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2020 (1) TMI 136
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....", Ghodbunder Road, Manpada, Thane, Maharashtra 400610. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in price w.e.f. 01.07.2017 to him. The Maharashtra State Screening Committee had examined the above application and after its prima facie satisfaction that the Respondent had violated the provisions of Section 171 of the CGST Act, 2017, had sent the same with its recommendations for necessary action to the Standing Committee on Anti-profiteering as per the provisions of Rule the Standing Committee on Anti-profiteering in its meeting held on 13.12.2018 and was referred to the DGAP under Rule 128 (2) for conducting detailed investigation on the allegations levelled by the Applicant No. 1. 2. The DGAP has stated in his Report that the Applicant No. 1 had submitted the following documents along with his application: (a) Duly filled in Form APAF-1. (b) Proof of identification (Aadhar card). (c) Copies of the demand letters. 3. The DGAP had issued Notice under Rule 129 (3) of the CGST Rules, 2017 on 16.01.2019 (Annexure-3 of the Report) asking the Responden....
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....it was computed at the intermediate stage by comparing the input tax credit availed till date and passed on to the flat buyers without taking into account the eventualities like reversal of credit on receipt of the completion certificate and non-deposit of tax by his suppliers, he would not be able to recover the amount from flat buyers at a later stage due to provisions of RERA. Therefore, it was not possible for him to quantify the benefit of additional input tax credit on recurring basis during the period of construction. (v) The Respondent further stated to the DGAP that he was not procuring the construction materials directly from the vendors but had given contracts to various Contractors. Majority of construction material had been procured by the Contractors who were providing works contract service to him. These Contractors had charged Service Tax under works contract service which was creditable to him even in the pre-GST period. The effective Service Tax rate on works contract was 6% (15% of 40%) and in the GST period, work contract service attracted GST @18% which was eligible for credit even in the pre-GST period. Similarly, for other input services, increase in....
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.... 3. On Completion of 11th Slab (E) Oct 24,2017 2,64,645 15,879 15,879 4. On Completion of 13th Slab (E) Nov 18,2017 2,64,645 15,879 15,879 5. On Completion of 15th Slab (E) Dec 12,2017 2,64,645 15,879 15,879 6. On Completion of 17th Slab (E) Jan 06,2018 2,64,645 15,879 15,879 7. On Completion of 19th Slab (E) Jan 20,2018 2,64,645 15,879 15,879 8. On Completion of 21st Slab (E) Feb 12,2018 2,64,645 15,879 15,879 9. On Completion of 23rd Slab (E) Mar 05,2018 2,64,645 15,879 15,879 10. On Completion of 25th Slab (E) Apr 02,2018 2,64,645 15,879 15,879 11. On Completion of Terrace Slab (E) May 16,2018 2,64,645 15,879 15,879 12. On Completion of Int Electric Conduit + Int Conceal + Plumbing (E) Apr, 20, 2019 6,61,613 39,697 39,697 13. On Completion of Flooring + Daddo + Water Proffing (E) Apr, 20, 2019 6,61,613 39,697 39,697 14. On Completion of Ext Plumbing + Electric Main + Ext ....
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....oncluded that the input tax credit pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportional benefit of additional input tax credit available to them post-GST. 6. The DGAP further observed from the details submitted by the Respondent that he had not submitted the details/reconciliation of all the home buyers of the project "Acme Ozone". Accordingly, he limited the computation of profiteering to the sub-project "Herbelia". It also appeared to the DGAP that prior to 01.07.2017, i.e., in the pre-GST era, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services only (no CENVAT credit was available in respect of Central Excise Duty and VAT paid on the inputs). However, post-GST, he could avail input tax credit of GST paid on all the inputs and the input services. From the data submitted by the Respondent, the details of the input tax credit availed by the Respondent, his turnover from the project "Acme Ozone Herbelia" and the ratio of input tax credit to the turnover during the pre-GST ....
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.... realization (profiteering) during the post-GST period, has been tabulated below as provided by the DGAP:- Table (Amount in Rs.) S. No. Particulars Pre-GST Post-GST Period A April, 2016 to June, 2017 July, 2017 to December, 2018 1. Tax Rate B 5.5% 12% 2. Ratio of CENVAT credit/ Input Tax Credit to Turnover as per Table B above (%) C 1.05% 3.66% 3. Increase in input tax credit availed post-GST (%) D=3.66% less 1.05% - 2.61% Analysis of Increase in input tax credit: 4. Basic Price collected during July, 2017 to December, 2018 E 72,03,56,512 5. GST @ 12% on Basic Price F= E*12% 8,64,42,781 6. Total Demand collected/raised G=E+F 80,67,99,293 7. Recalibrated Basic Price H=E*(1-D) or 97.39% of H 70,15,55,207 8. GST @12% on recalibrated Basic Price I=H*12% 8,41,86,625 9. Commensurate Demand J=H+I 78,57,41,832 10. Excess Realization or Profiteering Amount K=G-J 2,10,57,462 8. The DGAP concluded that ....
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....The Respondent vide his reply dated 29.07.2019 stated that the observations made by the DGAP about non-passing of benefit were not correct as supply to the customers/receivers was not yet completed and therefore time for passing on the benefit had not lapsed yet. He also argued that in the CGST Rules, 2017 which deal with anti-profiteering provisions (Rule 122 to Rule 137), due date/time before which the supplier was required to pass on the benefit to the receiver has no where been prescribed. 11. The Respondent further stated that the DGAP had determined the benefit even before the completion of supply and the benefit of additional input tax credit, if any due to implementation of GST which could only be ascertained and quantified at the end of the completion of construction of the project as neither sales nor purchases were evenly spread. He also argued that agreement with the flat buyer was a long term contract spreading into multiple years and flat buyer made payments which were progressive in nature as contract was not concluded unless construction was completed and flat buyer made full payment towards the agreement value. 12. He contended that the ITC availed by him was....
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....ustomers was after taking into consideration all the benefits which were accruing to him. And also, since the anti profiteering provisions itself are not applicable for flats booked after 01.07.2017, the DGAP needs to revise the report to the extent it has computed discount for flats which were booked after 01.07.2017. 17. The Respondent also stated that as the supply to the customers is not yet completed and therefore time for passing of the benefit has not lapsed yet and in absence of any specific provision with reference to the timing for passing of ITC benefit, he stated that the supplier may be required to pass on the benefit either, at the time of completion of supply or immediately after completion of supply. 18. The Respondent stated that the methodology worked by the DGAP is not proper as he has simply compared the ITC availed in the pre-GST and post-GST period from the returns filed. As per the Respondent, only those items which were not-creditable needs to be taken into consideration and items which were creditable in pre-GST period need to be excluded. 19. The submissions of the Respondent dated 24.10.2019 were forwarded to the DGAP for comments if any, the DGA....
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.... adjusted against the demand to be raised on the Applicant or the benefit of ITC to be passed on to him post December. He has also supplied the details of all the buyers who had purchased flats from the Respondent along with their unit numbers vide Annexure-16 attached with the DGAP Report in which the profiteered amount of Rs. 2,10,57,462/- has been computed. 21. The Respondent was issued notice dated 09.07.2019 to explain why the above Report of the DGAP should not be accepted and their liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed along with imposition of penalty as per Sections 122-127 of the above Act read with Rule 133 of the CGST Rules, 2017 and his registration under the above Act should also not be cancelled. 22. The DGAP has also mentioned that the above computation of the profiteered amount was in respect of the 152 fiat buyers whereas, the Respondent had booked 176 flats till 31.12.2018, out of which 24 buyers had not paid any consideration during the post GST from the period between 01.07.2017 to 31.12.2018 Post-GST. 23. He has further mentioned that if the ITC in respect of these 24 units was calculated with r....
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....r alia reads as below:- "we have already passed on the benefit of 3.61% of uncalled demand to Mr. Susheel Prasad Todi. (copy of letter dated 27.04.2018 intimating rebate/discount to Mr. Susheel Prasad Todi is enclosed as Annexure-2)" Also, in his submissions dated 24.10.2019, the Respondent reiterated that he had passed on the ITC benefit of 3.16% to all customers who booked flats before 01.07.2017 on the entire demand which would be issued in post-GST period and enclosed customer ledgers showing that the said benefit had been credited. But perusal of the ledgers proves that the Respondent has given them rebate/discount and not passed on the full benefit of ITC as there is no such entry in their account statements. Granting of rebates/discounts is the most prevalent practice followed in the construction industry to increase sales and hence the above rebate cannot be equated with the passing on of the benefit of ITC. The Respondent has also not produced any reliable or cogent evidence either before the DGAP or this Authority in support of his contention that he has passed on the benefit of ITC by submitting the details of the entries made in his books of account or chequ....
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....ermination of the profiteered amount vide its Notification dated 28.03.2018 however, as has been stated above the same has to be applied on case to case basis. It would also be appropriate to mention here that this Authority has power to 'determine' the methodology and not to 'prescribe' it as per the provisions of the above Rule and therefore, no set prescription can be laid while computing profiteering. Accordingly, the claim made by the Respondent that the methodology adopted is wrong cannot be considered. 29. 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 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 a supplier. In furtherance of the same, this Authority has in exercise of the powers conferred on it under Rule 126 of the CGST Rules, 20....
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.... subsequently shall also be passed on to the buyers by the Respondent. In case this benefit is not passed on the Applicant No. 1 or any other buyer shall be at liberty to approach the State Screening Committee Maharashtra for initiating fresh proceedings under Section 171 of the above Act against the Respondent. The concerned CGST or SGST Commissioner of Maharashtra shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future. 33. 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 'Fusion Homes' 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 liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Accordingly, the notice dated 09....