TaxTMI 
TaxTMI 
2020 (1) TMI 136
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....ra 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 Respondent to intimate as to whether he admitted that the benefit of ITC had no....
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....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 credit was due to increase in tax rate. The increase in the input tax credit was not due to availability....
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....bsp; 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 Painting (E) 6,61,613 39,697 39,697 15. On Completion of Int Painting + CP + Sanitary Ware + Int Wirring (E) 6,61,613 39,697 39,697 16. On Completion of Pumps + Substation+ STP (E) 3,96,968 23,818 23,818 17. On Possession (S) 2,64,642 15,875 15,875 Total 1,32,32,2....
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....tion 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 (April, 2016 to June, 2017) and post-GST (July, 2017 to December, 2018) periods, is furnished in table below as given by the DGAP:- Table (Amount in Rs.) Sr.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) July, 2017 to December, 2018 Total (Post-GST) 1. CENVAT credit of Service Tax Paid on Input Services (A) 42,05,349 21,81,958 63,87,307 2. Credit of VAT paid on Inputs (B)  ....
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....c 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 the additional input tax credit of 2.61% of the turnover should have resulted in commensurate reduction in the basic price as well as cum-tax price, and for the present, the Respondent has retained the benefits that had accrued on account of additional input tax credit. After taking into account the aforesaid CENVAT/input tax credit availability pre-GST and post-GST and the details of the amount collected from the home buyers during the period 01.07.2017 to 31.12.2018, the amount of benefit of input tax credit not passed on to the recipients as computed by the DGAP was Rs. 2,10,57,462/- which included 12% GST on the base profiteered amount of Rs. 1,88,01,305/-, and the benefit to....
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....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 not final and it was required to be reversed in future which would be in proportion to the unsold area of flats on the date of obtaining of Occupation Certificate, therefore he requested that the discount/reduction in sale price would only be possible only at the completion of the project by which the finality in terms of consumption of materials, services, cost, sales etc would be ascertained. 13. The Respondent claimed that the methodology followed by the DGAP was not correct as the DGAP has simply compared the ITC availed in the pre-GST and post-GST period from the returns filed, but only those goods/services on which credit was not available in the pre-GST period needed to be taken....
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.... 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 DGAP replied vide letter dated 07.11.2019 that the Respondent has not submitted any sales/booking agreement wherein it has been mentioned that the input credit benefit accruing to the Respondent in the post-GST period has been considered to arrive at the sale price for flat booked after introduction of GST. 20. We have carefully considered all the Reports filed by the DGAP, the submissions made by the Respondent and find that the Applicant No. 1 had booked Flat with the Respondent in his "Acme Ozone herbilia" project located in Thane, Maharashtra measuring 984 sq. feet, at basic sale price of Rs. 13447/- per sq. feet. It is also revealed from the record that the above Applicant vide his complaint dated ....
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....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 reference to the 152 units where payments had been received after GST had come in to force, the ITC as a percentage of taxable turnover would be distorted and erroneous and hence, the benefit of ITC in respect of these 24 units should be calculated when the consideration would be received Post-GST by taking into account the proportionate taxable turnover in respect of these 24 Units. It is observed from the documents placed on record as well as the above submissions of the DGAP that out of the above 176 flat buyers the Respondent has received consideration Post-GST, only from 152 flat buyers. Therefore, the ITC benefit is required to be passed on to the 152 buyers only at this stage and benefit should be passe....
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....ents. 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 cheques issued to the buyers or the copies of the tax invoices/demand letters or the acknowledgements made by his customers of having received the benefit of ITC due to implementation of the GST. As discussed above the Respondent has only claimed to have passed on the discount/rebate on account of GST which cannot amount to passing on the benefit of ITC as per the provisions of Section 171 (1) of the CGST Act, 2017. Therefore, the above claim of the Respondent is frivolous and hence, the same cannot be accepted. 26. Hence, we take the view that no benefit of ITC has yet been passed on to him by the Respondent. Accordingly, we hold that the Applicant No. 1 is entitled to an amount of Rs. 1,91,662/- including the GST as benefit....
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....ed 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, 2017, notified the 'Procedure & Methodology' for determination of the profiteered amount vide its Notification dated 28.03.2018. However, the mathematical methodology for determination of the profiteered amount is case specific since it depends on the facts of each case and thus, no fixed formula can be set for calculating the amount profiteered in different cases. It is also pertinent to elaborate that the mathematical methodology applied in cases where the rate of tax has been reduced and ITC disallowed cannot be applied to cases where the rate of tax has been reduced and ITC allowed. 30. The Respondent has also submitted that he would have to reverse the ITC after issuance of the Completion Certificate as per Schedule-III subje....
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....(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 09.07.2019 vide which it was proposed to impose penalty under Section 29, 122-127 of the above Act read with Rule 21 and 133 of the CGST Rules, 2017 is hereby withdrawn to that extent. 34. On perusal of the DGAP Report dated 03.07.2019 and the annexures attached with it, it has been observed that the Respondent has other subprojects under project "Acme Ozone" other than project "Acme Ozone Herbilia" as it was also intimated by the DGAP that the project "Herbilia" was a sub project under "Acme Ozone" project having RERA Registration No. P51700001038. The present investigation covers only one sub project i.e. "herbilia", out of the whole project under one RERA Registration. The Respondent has himself admitted that he had appointed Advocates....