TaxTMI 
TaxTMI 
2020 (5) TMI 287
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....situated at Plot No. 11/GH/8, Vrindavan Yojana No.3, Sector-11, Lucknow and had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices of the apartment purchased by him, on implementation of the GST w.e.f. 01.07.2017. The said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, had forwarded the same with its recommendation to the DGAP for investigation to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients. The minutes of the meeting were received by the DGAP on 27.03.2019 (Annex-2). 2. The DGAP has mentioned that alongwith the application the Applicant No. 1 had also submitted a copy of the flat buyer- seller agreement, copies of demand letters and copies of his communication with the Respondent. 3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering. had issued notice to the Respondent on 04.04.20....
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....said letters, the Respondent had submitted the following documents/information:- a. GSTR-1 & GSTR-3B Returns for the period from July-2017 to March-2019. b. Copies of Tran-1 Returns for transitional credit availed by him. b. Copies of Service Tax and VAT Returns for the period from April, 2016 to June, 2017. c. Electronic Credit Ledger for the period from July, 2017 to March, 2019. d. Pre-GST and post-GST Applicable tax rates. e. Copy of Balance Sheets for FY 2016-17 & 2017-18. f. Details of turnover and ITC in respect of the project "Azea Botanica". g. List of home buyers in the project "Azea Botanica". 7. The DGAP in his report has further stated that the Respondent had requested that the ITC Register and home buyers list were to be treated as confidential in terms of Rule 130 of the above Rules. 8. The DGAP has further stated that the various replies of the Respondent and the documents/evidence on record have been carefully examined and the main issues to be examined were (a) whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent a....
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....,560 Total 100% 62,95,550 1,98,192 2,40,172 67,33,914 10. The DGAP has reported that the contention of the Respondent that the accurate quantum of ITC benefit would be passed on to the recipients once the project was fully completed and the Respondent had knowledge of the exact benefit of ITC, might be correct but the profiteering, if any, had to be established at a given point of time, in terms of Rule 129 (6) of the Rules. Therefore, the ITC which was available to the Respondent and the amount received by him from the Applicant and other recipients till 31.03.2019, had to be taken into account for determining the extent of profiteering 11. The DGAP has also reported that another aspect that was kept in mind while determining the amount of profiteering was that the ITC proportionate to the unsold units would have to be reversed once the completion certificate was obtained, as ITC in respect of such unsold units would have been claimed in the relevant months when inward supplies were received by the Respondent. This finding was supported by para 5 of the Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither....
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....GST, the Respondent could avail ITC of GST paid on all inputs and input services. From the data submitted by the Respondent, the details of the ITC availed by the Respondent, his turnover for the project "Azea Botanica", the ratio of ITC to the turnover during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to March, 2019) periods, has been furnished by the DGAP in Table-B' below:- Table-B (Amount in Rs.) Sr.No. Particulars April, 2016 to June, 2017 (Pre-GST) July, 2017 to March, 2019 (Post-GST) 1. CENVAT credit of Service Tax paid on input services (A) 2,88,12,927 - 2. Credit of VAT on Inputs (B) - - 3. Total CENVATNAT Credit Available (C)= (A+B) 2,88,12,927 - 4. ITC of GST (D) - 8,07,24,336 5. Total turnover as per home buyers list (E) 72,38,10,202 69,64,97,850 6. Total saleable residential area in the project (in Sq. Ft.) (F) 10,27,462 10,27,462 7. Area Sold relevant to Turnover as per Home buyers list (in Sq. Ft.) (G) 3,43,360 4,58,535 8. CENVAT/ITC relevant to turnover (H)= [(C) or D*(G)/(F)] 96,28,781 3,60,25,599 9. Ratio of CENVAT/ ITC to T....
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....J*12% 7,30,36,341 11. Commensurate Demand price L = J+K 68,16,72,518 12. Excess Realization or Profiteered Amount M=I-L 2,72,21,532 14. The DGAP in his report has claimed that as per Table-C', the additional benefit of ITC of 3.84% of the turnover should have resulted in commensurate reduction in the base prices as well as cum-tax prices. In terms of Section 171 of the CGST Act, 2017, the benefit of the additional ITC was required to be passed on to the recipients. Whereas the Respondent had contended that any such benefit would eventually be passed on to the recipients at the time of giving possession of the flats, but as observed earlier, the profiteering has to be determined at a given point of time, in terms of Rule 129 (6) of the Rules. For the present, the Respondent had retained the benefit on account of additional ITC. In other words, by not reducing the pre-GST base price by 3.84% on account of additional benefit of ITC and charging GST @ 12% on the pre-GST base price, the Respondent appeared to have contravened the provisions of Section 171 of the of the CST Act, 2017. 15. The DGAP i....
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....hat he should have passed on in 167 cases including the Applicant (Sr. 1 & 2 of the above table) amounting to Rs. 73,61,288/- (Rs. 73,05,022 + Rs. 56,266). Further, benefit claimed to have been passed on by the Respondent was higher, compared to what he should have passed on in respect of 95 recipients of residential flats (Sr. 3 of the above table) amounting to Rs. 6,17,435/-. However, these amounts of the excess benefit, claimed to have been passed on, could not be set off against the additional benefit to be passed on to other recipients but might be adjusted against the future demands from such home buyers. 18. The DGAP has further reported that the above computation of profiteering was with respect to 262 home buyers from whom construction value had been received by the Respondent during the period 01.07.2017 to 31.03.2019 (excluding flats sold after 01.07.2017 on which agreements were executed after adjusting benefit of GST ITC. Whereas the Respondent had booked 319 flats till 31.03.2019, he had claimed that effective from 01.07.2017, he had sold 11 flats at the rates agreed by the customers on all-inclusive prices after considering market conditions, escalations, de....
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....realized an additional amount of Rs. 56,266/- as mentioned at Sr. No. 1 of the Table- 'D' from the Applicant No. 1 and Rs. 73,05,022/- as mentioned at Sr. No. 2 of the Table- 'D' from 166 other recipients (who were not Applicants in the present proceedings). These recipients were identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit No. allotted to such flat buyers/ customers/ recipients. Therefore, the total additional amount of Rs. 73,61,288/- was required to be returned to the Applicant and such eligible recipients. 20. The DGAP has further stated that in the present case, the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017. 21. The investigation Report was received by this Authority from the DGAP on 25.09.2019 and was considered in the sitting held on 26.09.2019 and it was decided to accord opportunity of hearing to the Applicants and the Respondent on 24.10.2019. Notice was also issued to the Respondent directing him to explain why the Report dated 24.09.2019 furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the CGST A....
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.... future date should correspondingly result in a lower benefit being passed on to the existing home buyers. It might be possible that on account of the above factors, a higher amount of credit would be passed on to the buyers which he might not be able to recover from the home buyers thereby resulting in losses to him. f. That the DGAP in his report while calculating the ratio of CENVAT/ ITC to turnover for the pre-GST era had considered a period of 15 months i.e. April 2016 to June 2017 and compared it with a period of 21 months i.e. July 2017 to March 2019. The ratio of CENVAT to Turnover in the initial years of the project was significantly higher than the ratio for the period April 2016 to June 2017. If the CENVAT of the period prior to April 2016 was not considered, it might result in an incorrect computation of profiteering. Table-1 below depicts the ratio of Total CENVAT to Total Turnover (calculated in the manner as laid down in the report of DGAP) if the entire CENVAT prior to April 2016 was also considered:- Table-1 (Amount in Rs.) S.No. Particulars Upto Mar Apr 16 to Jun 17 Total Pre- GST 1 Total CENVAT Credit of Service Tax Paid on Inp....
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....ssed on the benefit on the basis of his estimation. j. That in order to avoid further litigation, he agreed to pass on the ITC benefit determined by this Authority. 23.The Respondent has also contended the following:- a. That post implementation of GST he had passed on the benefit of ITC to the home buyers by way of reduction in the amount demanded from the home buyers at the time of raising the demands on them in accordance with the payment schedule agreed with the home buyers. b. That alongwith his submissions he has submitted the list of home buyers to whom the benefit had been passed onalong with copies of the credit notes that he had issued to the home buyers. He also prayed that this list and the details of the credit notes issued be kept confidential. c. That he has submitted a copy of his agreement with his contractor, i.e. M/s Vensa Infrastructure Ltd., alongwith his submissions. 24. The Respondent vide his submissions dated 18.12.2019 has further stated as follows:- a. That the DGAP in para 15 of his report had compared the ratio of ITC availed to turnover during the pre-GST (April 2016 to June 2017) and post-GST (July 20....
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....ent had complete knowledge of the exact benefit of ITC, but profiteering, if any, had to be arrived at a given point of time in terms of Rule 129 (6) of the Rules. Therefore, the ITC available to the Respondent and the amount demanded by him from the Applicant No. 1 and the other recipients till 31.03.2019, was taken into account for the same. The ITC pertaining to unsold units was already excluded from the computation of profiteering. c. That profiteering was computed for the period July-2017 to March-2019 for which comparision was made with the ITC available in the pre-GST period of 01.04.20156 to 30.06.2017. Therefore, the period considered in DGAP's Report was reasonable and comparable. d. That for computation of profiteering, he had considered the total demand raised to all the home buyers during the period July-2017 to March-2019. Once the demand had been raised by the Respondent, the home buyers needed to pay the amount according to the schedule/date mentioned in demand letter. Therefore, the recovery of the amount mentioned in the demand letter is entirely the Respondent's discretion. e. That the Respondent vide submissions dated 02,12.2019 has su....
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....iteered amount. The list of such credit notes was attached as Annexure 'A'. Further, the copies of acknowledgements from a few home buyers regarding the receipt of credit notes for passing on of the additional ITC benefit had also been attached as Annexure 'B'. 29. The Respondent vide his submissions dated 24.02.2020 has further stated that as per the directions of this Authority passed vide order dated 10.02.2020, he had submitted the copies of the acknowledgements from the home buyers regarding the receipt of the credit notes issued for passing on of the addititonal ITC benefit. 30. This Authority has carefully examined the DGAP's Reports, the written submissions of the above Applicants as well as the submissions of the Respondent. The issues to be decided by this Authority in the present case are as under:- 1) Whether the Respondent has availed the benefit of additional ITC during the period between 01.07.2017 to 31.12.2018 which he was liable to pass on to his buyers? 2) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent? 3) If yes, then what was the quantum of profiteering and whet....
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.... calculated the total profiteered amount as Rs. 2,72,21,5321- for the period from 01.07.2017 to 31.03.2019, out of which, an amount of Rs. 2,04,77,678/- was claimed to be passed on by the Respondent to the home buyers by way of reduction in the demand raised by him on his customers/ flat buyers/ recipients. The DGAP, vide his report dated 02.01.2020, has also reported that the claim of the Respondent that he had passed on the ITC benefit amounting to Rs. 2,04,77,6781- to his customers/ flat buyers by way of reducing the amount from their demand letters, has been duly verified by the DGAP with the data submitted by the Respondent and had been found to be correct as per the calculations made in the table-D & para-22 of the DGAP Report dated 24.09.2019. Table-D of the DGAP Report dated 24.09.2020 reveals that the amount of ITC benefit required to be passed on by the Respondent to the customers/flat buyers was Rs. 2,72,21,532/-, out of which an amount of Rs. 2,04,77,678/- had been claimed to have been passed on to his customers by the Respondent. The same has been verified by the DGAP. Hence, only the balance profiteered amount of Rs. 73,61,290/- is still required to be passed on by th....
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....efit is not passed on to the Applicant No. 1 or any other buyer they shall be at liberty to approach the State Screening Committee Uttar Pradesh for initiating fresh proceedings under Section 171 of the above Act against the Respondent. 39. Further, in line with Rule 136 of the CGST Rules 2017, this Authority directs the jurisdictional CGST Commissioners to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible buyers along with applicable interest. A report in compliance of this order shall be submitted to this Authority by the jurisdictional Commissioner CGST within a period of 4 months from the date of receipt of this order 40. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project 'Azea Botanica' in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently 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 Sec....