TaxTMI 
TaxTMI 
2020 (2) TMI 957
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....espondent's project "Edge Towers", Ramprastha City, Sec-37-D, Gurugram, Haryana. The above Applicant had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price. This Complaint was examined by the Haryana State Screening Committee and upon being prima facie satisfied that the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017. forwarded the said application with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the CGST Rules, 2017 on 30.10.2019. 2. The above Complaint was examined by the Standing Committee on Anti-profiteering in its meeting held on 13.12.2018 and vide its minutes was forward to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017 on 07.01.2019. 3. The DGAP in his Report has stated that the Applicant submitted the following documents along with his application: (a) Duly filled in Form APAF-1. (b) Copies of the demand letters. (c) ID proof (Aadhar Card). 4. The DGAP on receipt of the said reference from the Standing Committee on Anti-prof....
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....o stated that the subject application, the various replies of the Respondent and the documents/evidences on record had been carefully examined. The main issues for determination were 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 GST w.e.f. 01.07.2017 and if so, whether the Respondent had passed on such benefit to the recipients, in terms of Section 171 of the CGST Act, 2017. 8. The DGAP has further stated that the Respondent had submitted copy of the sale agreement dated 20.08.2010, for the sale of Flat No. K-1603 to the above Applicant in his project "Edge Towers", measuring 1340 square feet, at the basic sale price of Rs. 2683/- per square feet. The details of amounts and taxes paid by the Applicant No. 1 to the Respondent, has been furnished by the DGAP in Table-'A' below:- Table-'A' (Amount in Rs.) S.No. Demand Date Basic Sale Price Other Charges Service Tax/GST Total 1. 19-07-2010 12,73,862 6,87,201 38,937 20,00,000 2. 30-08-2010 - 11,699 301 12,000 3. 04-02-2011 9,479 - 251 10,000 4. 04-02-201....
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.... to the residential units which were under construction but not sold was provisional ITC which may be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the Completion Certificate, in terms of Section 17 (2) & Section 17 (3) of the Central Goods and Services Tax 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 ITC pertaining to the unsold units was outside the scope of the investigation ....
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....ring the post-GST period (July, 2017 to December, 2018), it was 2.64%. This clearly confirmed that post-GST, the Respondent had been benefited from additional ITC to the tune of 0.92% (2.64% - 1.72%) of the turnover. Accordingly, the profiteering has been examined by comparing the applicable tax and the ITC available for the pre-GST period (April, 2016 to June, 2017) when only Service Tax was leviable @4.5% with the post-GST period (July, 2017 to December, 2018) when the effective GST rate was 12% (GST @18% alongwith 1/3^rd abatement for land value) on construction service, imposed vide Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. On the basis of the figures contained in Table-'B' above, the comparative figures of the applicable tax rate and ratio of ITC to the turnover during the pre-GST and the post-GST periods as well as the recalibrated basic price the excess realization (profiteering) during the post-GST period, has been tabulated by the DGAP in Table-'C' below:- Table-'C' (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 ....
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....red amount of Rs. 31,50,664/-. Further, the benefit to be passed on to the Applicant No. 1 for the Flat No. K-1603 worked out to Rs. 14,096/- which included both the profiteered amount @0.92% of the basic price and 12% GST on the said profiteered amount 15. The DGAP in his Report has also stated that before concluding the investigation, it was pertinent to mention that the above computation of profiteering was with respect to 397 home buyers from whom payments had been received by the Respondent during the post-GST period covered by the investigation, i.e., 01.07.2017 to 31.12.2018, whereas the Respondent had booked a total number of 1242 flats till 31.12.2018. In respect of the remaining 845 flats, though the customers had booked the flats on or before 31.12.2018, they had not paid any consideration during the post-GST period from 01.07.2017 to 31.12.2018. If the ITC in respect of these 845 units was taken into account to calculate profiteering in respect of 397 units where payments had been demanded or received in the post-GST period, the ITC as a percentage of turnover would be distorted and erroneous. Therefore, the benefit of ITC in respect of these 845 units would have to ....
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....eived. During the period from 01.01.2019 to 30.06.2019, he has raised demand on 94 flat owners, which included taxable amount of Rs. 2,46,67,9581- on which CGST & SGST of Rs. 44,40,232/- was levied and he was in the process of giving benefit of ITC to these flat buyers. iii. There were 15 towers in the subject project out of which possession had been given to the flat buyers of 5 towers and the remaining 10 towers were still under construction. iv. He would pass on the benefit of ITC through the demands raised for the balance 10 towers. 21. This Authority vide Order dated 20.08.2019 had directed the Respondent to submit the following documents/information:- a. Statement showing project-wise ITC/CENVAT Credit availed and Turnover as per the statutory Returns (GST, ST, VAT Returns) for the period from 01.04.2016 to 31.12.2018. b. Details of all the Projects under the present Registration along with copies of Completion Certificate, if any. c. Project-wise list of all payments received from each of his buyers along with the details of booking date & amount and ITC benefit passed on, if any, to them. d. Ledger for the period from....
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....s:- "However, we clarify that a notice under Section 148 of the Income Tax Act is issued. the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notice. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years." iv. The office of the DGAP had asked for various information/documents from him, which all had been duly submitted by him before the DGAP. v. He has been engaged in the business of real estate in which the contracts were for long term duration and as per the GST law, he was required to reverse the ITC in respect of unsold units once the completion certificate was issued. Therefore, computation of the accurate quantum of ITC benefit which was req....
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....had been made out against him on the basis of evidence submitted to the Authorities by the Applicant No. 1. xi. In view of the above, he has stated that the Screening Committee had acted completely without jurisdiction, opposed to the mandate of law, and had forwarded the complaints. Hence, the initiation of proceedings on the basis of the reference of Screening Committee was opposed to the mandate of law, which was bad in law and was liable to be quashed. xii. Further, he has stated that the bare reading of Rule 128 provides the Standing Committee should examine the accuracy and adequacy of the evidence provided in the application to determine whether there was prima-facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of ITC had not been passed on to the recipient by way of commensurate reduction in prices. However, nowhere in the minutes of the meeting of the Standing Committee, the above requirement was met. The Standing Committee had merely decided to forward the complaint for further investigation without discussing any evidence on record and without recording ....
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....hat for a taxing statutes, to provide a mechanism for computation of value on which tax was to be paid. It had been repeatedly held that in case the provisions of law did not provide for complete machinery provision, with respect to levy, the levy itself would fail. Reliance in this regard was placed on the following cases:- a. B.C. Srinivasa Setty [1981(128) ITR 294 (SC)] = 1981 (2) TMI 1 - SUPREME COURT. b. National Mineral Development Corporation 2004 (6) SCC 281 = 2004 (5) TMI 575 - SUPREME COURT. c. Govind Saran Ganga Saran v. Commissioner of Sales Tax 1985 (60) STC 1 (SC) = 1985 (4) TMI 65 - SUPREME COURT. d. Mathuram Agrawal v. State of Madhya Pradesh, (1999) 8 SCC 667 = 1999 (10) TMI 125 - SUPREME COURT. Hence, in absence of any method/manner/basis for defining profiteering or for determining the manner in which the amount was to be computed, the provisions of Section 171 of the CGST Act, 2017 became unenforceable and therefore, the procedure and methodology adopted by the DGAP was completely wrong, arbitrary, unreasonable and without authority of law on the ground that the Report had proceeded to calculate the profiteering amoun....
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....on'ble High Court in its Order dated 09.12.2019 has stated that:- "Issue notice. Learned counsels for the respondents accept notice. Counter-affidavit be filed within eight weeks. Rejoinder, if any, be filed before the next date. List on 14.01.2020. In the meantime, the proceedings may go on and orders may be passed by the respondent No. 3. The Respondent No. 3 shall deal with the submissions of the petitioner. Since the petitioner has raised a fundamental issue of jurisdiction of respondent No. 3 to proceed in the matter, the respondent No. 3 shall pass a reasoned order, firstly, on the aspect of jurisdiction. In case the respondent No. 3 passes a reasoned order holding that they have jurisdiction, it shall be open to respondent No. 3 to pass an order on merits." 25. As per the above directions of the Hon'ble High Court, despite a time bound procedure, the Respondent was given an opportunity to appear for the hearing on 16.12.2019. However, the Respondent despite the directions of the Hon'ble High Court did not appear for the hearing. Instead, vide his e-mail dated 16.10.2019 he had informed that he would not be able to appear for the hearing and had ....
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....rima facie examine the allegations of profiteering which are to be investigated by the DGAP in detail under Rule 129 (1) of the Rules. Hence, the contention raised by the Respondent is not correct in as much as prima facie the above committees have found evidence to the effect that the ITC benefit has not been passed on. 30. The Respondent has also contended that Section 171 of the CGST Act, 2017 does not provide any methodology/procedure according to which this Authority shall examine whether any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. He further contended that the methodology and procedure would have come into force with effect from the issuance of the notification by this Authority. In this connection it would be pertinent to mention that the main contours of the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself which states that Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be....
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....completion of the project, price of the house/commercial unit, mode of payment of price, stage of completion of the project, timing of purchase of inputs, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realised before and after the GST implementation would always be different than the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to another project. Issuance of Occupancy Certificate/ Completion Certificate would also affect the amount of benefit of ITC as no such benefit would be available once the above certificates are issued. Therefore, no mathematical formulae can be fixed for determining the benefit of additional ITC which would be required to be passed on to the buyers of such units. Further, the facts of the cases relating to the Fast Moving Consumer Goods (FMCGs), restaurants, construction and cinema houses are completely different and therefore, the mathematical methodology employed in the case of one sector cannot be applied in the other sector otherwise it would result in denial of the benefit to the eligible recipients. Moreover, both....
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.... DGAP's Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.72% and during the post-GST period (July-2017 to December-2018), it was 2.64%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 0.92% (2.64%-1.72%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as Rs. 35,28,744/- on the basis of the information supplied by the Respondent, which the Respondent had himself admitted and hence the amount of profiteering computed by the DGAP is hereby accepted as correct. 34. In view of the discussions in para 33 above, it is clear that the Respondent has profiteered by an amount of Rs. 35,28,744/-(Annex-17) during the period of investigation i.e. 01.07.20....
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....that since the Respondent has denied benefit of ITC to his homebuyers in his Project 'Edge Towers' in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus committed an offence under Section 171 (3A) of the above Act, he is liable to be penalized under the provisions of the above Section. Accordingly. a 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 19.06.2019 vide which it was proposed to impose penalty under Sections 29 and 122-127 of the above Act read with Rule 21 and 133 of the CGST Rules, 2017 is withdrawn to that extent. 39. It is clear to us that the Respondent has profiteered in the project 'Edge Tower'. Therefore, as per the provisions of Section 171 (2) of the CGST Act, 2017, this Authority has reasons to believe that there is a need to verify all the Input Tax Credits of the Respondent so as to arrive at the aggregate profiteering of the Respondent, since profiteering on the part of the Respondent has already been established in the case of "Edge Towers....