TaxTMI 
TaxTMI 
2019 (12) TMI 1265
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.... Expressway, Gurugram, Haryana and alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price, in terms of Section 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. ft. The Haryana State Screening Committee on Anti-profiteering on prima facie having satisfied itself that there was less burden of tax in the GST regime due to availability of input tax credit which the Respondent should have passed to the buyers, had forwarded the above application with its recommendation to the Standing Committee on Anti-profiteering on 20.06.2018 for further action, in terms of Rule 128 (2) of the above Rules. 2. The above reference was examined by the Standing Committee on Anti-profiteering and vide minutes of its meetings dated 07.08.2018 and 08.08.2018, it had forwarded the same to the DGAP for detailed investigation under Rule 129 (1) of the above Rules. 3. The DGAP on receipt of the application issued two letters to the Standing Committee on Anti-profiteering on 12.09.2018 and 17.10.2018 and sought supporting documents along with details of the Applicant ....
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....e requisite documents. 8. In response to the Notice dated 29.10.2018 issued by the DGAP, the Respondent vide his replies dated 19.11.2018, 03.12.2018, 04.12.2018, 05.12.2018, 14.12.2018, 17.12.2018, 01.01.2019, 21.02.2019, 10.04.2019 and 12.04.2019 submitted that the Respondent was a single housing project construction company and was developing the present project in Sector-103, Gurugram under the Affordable Housing Scheme under the Pradhan Mantri Awas Yojna. He also submitted that he had already informed his customers that the benefit of reduction in the cost on account of tax benefit with the implementation of GST, would be duly passed on to them. He further submitted that his project was nearing completion and he was in the process of computing the final tax benefit which would be passed on to the customers in the next demand invoices to be raised in the month of May, 2019. The Applicant No. 1 had also been apprised of the above facts with the request for withdrawal of his complaint which had been made in haste. 9. He further stated that he was not directly engaged in any construction activity and all the work related to the project was assigned to various sub-contractors....
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....t case, it could be summarised that in the GST regime, there was no reduction in the rate of tax on supply of goods and services as compared to the pre-GST regime, instead, there was an increase in the rate of GST by approximately 3.5%. 11. The Respondent also submitted that the Central taxes, i.e., Central Excise Duty/Service Tax levied under the pre-GST regime, on the transfer of property in goods in the execution of works contracts, were now available as input tax credit in the GST regime. The Respondent was only procuring Cement, Steel and RMC on his own and all other raw materials used in construction were sub-contracted to the various contractors, who procured raw materials directly, after due payment of Central Excise Duty/GST. However, the Respondent was negotiating with the sub-contractors for seeking the benefits under the GST regime and would pass on the same to his buyers, on or before the completion of the project. 12. The DGAP in his Report has also stated that the Respondent had furnished the following documents:- (a) Copies of GSTR-I Returns for the period from July, 2017 to December, 2018. (b) Copies of GSTR-3B Returns for the period from Ju....
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....50% 10,69,950 85,596 11,55,46 2. Within 15 days of Allotment 3. Within 6 months of Allotment 4. Within 12 months of Allotment 5. Within 18 months of Allotment 6. Within 24 months of Allotment 31.05.2018 12.50% 213,990 17,119 2,31,109 7. Within 30 months of Allotment 25.11.2018 12.50% 213,990 17,119 2,31,109 8. Within 36 months of Allotment Not yet due 12.50% 213,990 17,119 2,31,109 Total 100% 17,11,920 1,36,953 18,48,873 15. The DGAP has also observed that the Respondent stated that he would compute the benefit of reduction in the cost on account of tax benefit in respect of the project, at the end of the project and pass on the benefit to his customers, might have merit but the profiteering, if any, had to be determined at a given point of time, in terms of Rule 129 (6) of the CGST Rules, 2017. Therefore, the additional ITC available to the Respondent and the amounts received by him from the Applicant No. 1 and other recipients post implementation of GST, have to be taken into account to determine the benefit of input tax credit that was required to be passed on. 16....
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....(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" 18. Thus the DGAP has claimed that the ITC pertaining to the unsold units may not fall within the ambit of the current investigation and the Respondent would be required to recalibrate the selling prices of such units to be sold to the prospective buyers by considering the net benefit of additional input tax credit available to them post-GST. 19. The Respondent has also submitted that out of total 1,472 flats and 113 commercial shops, only 55 flats and 38 commercial shops were unsold as on 31.12.2018. 20. The DGAP has also claimed that prior to 01.07.2017 i.e. before the GST was introduced, the service of construction of affordable housing provided by the Respondent, was exempted from Service Tax, vide Notification No.25/2012-ST dated 20.06.2012, as amended by Notification No. 9/2016-ST dated 01.03.2016. The Respondent was also not eligible to avail CENVAT credit of Central Ex....
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.... Total Saleable Carpet Area (Excluding Balcony Area) (in SOF) (I) 7,15,818 (Residential) 39,055 (Commercial) 7,54,873 7,15,818 (Residential) 39,055 (Commercial) 7,54,873 10. Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to turnover (J) 6,00,050 (Residential) 18,988 (Commercial) 6,19,038 6,91,293 (Residential) 16,361 (Commercial) 7,07,654 11. Relevant ITC [(K)=(D)*(J)/(I) or [(K)=(E)*(J)/(l)] 1,95,75,178 9,50,11,592 Ratio of Input Tax Credit to Turnover Post-GST [(L)=(K)/(H)*100] 4.76% 7.27% 21. Thus, from the above Table, the DGAP has contended that it was clear that the input tax credit as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 4.76% and during the post-GST period (July, 2017 to December, 201 8), it was 7.27% which confirmed that post-GST, the Respondent had benefited from additional input tax credit to the tune of 2.51% [7.27% (-) 4.76%] of the turnover. 22. The DGAP has also stated that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective r....
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.... 11,95,53,792 11. Commensurate demand price J = H+I 45,34,93,517 3,91,98,741 90,13,32,036 1,39,40,24,294 12. Excess Collection of Demand or Profiteering Amount K=G-J 1,16,75,749 10,09,220 2,32,05,902 3,58,90,871 23. The DGAP has also argued that the additional input tax credit of 2.51% of the turnover should have resulted in commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the Central Goods and Services Tax Act, 2017, the benefit of such additional input tax credit was required to be passed on to the recipients. Whereas the Respondent had not contested that any such benefit would eventually have to be passed on to the recipients at the time of giving possession of the flats, it was a fact that this had not been done so far. Thus, by not reducing the pre-GST base price by 2.51% on account of additional benefit of input tax credit and charging GST at the increased rate of 12% or 8% on the pre-GST base price, the Respondent had contravened the provisions of Section 171 of the of the CGST Act, 2017, the DGAP has alleged. 24. The DGAP has also submitted that on the basis of the afores....
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....ed both the profiteered amount @ 2.51% of the base price and GST on the profiteered amount, from other recipients (1416 home buyers and 54 shop buyers) as well who were not Applicants in the present proceedings. These recipients were identifiable as per the documents provided by the Respondent which gave their names and addresses along with Unit Nos. allotted to such recipients therefore, this additional amount of Rs. 3,58,50,265/- was required to be returned to such eligible recipients. 27. The DGAP has further stated 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 by him 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. 28. The above Report was considered by this Authority in its meeting held on 29 04 2019 and it was decided to hear the Applicants and the Respondent on 17.05.2019. A Notice was also issued to the Respondent on 01.05.2019 asking him to reply why the Report dated 25.04.2019 furnished by th....
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....ference got strengthened on a review of the response received by the Applicant No. 1 from the Helpdesk dated 28.04.2018 and the same was reproduced below:- "On Sat, Apr 14, 2018 at 8:56 PM, [email protected]<[email protected]> wrote: Dear Sir/Madam, Your Request ID is 201804101166998 Thank you for writing to us at CBEC Mitra Helpdesk. We received your support request, and we understand that you want to know the benefits of homes purchased under the Pradhan Mantri Awas Yojana (PMAY) scheme. This is to inform you that the GST Council Meeting held on 18^th January, 2018 has decided to reduce the GST rate on under-construction houses under Pradhan Mantri Awas Yojana (P MAY) scheme to 8% (after deducting the value of land). During the GST Council Meeting, it was declared that all under construction houses that are being built as a part of Credit Linked Subsidy Scheme (CLSS) would be charged at 8% GST, contrary to its current rate of 12%. Note: Anyone who is not entitled to CLSS will continue to pay 12% GST on real estate. NOTE: Sale of building is an activity or consideration that is neither a....
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....t addressed to the Standing Committee as prescribed under Rule 128 of the CGST Rules read with Rule 129. There had also been no receipt of information from the interested party by this Authority as prescribed in Para 9 read with Para 12 of the Procedure & Methodology to initiate investigation in accordance with the procedure prescribed in Rule 128 of the CGST Rule read with Rule 129. He has further claimed that the DGAP's Report dated 25.04.2019 has not mentioned the information on the basis of which the correspondence made by the above Applicant with the Helpdesk was assumed to be a complaint. He has also submitted that the DGAP in his Report dated 25.04.2019, has stated that the Applicant No. 1 had informed him that his doubts with regard to the pricing matters in respect of the said project stood clarified by the Respondent and that he was fully convinced that no undue advantage had been taken by the Respondent. He has also stated that the above Applicant had become a successful allottee in the project only in the post-GST period on 27.01.2018, therefore by necessary implication he was not an allottee in the pre-GST period to be impacted by any change in the rate. The Respondent....
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....ribed for computation of tax, no tax was payable. He has further submitted that the recent judgement passed in the case of Larsen & Toubro 2015 SCC Online SC 738 had also quoted with approval the decisions of the Patna, Madras and Orissa High Courts relating to machinery provisions in the following terms:- "We find that the Patna, Madras and Orissa High Courts have, in fact, either struck down machinery provisions or held machinery provisions to bring indivisible works contracts into the service tax net, as inadequate." The said judgment was also quoted in the judgment of Hon'ble Supreme Court passed in the case of State of Jharkhand v. Voltas Ltd. East Singhbhum, (2007) 9 SCC 266 = 2007 (5) TMI 18 - SUPREME COURT, the Respondent has contended. 35. The Respondent has also claimed that the anti-profiteering provisions under the CGST Act and the Procedure & Methodology drafted under Rule 126 was silent on the timing of the accrual of the benefit on the agreement entered in the pre-GST regime and the transfer of property in goods/services executed in the GST regime and the passing on of the same to the buyer. He has also mentioned that in a conventional sale of goods/se....
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....ing whether the correspondence between him and the Helpdesk would tantamount to being a complaint. (b) Forcibly converting a query with regard to minutes of the GST Council Meeting dated 18.01.2018 into a complaint ignoring the provisions of Rule 128 and 129 of the GST Rules. (c) and concluding the profiteering proceedings arbitrarily despite the complaint against the Respondent by the said Applicant having being withdrawn. (d) Making an arbitrary finding of profiteering of 2.51% on the claims raised during the GST period and ignoring the Respondent's submissions that the construction was yet to be completed by 31.12.2019. The Respondent has also claimed that it was premature to compute profiteering till the project was nearing completion which had found acceptance by the DGAP in para 16 of his Report dated 25.04.2019. However, the DGAP had made an observation in the same para of being bound to make a report in terms of Rule 129 (6) of CGST Rules. This observation of the DGAP was misinterpretation of the Rule 129 (6) which only provided a time frame of 3 months for concluding an enquiry and submitting his Report along with records. It did not provide for ....
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....to the above Applicant had forwarded his application to the Standing Committee on Anti-Profiteering for further action as per the provisions of Section 128 (2) of the above Rules. The above complaint was examined by the Standing Committee in its meetings held on 07.08.2018 & 08.08.2018 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 No. 1 and vide his Report dated 25.04.2019 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. 3,58,90,871/- 41. The Respondent in his written submissions filed on 17.06.2019 has claimed that no complaint had been filed by the Applicant No. 1 against him for not passing on the benefit of ITC. He has further claimed that the above Applicant vide his e-mails dated 10.04.2018 and 28.04.2018 addressed to the Helpdesk established by the Central Board of Excise & Customs (CBEC) had only raised queries regarding the proceedings of the 25th meeting of the GST Council held on 18.01.2018 which could not be construed ....
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....efers to my complaint to your good self and your subsequent letter to the builder M/s. JMK Holdings Pvt. Ltd., vide F. No. 22011/API/109/2018/5627 dated 29th October, 2018, a copy of which has been endorsed to me, wherein you had directed the builder to redress the Issue being faced by me. In this context I hereby inform you that the authorised representative of the company has approached me and has clarified all the doubts regarding pricing matters. I am fully convinced that no undue advantage has been taken from me for the flat booked under affordable housing. also confirm that the above statement is being made by me without any pressure and with full consent and understanding of the matter. Thanking you for your help, Your's Sd/- Name: Dharmendra. Goud Mobile No: 9015745676 Address: 212/3, Tex Chand Nagar, Sec-104, Gurugram" (Emphasis supplied) 44. It is clear from the perusal of the above letter that the Respondent had approached the above Applicant and won him over not to pursue the complaint as it would have made him liable for profiteering under Section 171 (1) of the above Act. It is also clear that t....
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....unity by the DGAP to either controvert or respond to the DGAPs adoption of the average basis for determining the alleged profiteering. In this connection it would be appropriate to mention that as per the provisions of Rule 129 (1) of the CGST Rules, 2017 the DGAP has been entrusted with the responsibility of carrying out detailed investigation in the allegations of profiteering and collect necessary evidence and therefore, he is not required to afford opportunity of hearing to the Respondent being an investigating agency. As per the provisions of Rule 129 (3) the DGAP is required to give notice to the Respondent which he has given on 29.10.2018 and hence he has complied with the above provision. Proper opportunity of being heard has been provided to the Respondent by this Authority in which the Respondent has controverted the computations of the DGAP through his written submissions and hence he should have no objection on this ground. However, he has not cared to attend any of the personal hearings which were afforded to him by this Authority on 17.05.2019, 30.05.2019, 10.06.2019, 18.06.2019 and 11.07.2019. 47. The Respondent has also contended that this Authority has not provi....
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.... above benefits, to provide relief to the affected consumers, get the profiteered amount returned or deposited and impose penalties. Under Rule 133 this Authority has been empowered to determine the above benefits, grant them to the eligible recipients, get the profiteered amount deposited and impose penalties. Under Section 171 (3A) of the CGST Act, 2017 read with Rule 133 (3) (d) & (e)) of the above Rules, this Authority has been given power to impose penalty on the registered persons and cancel their registration who do not pass on the above benefits. Under Rule 136 this Authority can get its orders monitored through the tax authorities of the Central or the State Governments. Hence, there is more than the adequate machinery required to implement the Anti- Profiteering measures and hence all the claims made by the Respondent on this ground are incorrect and hence they cannot be accepted. 49. He has also cited the judgement passed in 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. Keeping in view the facts mentioned in para supra it is respectfully submitted that the law settled in the abo....
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....pondent avails the ITC for discharging his output tax liability. Since, the Respondent is utilising the ITC every month through his GSTR-3B Returns he should also pass on the benefit by commensurate reduction in the prices every month to his buyers. The Respondent cannot use two parameters while using the ITC himself every month and by claiming that his buyers would be entitled to get the benefit of ITC when the project would be near completion or completed. The Respondent cannot be allowed to enrich himself at the expense of vulnerable affordable house buyers by denying them the benefit for more than 4 years and use the additional ITC in his business at the same time. In case he wants to pass on the benefit after completion of the project he should also claim the ITC after the project is completed. There is also no provision in the Anti-Profiteering measures which requires that the benefit of ITC would be passed on when the flats would be delivered to the buyers. The execution of the project by awarding works contracts also does not entitle him to pass on the above benefit when the project would be nearing completion or will be completed. Hence, all the above claims of the Respond....
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....r Table B supra and hence it is established that the Respondent has benefited from the benefit of additional ITC to the extent of 2.51% [7.27% (-) 4.76%] of the turnover. Since, the above computations shown in Table B have been made on the basis of the VAT, Service Tax and GST Returns filed by the Respondent as well as the information supplied by him therefore, the same can be taken to be correct and relied upon. 55. It is also clear from the record that the Central Government, on the recommendation of the GST Council, had levied 18% GST with effective rate of 12% in view of 1/3rd 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....
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....h the excess amount was collected by the Respondent from the buyers till the date of its payment within a period of 3 months from the date of this order failing which the same shall be recovered by the concerned Commissioner CGST/SGST and paid to the eligible buyers as per their entitlement as per the provisions of CGST/SGST Acts. 57. 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 concerned 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 on in future the Applicant No. 1 or any other buyer shall be at liberty to approach the Haryana State Screening Committee to launch fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017. 58. 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 'Grand....