TaxTMI 
TaxTMI 
2019 (12) TMI 703
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted at off GH-05A, Greater Noida (West), Uttar Pradesh and he alleged that the Respondent had increased the price of the flat after introduction of GST w.e.f. 01.07.2017 and had not passed on the benefit of input tax credit by way of commensurate reduction in the price. The Uttar Pradesh State Screening Committee on Anti-profiteering on prima facie having satisfied itself that the Respondent had not passed on the appropriate benefit of input tax credit to the above Applicant as the input tax credit available to Respondent was to be apportioned against the instalments towards the price of the flat forwarded the said application with its recommendation, to the Standing Committee on Anti-profiteering on 06.08.2018 for further action, in terms of Rule 128 of the above Rules. 2. The above reference was examined by the Standing Committee on Anti-profiteering and vide its minutes dated 06.09.2018 it had forwarded the same to the DGAP for detailed investigation. The application was forwarded to the DGAP along with the payment details as is given in the Table below:- Table (Amount in Rs.) Particulars Basic Sale Price Service Tax GST Total Agreement Value (A) 39....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and requested for 15 more days to submit the remaining details/documents. A letter dated 14.02.2019 was issued to the Respondent by the DGAP to submit the balance documents. The Respondent submitted few more documents, vide his letter dated 22.02.2019 but did not submit soft copies of the required documents, despite several requests and did not submit the data in the format as prescribed in the DGAP's Notice dated 15.10.2018. 6. The DGAP vide his e-mail dated 13.03.2019, also gave the above Applicant an opportunity to inspect the non-confidential documents/reply furnished by the Respondent during the period 15.03.2019 to 18.03.2019. The Applicant visited the DGAP on 18.03.2019 and inspected the documents submitted by the Respondent. 7. The DGAP had sought extension of time for completing the investigation which was extended by this Authority vide its order dated 26.12.2018 in terms of Rule 129 (6) of the CGST Rules, 2017. The period of the investigation is from 01.07.2017 to 30.09.2018. 8. In response to the Notice dated 15.10.2018 issued by the DGAP, the Respondent vide his replies dated 02.11.2018, 13.11.2018, 26.11.2018, 05.12.2018, 10.12.2018, 13.12.2018, 26.12.2018, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Copy of Completion Certificate for the part project (A to F Towers). 10. Based on the above mentioned documents filed by the Respondent, the DGAP submitted that the main issues for determination were whether there was any benefit of reduction in rate of tax or input tax credit on the supply of construction service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so, whether such benefit was passed on to the Applicant No. 1, in terms of Section 171 of the CGST Act, 2017. 11. The DGAP also submitted that the Respondent claimed that out of total number of 12 towers in his present project, towers A to F were completed in the pre-GST era. The Respondent also claimed that the Applicant No. 1 had purchased a flat in Tower 'E' which was completed before the implementation of GST and thus, the buyers of flats in this tower had no claim to the benefit of input tax credit. However, when the DGAP scrutinised the Completion/Occupancy Certificates issued by the Greater Noida Authority and other documents submitted by the Respondent, he observed that the above contention of the Respondent had no merit on the following grounds:- (i) The Completion Certificate w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,327 95,620 2,00,344 41,95,747 13. The DGAP also observed that prior to 01.07.2017, i.e., before GST was introduced, the Respondent was eligible to avail CENVAT credit of Service Tax paid on input services and the credit of the VAT paid on the purchase of inputs. However, CENVAT credit of the Central Excise Duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which were in force at the material time. Post-GST, the Respondent was eligible to avail the input tax credit of GST paid on all the inputs and input services including the sub-contracts. The DGAP also asked the Respondent to provide sample copies of invoices raised by him in the pre-GST era, in support of the applicable tax rates for the services provided by him. The Respondent submitted that he had to pay Service Tax at the applicable rate (4.5% of the gross value) and VAT on the deemed sale value of the flats. The DGAP also analysed that from the VAT returns submitted by the Respondent, it could be seen that though the Respondent had claimed credit of VAT paid on the inputs, he had not discharged any output VAT liability. However, in the invoices raised by the Respondent on the Applic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xcept where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier"'. Thus, the ITC pertaining to the residential units which were under construction but not sold was provisional input tax credit which may be required to be reversed by the Respondent if such units remained unsold at the time of issue of completion certificate, in terms of Section 17(2) & Section 17(3) of the CGST Act, 2017, which reads as under: Section 17 (2) "Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies". Section 17 (3) "The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervice, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (Annex-21). Accordingly, the profiteering had been examined by comparing the applicable tax and input tax credit available for the pre-GST period (April, 2016 to June, 2017) when effective Service Tax @ 4.5% was payable on construction service with the post-GST period (July, 2017 to September, 2018) when the effective GST rate was 12% on construction service. On the basis of the figures contained in Table above, the comparative figures of input tax credit availed/available during pre-GST period and post-GST periods, the recalibrated basic price and the excess collection/profiteering were tabulated by the DGAP in the Table below:- Table (Amount in Rs.) S.No. Particulars Pre-GST Post-GST 1. Period A April, 2016 to June, 2017 July, 2017 to September, 2018 2. Output tax rate (%) B 4.50 12 3. Ratio of CENVAT/Input Tax Credit to Total Turnover as per Table - C above (%) C 1.21% 6.25% 4. Increase in input tax credit availed post-GST (%) D 5.04 Analysis of Increase in input tax credit: 5. Basic Price rais....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2,36,428) from the other home buyers in the present project which included both the profiteered amount @5.04% of the basic sale price and GST on the said profiteered amount. The recipients other than the Applicant No. 1, were identifiable as per the documents provided by the Respondent. Therefore, this additional amount of Rs. 4,76,67,914/- might be returned to such eligible recipients who were not Applicants in the DGAP Report. 21. The DGAP further mentioned that the present investigation covered the period from 01.07.2017 to 30.09.2018 and profiteering, if any, for the period post September 2018, had not been examined as the exact quantum of input tax credit that would be available to the Respondent in future could not be determined at that stage, when the construction of the project was yet to be completed. 22. The above Report was considered by the Authority in its meeting held on 09.04.2019 and it was decided to hear the Applicants and the Respondent on 25.04.2019. 23. Six personal hearings were accorded to the parties on 25.04.2019, 09.05.2019, 24.05.2019, 03.06.2019, 12.06.2019 and 17.06.2019, out of which 3 hearings were attended by the Respondent and 2 hearings w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intenance charges to Rs. 1.80 per sq. ft. for less than half developed society which were very high. The Applicant No. 1 also submitted that the Respondent offered him letter of possession in January 2018 i.e. 16 months ago. The Applicant No. 1 further submitted that the Respondent had used Indian Green Building Council (IGBC) Platinum Pre-Certification as his key feature to sell his property/flats. But he had not implemented many works as per the Platinum certification. He further claimed that while offering possession, the Respondent demanded electricity connection charges at Rs. 5000/- per KVA which were very high. He also claimed that similar societies were charging Rs. 2000/3000/- per KVA and since this was govt. fee it should have been reasonable. The Applicant No. 1 also enclosed some photographs of his flat to show his flat's condition. 26. The Respondent filed his first written submissions on 09.05.2019 vide which he submitted that in the pre- GST regime, the Respondent used to charge Service Tax on 'construction services' provided by him to the customers. While in the post- GST regime, the Respondent was duly charging GST from his buyers and paying taxes to the Central....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of area for which agreement to sell had been entered after 01.07.2017 was incorrect. (iv) Even otherwise, he had already offered more than 10% discount in basic prices to all the customers who have booked flats post-GST. (v) In view of the change in economic scenario particularly increase in availability of ITC on account of higher rate of GST, the basic price of the flats had been reduced by more than 5% in as much as in the cases where pre-GST rate was Rs. 3,865 per sq. ft. it had been reduced to Rs. 3,400 per sq. ft. post GST. As the discount had been given mainly on account of availability of ITC, thus the allegation that the Respondent had failed to give the necessary discount and had profiteered is absolutely incorrect. (vi) While computing the ITC availed during the period 01.07.2017 to 30.09.2018, the DGAP Report included the amount of credit of Rs. 3,49,08,227/- taken from GST Tran- 1 statement. The said amount of credit included Rs. 69,68,288/- taken under section 140 (1) of the CGST Act, 2017 which was the balance carried forward as per last return (ST- 3). The Respondent further submitted that the said credit which had been taken prior to 30.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... GST rate on outward supply as well as inputs, the ITC in his Electronic Credit Ledger was continuously increasing which would be evident by the following details - Quarter Closing balance of ITC Electronic Credit Ledger September, 2017 Rs. 66,75,612/- December, 2017 Rs. 6,97,93,367/- March, 2018 Rs. 3,55,34,257/- June, 2018 Rs. 5,03,51,304/- September, 2018 Rs. 6,92,39,947/- Thus, he requested that the authorities may take necessary actions for refund of the said excess ITC so that the funds so received may be ploughed back in the business and the projects may be completed expeditiously. 27. The Respondent further submitted that the calculations of Profiteering done by DGAP were erroneous and conceptually flawed. He also submitted that on receiving the application of the Applicant No. 1, the necessary discount/benefit of additional ITC had duly been given by him and the DGAP could not ignore the discounts already given to the Applicant No. 1. The Respondent also furnished a copy of assessment" order and VAT paid to the department, copy of discount pamphlet and sample bookings, copy of ST-3 Return for the period Apr-June 2017 and Trans-I St....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Plans. The Respondent also enclosed the 5 calculation sheets in respect of 5 issues prepared by him against the DGAP's Report dated 02.04.2019 which are furnished below:- Calculation Sheet - 1 Issue - VAT ITC to be taken in Pre-GST Pre GST 01-04-2016 to 30-07-2017 Post GST 01-07-2017 to 30-09-2018 Cenvat of ST 30551024 VAT 19804225 ITC 14342157 Total Credit 50355249 143421257 Gross Taxable Turnover 641597757 848645518 Total Saleable Area 2120603 2120603 Total Sold Area relevant to Turnover 536794 784163 ITC Relevant to Sold Area 12746561 53034747 Ratio 1.986690396 6.249340351 Difference 4.26 Turnover plus GST 950482980.16 Recalibrated 812493218.93 Recalibrated plus GST 909992405.21 Difference - Profiteering 40490574.95 Calculation Sheet - 2 Issue- Trans 1 ITC In Pre-GST Regime Pre GST 01-04-2016 to 30-06-2017 Post GST 01-07-2017 to 30-09-2018 Cenvat of ST 30551024 VAT 19804225 ITC 14342157 Trans-1 27281055 To....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vide which he had submitted that he had paid VAT of approx. Rs. 6.77 lakhs during 2016-17 and Rs. 7.28 lakhs during 2017-18 in cash, and made balance payment with ITC. He also submitted that the total area sold during the post-GST period was 9,54,820 sq. ft. 30. The Respondent also submitted that the Authority had notified the methodology and procedure, on its website and it was an admitted position that the said procedure contained the procedure to be followed but did not contain any methodology to arrive at the quantum of alleged profiteering. He further explained that the Authority in its earlier orders had observed that no single methodology can be adopted for all the cases. He also cited the case of Kiran Chimirala Vs. M/s. Jubilant Food Works Pvt. Ltd., in Case No. 04/2019 decided on 31/01/2019 = 2019 (2) TMI 295 - NATIONAL ANTI-PROFITEERING AUTHORITY by the Authority according to which the Authority had ordered as under:- "47. The Respondent has alleged that no methodology has been prescribed for determination and calculation of profiteering. In this connection it would be relevant to point out that this Authority has already notified the 'Procedure and the Metho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted. Thus, the Authority alone could determine as to which methodology was to be applied in a particular case to determine the quantum of profiteering, if any. The Authorities like State Level Screening Committee, Standing Committee on Anti-Profiteering or the DGAP did not possess any power to apply a particular methodology. 31. The Respondent further claimed that, the DGAP had concluded in his Report that post-GST, the Respondent had been benefitted from additional input tax credit to the tune of 5.04% of the turnover and these figures had been arrived at by comparing the ratio of ITC availed with turnover in the pre-GST and post-GST period. He also mentioned that the DGAP divided the ITC availed during the period 01.04.2016 to 30.06.2017 by the turnover during the said period which resulted in a ratio of 1.21%. Similar exercise was done for the period 01.07.2017 to 30.09.2018 and which resulted in the ratio of 6.25%. The difference of the said ratios had been held as additional input tax credit. He also submitted that the real estate projects were long drawn processes taking five years or more, which involved various stages. like obtaining permission from various Statutory Aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eco Infra = 2019 (5) TMI 1448 - NATIONAL ANTI-PROFITEERING AUTHORITY April'16 to June'17 3.06% July'17 to August'18 4.51% In the above chart, ratio in pre-GST ranges from 0.27% to 7.56% and in post-GST, it ranges from 3.31% to 13.70% which clearly showed that the benefit of additional ITC could not be computed by this methodology. 33. The Respondent also questioned the DGAP's investigation and findings in his report and submitted that:- a) The Respondent had intimated the Authorities about completion of the said towers much prior to 1st July, 2017. The delay in issuance of completion certificate was beyond the control of Respondent. And also, there was no evidence that the Municipal Authorities on inspection had found that project was not complete. b) The Respondent had given details of stages of all the work, wherein it was clearly stated that the work relating to internal and external plasters, flooring, tile work, doors and windows, lobby tiling and finishing, lift, fire-fighting, paint, sanitary ware, basement parking, water tank, were all complete. A detail of pending/partly completed services was also given, wherein work relating to electri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Respondent it would not be possible to ensure that the benefit has been passed on to each customer as the calculation would have to be made for all the SKUs together irrespective of the fact whether the base price of a product has been reduced or increased. The Respondent is under legal obligation to pass on both the above benefits to each customer and he cannot deny benefit to one customer on the ground that he has as an entity passed on the benefits to entire group of customers. Similarly benefit due to a customer cannot be denied to him on the claim that the same has been passed on to another customer on another product. There is no justification in the claim of the Respondent that the DGAP should also have taken in to account those SKUs in the case of which the price increase was within the permissible limit of 5.59%, since there was no profiteering in their case they were not required to be considered. Even if each restaurant owned by the Respondent was assessed separately for profiteering the conclusion would have been the same as the Respondent was charging the same prices in each of his outlets and was also centrally fixing the prices and hence he has been rightly assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tation of profiteering in the post-GST period was incorrect since Tran-I credit had not been considered by the DGAP while computing the amount of profiteering. He also submitted that all other facts/ queries raised by the Respondent had been explained in his report dated 02.04.2019. 37. We have carefully considered all the Reports filed by the DGAP, submissions of the Respondent and the Applicant No. 1 and other material placed on record and find that there are certain issues raised by the Respondent vide which he has raised objections against the DGAP's Report dated 02.04.2019. 38. We observe that the first objection of the Respondent is that the DGAP had exceeded his jurisdiction in calculating profiteering in respect of the customers other than the Applicant No. 1 in the matter. This claim is incorrect since the ITC was collected by the Respondent over the complete project and hence the benefit is required to be passed to all the eligible flat buyers. Thus, the Authority is of the opinion that in order to compute the ITC benefit to be passed on to the buyers, it was necessary to computer the same for the whole project and for every buyer. Further, in the interest of justic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... trend across the industry. He has also furnished the comparative chart of the ratios arrived in the different orders of the Authority as mentioned in para 32 of this Order and has contended that these ratios ranged from 0.27% to 7.56% in the pre-GST period while in the post-GST period, these ranged from 3.31% to 13.70%, which shows that the benefit of additional ITC cannot be computed by this methodology. After going through the orders mentioned by the Respondent, we find that this contention is not tenable since the mathematical computation pertaining to benefit of additional ITC is case specific and it depends on various factors specific to each case. These factors include the stages viz. completion of the project pre-GST and post-GST; the payment schedule; the number of units in the project; the total area sold and unsold in pre-GST and post-GST periods, the ITC availed in the two periods; and the turnover i.e. (aggregate amounts billed to the home-consumers) recalibrated in the two periods. 43. We also find it 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 benefi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9. 45. We further observe that the Respondent claimed that the provisions of Section 171 of the CGST Act, 2017 were applicable to the long term/continuous contracts and they could not said to be applicable to the fresh contracts entered after 01.07.2017. This contention of the Respondent is irrelevant since the present project was started in the pre-GST era and continued in the post-GST era and the Applicant had also made the booking in the on 26.06.2017, at the agreed value of Rs. 39,29,928/- (@ 3357.81 for 1130 sq. ft. plus IFMS @ Rs. 20 per sq. ft. plus PLC @ Rs. 100 per sq. ft.) plus the applicable taxes and possession charges. Further, Section 171 of the CGST Act, 2017 states that:- "171. (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." Nowhere does the above provision of law mentions that the above provisions would not be applicable to the fresh contracts entered after 01.07.2017. 46. The Respondent's further contention that he had already offered more than 10% discount in basic prices to all the customers who have booked fla....