TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 302
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....n the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above flats. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meetings held on 13th December, 2018, wherein it was decided to forward the same to the DGAP to conduct detailed investigation in to the complaint according to Rule 129 (1) of the CGST Rules, 2017. 2. The Applicant No. 1 submitted a copy of her communication with the Respondent regarding passing on of the benefit of input tax credit along with her application. 3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP found that the Applicant No. 1 had booked a flat in the Respondent's project "Pyramid City -5", in the pre-GST era and had paid the booking amount of Rs. 50,000, vide Cheque dated 28.03.2017 and the first demand letter/invoice was raised by the Respondent in the post-GST era. Thus, the DGAP issued Notice dated 16.01.2019 under Rule 129 (3) of the above Rules, asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on by him to the Applicant No. 1 by way of commensurate....
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....it sold in the pre-GST period, to show that due to GST implementation, prices had been reduced by him. d) The Respondent had submitted that the Applicant No. 1 had made a payment of Rs. 50,000 only on 28.03.2017, as initial booking amount, but she did not register her agreement after paying such initial booking amount in the pre-GST period. Upon registration of the Agreement to sale on 29.08.2017 in the Post-GST period, demand was raised on the Applicant No. 1 on 02.09.2017, after deducting the initial booking amount paid earlier and the Respondent had no choice but to charge 12% GST on the said amount. e) The Respondent, vide his letter dated 07.06.2019, had also contended that he had already reduced the price by more than the amount of additional input tax credit in the GST era, either by way of reduction in prices or by offering various discounts on other charges to be collected from his recipients. In support of this contention the Respondent had also submitted sample copies of sale deeds for the units sold in the GST era at reduced prices as compared to similar units sold in the pre-GST era. f) The Respondent had also submitted a copy of his Agreement with the Applicant ....
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.... c) Copy of Electronic Credit Ledger for the period01.07.2017 to 31.12.2018. d) Copies of VAT & ST-3 Returns for the period April, 2016 to June, 2017. e) Copies of all demand letters, sale agreement/contract issued to the Applicant No. 1. f) CENVAT/input tax credit registers for the period April, 2016 to December, 2018. g) Copies of Balance Sheets for FY 2016-17 & 2017-18. h) Copy of project report submitted to the RERA. i) Details of VAT, Service Tax and GST for the periods FY 2016-17, 2017-18. j) List of home buyers in the project "Pyramid City 5". 7. In his Report dated 28.06.2019, the DGAP has stated that all the documents placed on record were carefully examined and it was found that the main issues for determination were as to whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not. 8. The DGAP has also reported that para 5 of Schedule-Ill of the Central Goods and Services Tax Act, 2017....
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.... inputs was not admissible as per the CENVAT Credit Rules, 2004, which was in force at the material time. Moreover, since the Respondent was paying VAT @ 1% under Maharashtra VAT Composition Scheme, he was not eligible to avail input tax credit of VAT paid on the inputs. Further, post-GST, the Respondent could avail the input tax credit of GST paid on all the inputs and input services. From the information submitted by the Respondent for the period April, 2016 to December, 2018, the details of the input tax credit availed by him, his turnover from the project "Pyramid City 5" 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, the DGAP has furnished Table-'B' as below:- Table-'B' (Amount in Rs.) S. No. Particulars (Pre-GST) April, 2016 to June, 2017 (Post-GST) July, 2017 to Dec, 2018 1 CENVAT credit of Service Tax Paid on Input Services (A) 63,71,323 - 2 Input Tax Credit of VAT Paid on Purchase of Inputs (B) - - 3 Total CENVAT/Input Tax Credit Availed pre-GST (A+B) 63,71,323 - 4 Input Tax Credit of GST Availed (D) - 1,92,72,708 5 Total Turnover ....
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....le the booking amount was received and the booking form was signed between the Applicant No. 1 and the Respondent on 28.03.2017 i.e. prior to the implementation of GST, there was no mention in the said form that the price of the flat had factored the benefit of additional input tax credit in the post GST period. The DGAP has further reported that the Respondent was required to pass on the benefit of the additional input tax credit to his unit buyers who had booked their units in the pre-GST period and hence, for the purpose of calculation of profiteering, the turnover from the units booked in the pre-GST period has only been taken into consideration. 12. The DGAP has further stated that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, the DGAP has examined the profiteering by comparing the applicable tax rate and input tax credit available to the Respondent during the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.5% and VAT@ 1% were payable (total tax rate wa....
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....home-buyers and unit no. wise break-up of this amount has been given in Annexure-14 of the DGAP Report. It was also observed that the Respondent had supplied the construction services in the State of Maharashtra only. 15. The DGAP has further mentioned in his Report that above computation of profiteering was made only with respect to 100 home buyers, including the Applicant No. 1, who had booked their units prior to the implementation of GST. Out of the 153 units (out of a total 159 units) booked till 31.12.2018, 43 buyers of residential units, who had booked their flats in the post-GST period at the reduced price, had not been considered for the purpose of calculation of profiteering. Out of the 110 units booked in pre-GST period, buyers of 10 units had not paid any consideration during the post-GST period from 01.07.2017 to 31.12.2018 (period covered by the investigation) and hence, these units have been excluded from the current computation because if the input tax credit in respect of these 10 units had also been considered for the computation of profiteering, the computation of input tax credit as a percentage of turnover would be distorted. Therefore, the benefit of input ta....
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.....07.2019 and it was decided that the Applicant No. 1 and the Respondent be asked to appear before the Authority on 06.08.2019. The Respondent was issued notice on 10.07.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed. During the course of the hearings no one appeared for the Applicant No. 1 while the Respondent was represented by Sh. Shailesh Chandak, Authorised Representative. 19. The Respondent vide his submissions dated 23.08.2019, 12.11.2019, 21.11.2019, 29.11.2019, 10.12.2019 and 14.12.2019 has made following contentions:- a) The Respondent has submitted that the intention of introducing GST Law was to give seamless credit to assessee. The intention of Government was to pass on the benefit of ITC in respect of those goods/services on which the assessee was not eligible to avail ITC in pre GST period. As per natural law of justice, profiteering should have been calculated on the basis of extra/incremental amount of ITC accrued to him in the post-GST era as compared to the pre-GST era. b) The Respondent has submitted that neither did the CGST law h....
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....ate sector. ii. Project Life cycle of construction projects effect had been totally ignored and it was assumed that uniform expenses were being incurred by him throughout the lifecycle based on the formula adopted by this Authority. iii. Input Tax Credit was an absolute number which would vary as per the Govt. rate policies. A lot of goods had been moved from 28% to 18% tax-rate slab. This had not resulted into any benefit to him as a buyer of raw materials/inputs as he was entitled to credit in both the scenarios. The ratio of ITC/turnover calculated by the DGAP would have varied significantly had this factor been taken into account while computing the amount of profiteering. iv. The ratio of ITC availed to taxable turnover may vary from time to time and single formula cannot fit in all such cases. As such this Authority should undertake to recover the excess passed-on benefit from customers in future if this methodology is followed and later it is found that the ratio has changed. v. Dealer pays GST amount over and above basic cost, and he gets ITC of what he pays separately as GST. In this system, his basic cost remains same whereas ITC amount and consequent ITC ratio va....
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....ent showing Turnover as per statutory returns & ITC/CENVAT Credit availed for the period from 01/04/2016 to 31/12/2018. ii. List of payment received from buyers. iii. Balance sheets for the F.Y. 2016-17, 2017-18 & 2018-19. iv. Copy of registry of land in the name of the Respondent. 20. The submissions filed by the Respondent were forwarded to the DGAP vide Order dated 25.11.2019 and 03.12.2019 for clarifications under Rule 133(2A) of the CGST Rules, 2017. The DGAP has filed his clarifications dated 11.12.2019 on the submissions of the Respondent as follows:- a) On the issue raised by the Respondent that the Profiteering should have been calculated on the basis of extra/incremental amount of Input Tax Credit which was available to builder in GST era, the DGAP has clarified that the investigation Report dated 28.06.2019 had taken into account all the details and evidence supplied by the Respondent. The additional benefit which the Respondent got in Post GST era on account of Input Tax Credit had been taken into consideration for calculation of profiteering and it addressed the concern of the Respondent. b) On the issue raised by the Respondent on the methodology adopted by....
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....by the DGAP in its investigation. In this regard, methodology of DGAP had been consistent throughout in all its reports involving allegation of profiteering in cases of similar nature. e) On the issue raised by the Respondent that only proportionate ITC in respect of sold flats should have been considered, the DGAP has clarified that this aspect had been taken into account as ITC of only sold flats was taken into consideration. In this regard the investigation Report wherein area sold relevant to turnover and ITC relevant to sold area had been taken is clearly depicted in Table 'B'. Further, it was clearly mentioned in the investigation Report that profiteering, if any, for the period post December, 2018 had not been examined. Also, the eligibility of refund of excess credit had not been examined for calculation of profiteering. 21. The clarifications dated 11.12.2019 filed by the DGAP were supplied to the Respondent to file further submissions, if any. The respondent has filed submissions dated 14.12.2019 on the clarifications of the DGAP as follows:- a) The Respondent has submitted that he had reduced the selling prices of the units in the month of March itself as GS....
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....ilarly, the prices of different units also varied based on other factors such as completion of building, location of building in premises etc. which have been ignored by the DGAP while computing the profiteering amount in the instant case. e) The Respondent has further submitted that he denied to have profiteered by any amount in terms of Section 171 of the CGST Act and Rules made there under and / or any other legal provisions as applicable and has added that the CGST Act did not provide any machinery for assessment of tax in terms of Section 171 of the above Act. He has also contended that the law being vague, it would not be open to the Assessing Authority to arbitrarily assess the tax amount. He has further added that where the statute did not provide procedural machinery for assessment or levy of tax, or where it was confiscatory, the same ought to be treated as unconstitutional. He has cited the case of Commissioner Central Excise and Customs Kerala v. Larsen and Toubro Limited (2016) 1 SCC 170 = 2015 (8) TMI 749 - SUPREME COURT in his defence, The Respondent has stated that the Hon'ble Apex court in the above cited case, held that in absence of prescribed machinery and....
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....the Respondent along with their unit numbers and the profiteered amount vide Annexure-14 attached with his Report dated 28.06.2019. 23. Further, we observe that the Respondent has contended that the profiteering should have been computed on incremental/extra amount of ITC only. Perusal of DGAP Report suggests that he has already addressed this objection of the Respondent in Table-B of his Report as the profiteering has been computed by reducing the pre-GST ITC to turnover ratio, i.e. 2.76%, from post GST ITC to turnover ratio, i.e. 7.26%. Therefore, amount of ITC which was available to the Respondent before introduction of GST, i.e. 2.76% of turnover, has been duly considered in Table 'B' above. Therefore, the profiteering has been calculated only on the additional ITC benefit which he has got during post-GST period and hence, the contention of the Respondent has already been addressed during investigation by the DGAP. 24. 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 c....
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.... availed by him. Further, it is observed from the Annexure-13 of the DGAP Report that the discount offered by the Respondent to his home-buyers varies from 4% to 17% which shows that this discount has no correlation with ITC benefit to be passed on. Therefore, there is no ground to believe that the above discount was given on account of the ITC benefit and there is no doubt that this discount was given only due to commercial reasons and hence the contention made by the Respondent in this regard cannot be accepted. 27. The Respondent has contended that he had reduced the prices of flats after introduction of GST. In this regard it is observed from the Annexure-13 of the DGAP Report that the Respondent has reduced the prices in March, 2017, much before the implementation of GST and further prices reduced by the Respondent vary from 4% to 17% and it is nowhere mentioned that these prices have been reduced in respect of ITC benefit which has accrued to the Respondent due to implementation of the GST. Therefore, there is no ground to believe that the above price reduction was done on account of the ITC benefit and there is no doubt that this reduction was done only due to commercial re....
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.... of profiteering is best suitable in this case and appropriate. Hence, the contention of the Respondent is without any basis and frivolous. 30. The Respondent has also contended that the ITC in respect of unsold units was uncertain and it may have to be reversed at the time of completion of the project. Perusal of Row No. 6, 7 and 8 of Table-B of the DGAP Report suggests that the DGAP has already divided the whole ITC into proportionate ITC relevant to sold and unsold units and profiteering has been computed by considering the proportionate ITC relevant to sold flats/units only. Therefore, the contention of the Respondent has already been addressed appropriately at the time of investigation by the DGAP. 31. The Respondent has also contended that at the time of completion of project, there may be the situation in which he would remain with excess ITC credit. In this regard it is clear from the DGAP Report that the profiteering has been calculated from July, 2017 to December, 2018 only and the ITC relevant to this period has been considered by the DGAP. It is clearly mentioned in the Para-22 of the DGAP Report that the profiteering after December, 2018 had not been examined as the ....
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....Authority has been established to determine whether both the above benefits have been passed on or not to the consumers. Under Rule 123 Standing and Screening Committees on Anti-Profiteering have been constituted to examine the accuracy and adequacy of the evidence to prima facie establish whether the above benefits have not been passed. As per Rule 129 of the CGST Rules, 2017 office of DGAP has been created and empowered to investigate the complaints alleging non passing of the above benefits on the recommendation of the Standing Committee on Anti-Profiteering. Vide Rule 127 this Authority has been assigned the duty of determining whether these benefits have been passed on or not, to identify the registered person who has not passed on the 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 ....
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....r the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him", therefore this Authority has been constituted to examine whether input tax credits availed by a registered person have actually resulted in commensurate reduction in the price of the goods or services or both supplied by him. Intention of the law clearly suggests that the registered person has to pass on the commensurate benefit of ITC to his each and every recipient not only to the complainant. Therefore, the contention of the Respondent is contradictory to the intent of the law and hence, cannot be accepted. 37. The Respondent has also contended that he was not in agreement with the computation of the profiteered amount made by the DGAP as it included the GST which had been deposited by him in the Govt. account. The plea taken by the Respondent on this ground is fallacious as by forcing the flat buyers to pay more price by not releasing the benefit of additional ITC and by collecting tax @12% on this additional realisation he has denied t....
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.... No. 1 which includes both the profiteered amount @ 4.52% of the taxable amount (base price) and 12% GST on the said profiteered amount. He has further realized an additional amount of Rs. 49,79,425/- which includes both the profiteered amount @ 4.52% of the taxable amount (base price) and 12% GST on the said profiteered amount from the 99 other flat buyers other than the Applicant No. 1 as mentioned in Annexure14 of the Report dated 28.06.2019. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of Rs. 49,79,425/- and Rs. 1,33,503/- to the other flat buyers and the Applicant No. 1 respectively along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made, within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure- 14 attached with the Report dated 28.06.2019. 40. In view of the above facts this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ....