 3.35% as has b....
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....t claimed to have been Passed on by the Respondent Difference Remarks A B C D E F G H=F-G I 1 Applicant 1 541.45 26,69,195 98,808 93,875 4,933 Further Benefit to be passed on as per Annex-28 2. Other Than Applicant 332 1,71,978 51,95,42,421 1,92,18,164 1,31,36,446 60,81,718 Further Benefit to be passed on as per Annex-28 3. Other Than Applicant 162 78,823 33,28,52,663 1,22,79,124 1,68,45,255 (45,66,131) Excess Benefit passed on. List Attached as Annex-29 4. Other Than Applicant 42 20,127 - - - - No Consideration Paid Post-GST, No benefit to be passed on 5. Other Than Applicant 117 55,168 - - - - Unsold Units as on 30.06.2018 Total 654 3,26,638 85,50,64,279 3,15,96,096 3,00,75,576 - 86. The DGAP has also submitted on the basis of the above Table that the benefit claimed to had been passed on by the Respondent was less than what he should have passed on in respect of 333 cases including the Applicant No. 1 (Sr. 1 and 2 of the above table), amounting to Rs. 60,86,651/-(Annexur....
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.... correct and accordingly, the Respondent shall be liable to pass on the benefit of ITC to the flat buyers regularly in future in terms of the provisions of Section 171 (1) of the above Act. 88. The Respondent has also submitted that vide Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 the rate of tax on the construction service had been changed without benefit of ITC and any such benefit availed by a registered person would have to be reversed in case he opted for the new rate of tax and therefore, all the credit availed w.e.f. 01.07.2019 could not be passed on to the customers and it might also result in excess release of the benefit. However, the above plea of the Respondent is incorrect as the provisions of the above Notification will come in to force w.e.f. 01.04.2019 only and any benefit of ITC which has been availed by the Respondent before the above date will have to be passed on to the home buyers. There is also no question of reversal of the ITC except when it pertains to the unsold flats on which he has not been asked to pay ITC benefit. There is also no issue of excess payment of ITC benefit as he can always adjust the same in the future instalments. 89....
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....rity under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 30.06.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The Commissioners CGST/SGST shall ensure that the above benefit is passed on to the eligible buyers. The Applicant No. 1 as well as the other flat buyers will also be at liberty to maintain proceedings against the Respondent for violation of the provisions of Section 171 of the CGST Act, 2017, in case the benefit of additional ITC is not passed on to them. 91. It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his 'Runwal My City Project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered an amount of Rs. 3,20,49,507/- from his customers, hence he has committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he is liable f....