TaxTMI 
TaxTMI 
2019 (12) TMI 834
X X X X Extracts X X X X
X X X X Extracts X X X X
....ddress Flat No./In the Respondent's project Application Date S.No. in Standing Committees minutes 1. Shruti Garg V-1718, DLF Phase 3, Gurgaon [email protected] A2(1)-12A04 26.09.2018 4 2. Saurabh Gupta B-12, Moti Nagar, New Delhi-110015 [email protected] A2-305 06.10.2018 12 3. Anil Bhargava C-248, First Floor, Hari Nagar Clock Tower, New Delhi [email protected] A1 -404 28.08.2018 18 4. Narendra Prakash Varia Flat No.-701, Jasminium Apartment, Sector-45, Gurgeon [email protected] A3-1403 02.10.2018 7,10*& 53* * Name of the Applicant was wrongly mentioned as Sh. Vijender Jain at S. No. 10 & 53, as the applications filed by Shri Narendra Prakash Varia were received by the Standing Committee on Anti-profiteering from the e-mail account of Sh. Vijender Jain ([email protected]). 2. The above Applicants submitted that they had purchased flats (as shown in Table 'A') in the Respondent's project "Solera Affordable Group Housing" situated in Sec-107, Gurugram, Haryana and alleged that the Respondent had not passed on the benefit of input tax credit (ITC) to them by way of commensur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... project "Solera Affordable Group Housing" project in Sector-107, Gurugram and the "Orchard Avenue-93" project under the Affordable Housing Scheme, i.e., the Pradhan Mantri Awas Yojna. (b) The Respondent submitted that he was not directly engaged in any construction activity and all the work related to the project was assigned to various sub-contractors, who procured all the required raw materials on their own except steel, cement and RMC which were supplied by the Respondent on free of charge basis. However, the project was executed under the supervision of the staff employed by the Respondent. (c) The Respondent informed that in the pre-GST regime, "under-construction properties" were covered by the definition of works contract and attracted Haryana VAT @ 4.5% approximately with full input tax credit of VAT paid on goods involved in the execution of works contracts. Affordable housing was, however, exempted from Service Tax, vide Notification No. 9/2016-ST dated 01.03.2016. In the GST regime, construction of low cost houses upto a carpet area of 60 square meters per house in a housing project approved by any State Government, was taxable @ 12% (effectively @ 8% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the Respondent had himself calculated the additional benefit of ITC (provisionally), now available under GST regime and the same had already been credited to the home buyers. (g) The Respondent had also raised three objections with the request to dispose off the same by passing a speaking order before proceeding under Section 171 of the Central Goods and Services Tax Act, 2017, in view of the methodology explained by the Supreme Court in M/s. GKN Drive shafts (India) Ltd. [2002] 1 SCC 72 = 2002 (11) TMI 7 - SUPREME COURT. These objections are as follows: (i) Whether on the facts & circumstances of the case, there was any reduction in rate of tax on the supply of goods & services involved in the execution of works contract in the current GST regime. (ii) Whether on the facts & circumstances of the case, the benefit already credited/passed on to the buyers before initiation of the present proceeding, should not be treated as compliance with the provisions of Section 171 of the Central Goods and Services Tax Act, 2017. (iii) Whether on the facts & circumstances of the case, the Co-applicants have misled this investigation by not providing complete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....15.07.2016 20% 3,97,700 17,897 - 4,15,597 3. Within 6 months from the date of Allotment 15.07.2016 12.50% 2,48,562 11,186 - 2,59,748 4. Within 12 months from the date of Allotment 01.10.2016 12.50% 2,48,562 11,186 - 2,59,748 5. Within 18 months from the date of Allotment 01.10.2016 12.50% 2,48,562 11,186 - 2,59,748 6. Within 24 months from the date of Allotment 01 04.2017 12.50% 2,48,562 11,186 - 2,59,748 7. Within 30 months from the date of Allotment 01.10.2017 12.50% 2,48,562 - 29,827 2,78,389 8. Within 36 months from the date of Allotment 06.04.2018 12.50% 2,48,562 - 19,885 2,68,447 9. Change in size 06.04.2018 - (8,088) - (647) (8,735) 10. GST input benefit 31.05.2018 - (12,143) (971) (13,114) Total 100.00% 19,68,266 67,116 48,094 20,83, 476 10. The DGAP observed in his Report that the Respondent had claimed that the benefit already credited/passed on to the buyers before initiation of proceedings, should be treated as compliance with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the completion certificate, in terms of Section 17 (2) & Section 17 (3) of the CGST Act, 2017, which read 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 in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building." Therefore, the DGAP has contended that the input tax credit pertaining to the unsold units may not fall within the ambit of this investigation and the Respondent would be required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additiona....
X X X X Extracts X X X X
X X X X Extracts X X X X
....300 313,59,186 573,17,486 6. Turnover from Commercial Shops as per ST-3 return (F) 4,14,67,307 36,68,228 4,51,35,535 - 8,95,53,361 - 7. Turnover from residential flats as per VAT Returns (G) 55,55,75,827 10,80,51,746 66,36,27,573 - 29,82,60,039 - 8. Total Turnover (H) 59,70,41,134 11,17,19,974 70,87,63,108 38,26,82,744 38,78,13,400 77,04,96,144 9. Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (I) 4,62,932 (Residential) 26,470 (Commercial) 4,89,402 4,62,932 (Residential) 26,470 (Commercial) 4,89,402 10. Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to turnover (J) 4,02,726 (Residential) 12,566 (Commercial) 4,15,292 4,61,642 (Residential) 18,987 (Commercial) 4,80,629 11. Relevant ITC [(K)=(D)*(J)/(I)] or [(K)=(E)*(J)/(I)] 4,00,51,564 5,62,90,015 Ratio of Input Tax Credit to Turnover [(L)=(K)/(H)*100] 5.65% 7.30% 13. The DGAP has also submitted that as seen from the Table 'B' it was clear that the ITC as a percentage of the turnover that was available to the Respondent....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... E*B 4,59,21,929 1,07,46,403 2,38,60,803 8,05,29,136 8. Total Demand raised G=E+F 42,86,04,674 10,02,99,764 32,21,20,842 85,10,25,280 9. Recalibrated Base Price H=E*(1-D) or 98.35% of E 37,63,67,479 8,80,75,730 29,33,38,748 75,77,82,958 10. GST @12% or 8% I=H*B 4,51,64,217 1,05,69,088 2,34,67,100 7,92,00,045 11. Commensurate demand price J = H+I 42,15,32,697 9,86,44,818 31,68,05,848 83,69,83,363 12. Excess Collection of Demand Or Profiteering Amount K=G-J 70,71,977 16,54,946 53,14,994 1,40,41,917 15. The DGAP further stated that from Table-'C' above, it was clear that the additional ITC of 1.65% of the turnover should have resulted in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on to the recipients. 16. The DGAP has also Submitted that on the basis of the aforesaid CENVAT/input tax credit availability in the pre and post-GST periods and the details of the amount collected by the Respondent from the Applicants and othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 81 17,891 12,15,94,699 22,47,070 4,45,474 18,01,596 Further Benefit to be passed on. List Attached as Annex-17 6 Commercial Shop Buyers 4 1,096 8,00,000 14,784 27,299 -12,515 Excess Benefit Passed on. List Attached as Annex-18 7 Commercial Shop Buyers 6 1,711 - - 42,595 -42,595 No Consideration Paid Post-GST, However, Respondent passed on benefit. List Attached as Annex-18 8 Unsold Shop 21 5,772 - - - - Unsold Units. Total Commercial (B) 112 26,470 12,23,94,699 22,61,854 5,15,368 Grand Total (C)=(A)+(B) 1,112 4,89,402 77,04,96,144 1,40,41,916 1,29,29,849 18. The DGAP observed From the Table "E" above that the benefit claimed to have been passed on by the Respondent to the recipients was less than what he ought to have passed on in case of 132 residential flats (Sr. 3 of Table 'E') by an amount of Rs. 27,75,665/- and by Rs. 18,01,596/- in case of 81 commercial shops (Sr. 5 of Table 'E'). The details of these amounts are given in Annexure- 16 & 17 of the DGAP's Report. Further, the Re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. He was also asked to state why penalty should also not be imposed upon him under Section 29 and 122-127 of the CGST Act, 2017 read with Rule 21 and 133 of the CGST Rules, 2017. During the course of the proceedings the Applicant No. 1, 2, 4 and the Respondent did not appear while the Applicant No. 3 was present in person. The first hearing was fixed on 03.07.2019 however, the Respondent had sought adjournment and the next hearing was scheduled on 16.07.2019 which was also not attended by the Respondent. Further hearings were fixed on 17.07.2019, 31.07.2019, 08.08.2019 and 19.08.2019 however; none of the above hearings were attended by the Respondent due to which he was proceeded ex-parte on 19.08.2019. Further hearing opportunity on 30.08.2019, 16.09.2019 and 01.10.2019 was given to the above Applicant. 21. The Applicant No. 3 had filed his submissions on 02.08.2019, 21.08.2019, 03.10.2019 and 20.12.2019 which may be summed up as follows:- I. Vide his submissions dated 10.07.2019 he claimed that he has not been provided any of the documents on which the DGA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of payment to sub-contractors, it was to be estimated how much of material or labour services got transferred between the builder and sub-contractors by checking the actual bills and the ITC would be available only on the material transferred and not on labour services. VI. The above Applicant has also contended the DGAP wrongly computed ITC of as per Sr. No. 3 of Table C as per his reply dated 18.06.2019 and the DGAP must explain the breakup of the same. VII. He also requested to provide bills/invoices raised by sub-contractors to the Respondent for the period 01.04.2016 to 30.06.2017 to ascertain exact value under "Rebate of VAT (WCT) paid to sub-contractors. VII. He also submitted that the ITC claimed by the Respondent as Transitional Cenvat Credit/VAT Credit was related to Excise Duty paid. The Excise Duty paid was part of cost in pre-GST era for residential projects. The Respondent had claimed ITC in Trans-1 for the stock available on 01.07.2017 including residential flats and commercial shops for the inputs used for residential project which was "incremental benefit" for him which was required to be passed to home buyers in terms of Section 140 of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asis which was being disputed on the following grounds :- (a) It was not the case that the Respondent has not passed on the benefit to his patrons / flat owners as was envisaged for triggering the provisions of section 171 of the CGST Act. (b) It was a case of there being a difference in the computation of the profiteered amount by him and the DGAP, who had completed the same on average basis, instead of controverting the calculation made by the Respondent. (c) It has not been established in the DGAP Report how the provisions of Section 171 were attracted in the present case since the Respondent on his own volition has computed and passed on the benefit of ITC in the GST period to the flat owners. VIII. He has also informed the DGAP that the applicants who had applied for residential / commercial space in his project included 132 Residential and 20 commercial new buyers. Since the allotment of the flats/shop and receipt of first consideration was made in the GST period, the works contract with such buyers came into existence thereafter and not in the pre GST period. He also quoted the decision of the Hon'ble Apex Court in the case of Larsen & Tou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al of the objection filed by him, by passing a speaking order was illegal and vitiated the entire investigation proceeding. XI. Further he has raised the following objections on the Report of DGAP:- a. He has not been given any opportunity to either controvert or respond to the DGAP adopting the average basis for determining the alleged profiteering. b. Rule 126 required this Authority to prescribe the Methodology and Procedure for determining whether the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices. The Authority has accordingly drafted the Procedure & Methodology comprising of 41 paras. However it did not provide in any paragraph the basis, method and reasoning for computing any alleged contravention of the provisions of Section 171 of the CGST Act. It was also not explained why the average method has been adopted for computing alleged benefit of additional input tax credit. XII. He further submitted that it was necessary for the taxing statutes, to provide a mechanism for computa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of alleged profiteering on average basis by the DGAP:- a. While computing the alleged profiteering (Table-B), certain inputs used in construction including bricks, stone, stone dust aggregate etc, were exempted from VAT in pre GST period. In post GST period, these inputs has suffered GST @ 5%. Thus, while computing input GST, the amount of GST on such tax free items has also been considered by the DGAP which was to the detriment of the Respondent. In fact, the GST on such items which earlier were tax free has to be eliminated while computing possible profiteering. b. Even while adopting average basis for alleging profiteering, the DGAP has erred in not doing a like comparison adopting similar set of circumstances in pre and post GST period. c. Attention was also drawn to Table 'E' of the Report of DGAP and it was claimed that as per Column F of the Report the total benefit which was required to be passed on to the flat owners has been computed as Rs. 1,40,41,916/-. However, as per Column G of Table E, the DGAP has noted that the total benefit claimed to have been passed on by the Respondent aggregated to Rs. 1,29,29,849/- The details have been computed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as not in accordance with the provisions of Haryana Value Added Tax Act, 2003. Further he submitted that the same could also be verified from form VAT-R-1. II. With regard to the objections raised by the Applicant No. 3 pertaining to the availment of transitional credit on account of Excise Duty, it was observed that Respondent has availed any transitional credit on account of Excise Duty or VAT and therefore provisions of proviso to Section 140 (3) of the Central Goods and Services Tax Act, 2017 were not attracted in the present case. III. The Applicant No. 3 had raised objection regarding receiving benefit of ITC amounting to Rs. 13,115/-, In this regard, the DGAP has stated that it could be observed from Annex- II of the Report dated 14.06.2019 that the Respondent had submitted copy of Credit Note No. CRS1/02077/18-19 dated 31.05.2018 towards passing on benefit of input tax credit amounting to Rs. 13,115/- (Rs. 12,143 basic price and Rs. 972/- as GST). From the Applicants Ledger, it could also be observed that the Respondent has raised last instalment on 06.04.2018 which was timely paid by him. Thereafter Credit Note was issued on 31.052018 which was adjusted a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....visions of Section 171 of the above Act by resorting to profiteering of 1.65% of the turnover of an amount of Rs. 1,40,41,917/-. 27. The Applicant No. 3 has claimed that all the documents on which the DGAP's Report dated 14.12.2019 was based were not supplied to him however, this Authority vide its order dated 16.07.2019 has provided him the required documents after giving due notice to the Respondent. 28. The Applicant No. 3 has also contended that the calculations of the rebate of VAT (WCT) paid to the sub-contractors in the DGAP's Report were incorrect and the rebate of VAT (WCT) was TDS. However, this contention of the Applicant No. 3 is not correct as the Respondent was eligible to claim deduction of VAT (WCT) from his turnover on the payments made to the registered contractors or sub-contractors for the execution of the project which is in accordance with the provisions of Section 42 of Haryana Value Added Tax Act, 2003. It appears that the above Applicant has misunderstood the VAT (WCT) as TDS. The contention of the above Applicant that the ratio of pre GST ITC cannot be 5.65% when the rate of VAT was 4.5% is also not correct as the above ratio has been computed on the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne,2017 has been calculated on the basis of the Returns filed by the Respondent himself. Similarly, the computation of ratio of ITC to turnover for the period from July, 2017 to December, 2019 is based on the information supplied by him. The figures of turnover for both the above periods have also been taken from the documents submitted by the Respondent him. The Respondent has further supplied the details of the total saleable carpet area and the total sold area relevant to the turnover for both the above periods. Hence, both the above ratios are based on actual mathematical computations and not on averages as has been claimed by the Respondent and hence, the above claim of the Respondent is incorrect. 32. The Respondent has further contended that once it was established that he had passed on excess benefit of Rs. 16,515/- to the above Applicants the present proceedings were not maintainable. However, the above contention of the Respondent is not maintainable as he has been found to have not passed on the benefit to the above Applicants and other residential and commercial buyers and therefore, the present proceedings are very much maintainable against him as any information ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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." Therefore, it is quite clear that both the above benefits are required to be passed on by reduction in the prices and in case they are not passed on profiteered amount has to be computed as per the provisions of Section 171 (3A) of the above Act. In view of the above facts this contention of the Respondent is not correct. 35. He has further contended that it was settled that in the taxing statutes that mechanism for computation of value should be provided. However, this contention of the Respondent is fallacious as no tax has been imposed under Section 171 of the above Act. It would also be appropriate to mention here that under Section 171 (2) this Authority has been constituted to ensure that the provisions of 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion under the CGST Act and the Procedure & Methodology drafted under Rule 126 was silent on the timing of passing on of the benefit. However, there can be no doubt that the above benefit has to be passed on as soon as the Respondent avails the benefit for discharging his output tax liability by utilising the ITC. Since, the Respondent is utilising the benefit of ITC every month through his GSTR-3B Returns he should also pass on the benefit by commensurate reduction in the prices every month. The Respondent cannot use two yardsticks while passing the above benefit by himself using the ITC every month and by claiming that his buyers would be entitled to get the same when the project would be completed. The Respondent cannot enrich himself at the expense of vulnerable house buyers by denying them the benefit for more than 4 and half year and use the additional ITC in his business. In case he wants to do so he should also claim the ITC at the time of completion of the project. There is also no provision in the anti-profiteering measures which mentions that the benefit of ITC would be passed on when the flats would be delivered to the buyers. The execution of the project under the works....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n in case of 132 residential flats (Sr. 3 of Table 'E') by an amount of Rs. 27,75,665/- and by Rs. 18,01,596/- in case of 81 commercial shops (Sr. 5 of Table-E) as per the details given in Annexure-16 & 17 of his Report. He has further stated that the benefit claimed to have been passed on by the Respondent was higher than what he should have passed on, in respect of 866 residential flats including the above Applicants (Sr. 1 & 2 of Table-E) by an amount of Rs. and by Rs. 55,110/-, and in case of 10 commercial shops (Sr. 6 & 7 of Table 'E') as per the details given in Annexure-15 & 18 of his Report. Thus, the DGAP has submitted that the Respondent has claimed to have passed on the benefit of Rs. 1,29,29,849/- against the profiteered amount of Rs. 1,40,41,916/- However, the DGAP has not verified and clearly mentioned in his Report that the above amount has been passed on by the Respondent on account of ITC benefit to the buyers. Hence, the above claim of the Respondent cannot be accepted on his mere assertion. Accordingly, the above amount will not be adjusted against the benefit of ITC as has been done by the DGAP vide Table-E supra. 41. The Respondent has also contended that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oming in to force of the GST in respect of which the buyers were not entitled to get benefit of ITC. However, he has not submitted the details of the above buyers during his submissions. Hence, the above contention of the Respondent is untenable due to lack of evidence. 44. Therefore taking into account the 1.65% net benefit of additional ITC this Authority is in agreement with the DGAP's calculation, as has been mentioned in Annexure-14 of his Report that the profiteered amount is Rs. Rs. 1,40,41,916/-. Thus, this Authority determines tie profiteered amount as Rs. ,916/- which includes GST @12% for the period w.e.f. 01 07.2017 to 31.12.2018. 45. It is established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has profiteered an amount of Rs. 1,40,41,916/-which includes both the profiteered amount @1.65% of the base price and GST on the said profiteered amount from the above Applicants and the other recipients as well who are not Applicants in the present proceedings. Accordingly, the above amounts shall be paid to the Applicant No. 1 to 4 and the other eligible house buye....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of this order Shall be submitted to this Authority by the DGAP within a period of 4 months from the date of receipt of this order. 49. A copy each of this order be supplied to the Applicants, the Respondent, Commissioners CGST /SGST as well as Principal Secretary (Town &Planning) Government of Haryana for necessary action. File be consigned after completion. ============= Document 1 Sale Summary 2016-2017 Sale price OCM received/receiv able in respect Deduction U/r 25 Deduction U/r 25 Deduction U/s Deduction U/r Total deduction on account of Land @25% on account of Land 40% on 42 on account of payment to sub- 25 on account of dained by works Labour & Contractor as of goods sold commercial Retail contractor Services regular desler- 30-06-2016 Sector 107 Sector 93 729,06,109 62,56,932 791.63,041 182,26,527 25,02,773 177,58,253 101,68,872 486,56,425 Total 30-09-2016 729,06,109 62,56,932 791,63,041 182,26,527 25,02,773 177,58,253 101,68,872, 486.55 425 Sector 107 1239,39,431 65,11,261 1304,50,692 309,84,858 26,04,504 968,61,330 1304,50,692 Sector 93 T....