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2019 (12) TMI 777
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....ction 171 of the Central Goods and Services Tax Act, 2017 and had charged GST on the pre-GST base price of Rs. 4000 per sq. feet. 2. The above reference was examined by the Standing Committee on Anti-profiteering and vide minutes of its meeting dated 13.12.2018, it was forwarded to the DGAP for detailed investigation. 3. The DGAP on receipt of the application issued notice dated 16.01.2019 to the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all the supporting documents. Further, the DGAP vide his letter dated 16.01.2019, had given an opportunity to the Respondent to inspect the non-confidential evidences/information submitted by the above Applicant. However, the Respondent did not avail of the said opportunity. The DGAP, vide e-mail dated 14.01.2019 had requested the Applicant No. 1 to provide copies of demand letters and any other relevant documents along with his contact details. However, neither the Applicant responded nor did he submit the de....
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.... to the vendors/Sub-contractors. The affordable housing sale price of Rs. 4,000/- per sq. ft. was fixed after considering the benefit of ITC of VATM/CT. However, the Central taxes, i.e., Central Excise Duty and Service Tax levied on the goods & services used in the execution of works contract were part of the cost of the project. Now, under the GST regime, the benefit of erstwhile Central Excise duty/Service Tax was available to the Respondent and the same was required to be passed on to the recipients. He also stated that he was negotiating with the sub-contractor for getting the benefit of ITC and the same would be passed on to the home buyers on or before the completion of the project. 5. The Respondent further submitted that Section 171 of the CGST Act, 2017 provided that it was mandatory to pass on any benefit due to reduction in rate of tax or input tax credit, to the consumer, by way of commensurate reduction in prices and the applicability of this statute would have arisen in the following two situations: a) If there was reduction of rate of tax on the supply of goods or services b) If additional benefit of input tax credit was available. He then sub....
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....payable and input tax credit availed. (j) List of home buyers and commercial shop buyers in the project "Orchard Avenue - 93", along with the details of benefit passed on to them. (k) Reconciliation of turnover reported in the GSTR-3B returns with that in the list of home buyers. (l) Copies of sample ledger showing benefit of ITC passed on. The Respondent had also requested to treat all the data/information furnished by him as confidential, in terms of Rule 130 of the CGST Rules, 2017. 9. 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. 10. The DGAP further submitted that the Respondent, vide his letter dated 06.02.2019, submitted a copy of an application dated 17.08.2016, demand letters and payment recipients for the sale of flat No. A-801 to one of the recipients Shri Nephe Si....
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....he benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices. Besides, in terms of Rule 128 of the CGST Rules, 2017, an application alleging profiteering might be filed by an interested party or a commissioner or any other person. Therefore, though the Applicant No. 1 was not a recipient of service provided by the Respondent, he could still file an application under Rule 128 of the CGST Rules, 2017 alleging profiteering by a registered person. 13. The DGAP also submitted that para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) reads as:- "Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Further, clause (b) of Paragraph 5 of Schedule II of the Central Goods and Services Tax Act, 2017 reads as:- "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after....
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....the inputs and could claim deduction from the taxable turnover under VAT (WCT), of the payments made to the registered contractors or sub-contractors for the execution of the project. Further, post-GST, the Respondent could avail ITC of GST paid on inputs and input services including the sub-contracts. From the information submitted by the Respondent for the period April, 2016 to December, 2018, the DGAP furnished the details of the input tax credit availed by him, his turnover from the present project and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to December, 2018) periods in the Table given below:- Table-'B' (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) 01.07.2017 to 24.01.2018 (GST@12%) 25.01.2018 to 31.12.2018(GST@8%) Total (Post-GST) (1) (2) (3) (4) (5) = (3)+(4) (6) (7) (8) = (6) + (7) 1. Credit of Service Tax Paid on Input Services used for Commercial Shops (A) 7,04,170 15,29,496 22,33,665 - - - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) 57,49,401 6,05,284 ....
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....AP had examined the issue of profiteering in two parts, i.e., by comparing the applicable tax rate and input tax credit available in the pre-GST period (April, 2016 to June, 2017) when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8% and accordingly, on the basis of the figures contained in table-'B' above, the comparative figures of the ratio of input tax credit availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (Profiteering) during the post-GST period, were tabulated in Table-'C' below. Table 'C' (Amount in Rs.) S.No. Particulars Post- GST Period 1. Period A 01.07.2017 to 24.01.2018 (Flats & Shops) 25.01.2018 to 31.12.2018 (Shops) 25.0.2018 to 31.12.2018 (Flats) Total 2. Output GST rate % B 12 12 8 3. Ratio of CENVAT credit/Input Tax Credit to Total Turnover as per table - 'B' above (%) C 5.89 5.89 5.89 5.89 4. Increase in inp....
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....he DGAP also furnished the home buyer and unit no. wise break-up of the above mentioned amount. The DGAP also clarified that this amount did not include profiteering pertaining to the Applicant No. 1 as he had not bought any flat or commercial shop in the Respondent's present project. 20. The DGAP also observed that the Respondent had supplied the service in the State of Haryana only. 21. The DGAP also clarified that the Respondent had submitted that he had passed on benefit of Rs. 1,41,57,700/- to the home buyers and the summary of category-wise ITC benefit required to be passed on and the benefit claimed to have been passed on, was furnished in table-'D' below:- Table-'D' (Amount in Rs.) S.No. Category of Customers No. of units Area (In Sq.Ft) Amount Received Post-GST Benefit to be passed on as per Annex-12 Benefit claimed to have been Passed on by the Respondent Difference (profiteering) Remark A B C D E F G H=F-G I 1. Applicant (Residential) - - - - - - No unit sold to the Applicant 2. Others Buyers (Residential) 712 3,89,022 78,77,52,831 2,33,47,091 1,27,61,725 ....
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....4. The DGAP also clarified that since the present investigation covered the period from 01.07.2017 to 31.12.2018. Thus, profiteering, if any, for the period post December, 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 the present stage, when the construction of the project was yet to be completed. 25. The above Report was considered by the Authority in its meeting held on 18.06.2019 and it was decided to hear the Applicants and the Respondent on 03.07.2019. Two personal hearings were accorded to the interested parties on 03.07.2019 and 16.072019, neither the Applicant nor the Respondent appeared for the above hearings. 26. The Respondent however filed his written submissions on 16.07.2019 vide which he submitted that the Applicant No. 1 was not a flat owner in the present project and this fact was also brought to the notice of the DGAP during the investigation phase but was not considered by the DGAP. He further stated that if the Applicant No. 1 was not a flat owner in the said project, then on what basis was he claiming that the benefit of ITC in the pre and post GST period....
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....me Court passed in the case of State of Jharkhand v. Voltas Ltd., East Singhbhum, (2007) 9 SCC 266 = 2007 (5) TMI 18 - SUPREME COURT. 29. The Respondent also claimed that anti-Profiteering provision under the CGST Act and the Procedure & Methodology drafted as provided in Rule 126 was silent on the timing of benefit accrued on agreement entered in pre-GST regime & transfer of property in goods/services executed in the GST regime and passing on of the same to the buyer especially for unfinished projects. He also mentioned that in a conventional sale of goods/services, the property in goods/services got transferred as intended by the parties, and after transferring risk and reward of the goods/services, the recipient became the owner after paying due consideration along-with taxes thereon. In a conventional case, the provisions of anti-profiteering came into effect from the time, the recipient received the goods/services. He further submitted that in the present case, he was engaged in the development of Affordable Group Housing residential flats. The project was commenced on 04.05.2016 with expected completion on 31.03.2020. The transaction entered with the buyer was covered unde....
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....with the Rules determined on ad hoc basis the following estimated benefit of ITC had been passed on by him to the flat owners:- • For residential flat owners, the benefit of input credit in comparison with the pre-GST era was determined on ad hoc basis @ Rs. 32.80 per sq. ft. • For commercial shop buyers the benefit of input credit was determined on ad hoc basis @ Rs. 107/- per sq. ft. He has also stated that as it was an ad hoc calculation, which was done across the board irrespective of the amounts received from the flat I shop owners in the pre and the post GST periods. 32. He further claimed that the following issues had not been addressed in the above mentioned Report:- i. Whether the allegation of the Anti-Profiteering provisions as per section 171 of the CGST Act, 2017 read with CGST Rules, 2017 thereon apply to him since he had made payment of estimated profiteering amount on his own accord despite the project being half complete. ii. It had not been appreciated by the DGAP while framing the report that he had pending completion of the project, made an ad hoc estimate of the benefit against ITC. The actual and factual comput....
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....able C especially with regard to average method not being representative of like comparison. (ix) The Authorities (DGAP and this Authority) assuming jurisdiction on their own motion when there was a complaint on which the proceedings were initiated and it was subsequently observed that the Applicant's complaint was erroneous as well as misrepresented. (x) Whether disputing the ad hoc calculation done by the Respondent and super imposing arbitrary calculation on average basis overlooking the basic fact that both the calculations were ad hoc pending project completion was correct. 34. The Respondent further requested that his above submissions be taken on record for concluding the case without granting any further hearing to him and in case any documents I clarifications were required, the same be conveyed for being submitted to the Authority. 35. The Respondent vide his written submissions filed on 19.08.2019 and 18.09.2019 submitted that the Authority had asked him to furnish certain documents. He clarified that he had already submitted these documents to the DGAP during the investigation period which were sought by the Authority. He also claimed that Tran -....
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.... by the Government of Haryana under the Prime Minister Awas Yojana and is constructing both the residential and commercial accommodation. It is also revealed that the Applicant No. 1 had complained to the Standing Committee on Anti-Profiteering on 29.09.2018 that the above Respondent was not passing on the benefit of ITC to him and was also charging GST from him on the pre-GST base price of Rs. 4,000/- per sq. ft. The above complaint was examined by the Standing Committee in its meeting held on 13.12.2018 and was forwarded to the DGAP for detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017. The DGAP has conducted investigation in the above allegations levelled by the Applicant and vide his Report dated 12.06.2019 has stated that the Respondent had violated the provisions of Section 171 of the above Act by resorting to profiteering of an amount of Rs. 2,58,80,927/-. 38. The Respondent in his written submissions filed on 16.07.2019 has claimed that the Applicant No. 1 was not a flat owner in the present project and thus, he was not entitled to claim that the benefit of ITC in the pre and post GST period should be passed on to him. In this connectio....
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....ent by this Authority on 03.07.2019 and 16.07.2019, however he has not availed any of these opportunities but chose to file written submissions in which he has objected to the computations of the DGAP. 41. The Respondent has also contended that this Authority has not provided any basis, method and reasoning for computing profiteering in respect of violation of the provisions of Section 171 of the CGST Act, 2016 under Rule 126 of the above Rules. 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 prices and the same cannot be retained by the suppliers. This Authority has been duly constituted under Section 171 (2) of the above Act and in exercise of the powers conferred on it under Rule 126 of the CGST Rules, 2017 has notifi....
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....Section 171 (1) are implanted. Rule 123 of the CGST Rules, 2017 provides constitution of Standing Committee at the Central level and Screening Committees at the State level to prima facie examine the allegations of profiteering which are investigated by the DGAP in detail under Rule 129 (1). This Authority can also seek assistance of the State and Central tax authorities to monitor its orders as per the provisions of Rule 136. Therefore, there is adequate machinery to enforce the anti-profiteering provisions. 43. He has also cited the case of Commissioner of Income Tax V. B. C. Srinivasa Setty (1981) 128 ITR 294 (SC) = 1981 (2) TMI 1 - SUPREME COURT in his support. upon perusal of this judgement, it is observed that it involved valuation of the goodwill for computation of income tax and the same is not the issue in the present case. Thus, it is respectfully submitted that the above case is of no help to the Respondent. The Respondent further cited the case of Commissioner of Income Tax v. The Official Liquidator Palai Central Bank Ltd. (1984) 150 ITR 539 (SC) = 1984 (10) TMI 41 - SUPREME COURT which is related with the issue of charging of super profit tax, but, no such issue is....
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....xecution of the project under the works contract also does not entitle him to pass on the above benefit when the project would be nearing completion. In view of the above discussions the above claims of the Respondent cannot be accepted 45. The Respondent has also submitted that while computing the above benefit the DGAP has not taken into account the rate of tax on that material which was tax free in the pre-GST period. This argument of the Respondent is untenable since the DGAP has computed the benefit of additional ITC by comparing the ratios of ITC which was available/availed by him in the pre and the post-GST period and it is clear from his computation that the Respondent has got additional benefit of 2.72% of the turnover. Further, the DGAP has also not calculated the profiteered amount by using averages. Hence, the above arguments of the Respondent are incorrect. 46. The Respondent has further submitted that the DGAP has stated that the total benefit to be passed on by him was Rs. 2,33,47,091/- and the benefit claimed to have been passed on by the Respondent was Rs. 1,27,61,725/-, and hence he had passed on benefit under the provisions of section 171 of the CGST Act, 2....
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....fit of ITC availed by the Respondent. 49. The Respondent has also contended that the DGAP had calculated the profiteered amount as Rs. 2,33,47,091/- whereas he had passed on an amount of Rs. 1,27,61,725/-. He has further stated that as he has already passed on the benefit of 1.50% to the buyers of the project, the same has also been considered in the DGAP's Report. However, in the DGAP's Report dated 12.06.2019, the DGAP has stated that the total benefit to be passed on by him was Rs. 2,58,80,927/-, and the amount of Rs. 2,33,47,091/- pertained only to the 712 Residential flat buyers. Thus, the claim of Respondent that the DGAP has stated that the total benefit to be passed on by him was Rs. 2,33,47,091/- is incorrect. Further, perusal of 39 ledger accounts of the buyers which have been submitted by the Respondent to the DGAP shows that there is no evidence to suggest that he had passed on the benefit of Rs. 1,27,61,725/- to the 712 home buyers and Rs. 13,95,975/- to the 53 commercial buyers on account of ITC as there is no such entry in the ledger accounts of these buyers. A typical entry of Rs. 13,469/- made in the ledger account on 01.05.2019 in resect of one Mr. Amit Rajoria....
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....onal ITC to the extent of 2.72% [5.89% (-) 3.17%] of the turnover. Since, the above computations made in Table B have been done on the basis of the Returns filed by the Respondent as well as the information supplied by him therefore, the same can be relied upon. 52. It is also clear from the record that the Central Government, on the recommendation of the GST Council, had levied 18% GST effective rate of 12% in view of 113rd abatement on value on the construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. Accordingly, the DGAP has computed the profiteered amount by comparing the applicable tax rate and ITC available in the pre-GST period when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8%. Accordingly, the DGAP has calculated the profiteered amount or the benefit to be passed on for the period from 01.07.2017 to 24.01.2018, as Rs. 66,70,369/- for t....
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.... date of this order failing which the same shall be recovered by the concerned Commissioner CGST/SGST and paid to the eligible house buyers as per their entitlement as per the provisions of CGST/SGST Acts. 54. Since, the DGAP has carried out the present investigation till 31.12.2018 only any further benefit of additional ITC which might accrue to the Respondent shall also be passed on by him to the eligible buyers. The Commissioner CGST/SGST shall ensure that the above benefit is passed on by the Respondent to his recipients as per the provisions of Section 171 of the CGST Act, 2017. In case if the above benefit is not passed in future any other buyer shall be at liberty to approach the Haryana State Screening Committee to launch fresh proceedings against the Respondent as per Section 171 of the CGST Act, 2017. 55. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project 'Orchard Avenue 93' in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is l....