TaxTMI 
TaxTMI 
2020 (12) TMI 888
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.... the benefit of input tax credit to him by way of commensurate reduction in price in terms of Section 171 of the CGST Act, 2017. Before recommending the investigation under Rule 129 (1) of the CGST Rules, 2017, the aforesaid complaint had been examined by the Standing Committee on Anti-profiteering in its meeting held on 15.05.2019. 2. On receipt of the aforesaid reference and the supporting documents from the Standing Committee on Anti-profiteering on 28.06.2019, a Notice under the provisions of Rule 129 (3) of the CGST Rules, 2017 was issued by the DGAP on 08.07.2019 calling upon the Respondent, to intimate as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of a commensurate reduction in the price of the flat and if it was so, to suo-moto compute the quantum of the same and mention it in his reply to the Notice along with the supporting documents. Further, vide DGAP's Notice dated 08.07.2019, the Respondent was allowed to inspect the non-confidential evidence/information submitted by Applicant No. 1 on any day between 15.07.2019 and 17.07.2019. The Respondent availed of the opportunity to inspect the non-confidential docu....
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....the demand letters issued to Applicant No.1 and a copy of the Agreement he had executed with the Applicant No.1. (f) Details of the various taxes and tax rates leviable in his case in the pre-GST and the post-GST periods. (g) Copy of his Balance Sheet (including all Annexures), his Profit & Loss Account, and Cost Audit Report for financial years 2016-17 & 2017-18. (h) Copy of Electronic Credit Ledger for the period 01.07.2017 to 30.06.2019. (i) CENVAT Credit/Input Tax Credit registers for the period from April 2016 to June 2019. (j) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit, for the period April 2016 to June 2017 and output GST and ITC of GST for the period July 2017 to June 2019 for the project "Suncity Avenue-102". (k) List of homebuyers in the project "Suncity Avenue-102" along with the details of Input Tax Credit benefit passed on. (l) Ledger Account statement maintained by him for his homebuyers. 6. The DGAP has further reported that a careful examination of the case records has revealed that the main issue for determination is as to whether the Respondent had benefitted on account of input tax cred....
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....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". 9. Citing the above provisions, the DGAP has stated that in the instant case, the ITC in respect of those residential units which were under construction but not yet sold is a provisional input tax credit which may be required to be reversed by the Respondent, if such units remain 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. 10. The DGAP has further rep....
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....x Credit of GST Availed (D) - 1,06,24,296 3,29,97,020 4,36,21,316 5. Turnover for Residential Flats as per Home Buyers List (E) 384477456 19,22,38,774 59,25,53,793 78,47,92,567 6. Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (F) 3,99,574 3,99,574 7. Total Sold Carpet Area (Excluding Balcony Area) (in SQF) relevant to turnover (G) 3,76,068 3,86,498 8. Relevant ITC [(H)= (C)*(G)/(F)] or [(H)= (D)*(G)/(F)] 84,99,974 4,21,93,815 Ratio of Input Tax Credit Post-GST [(I)=(H)/(E)] 2.21% 5.38% 12. Basis the above calculation, the DGAP has reported that ITC as a percentage of turnover that was available to the Respondent during the pre-GST period from April 2016 to June 2017 worked out to 2.21% whereas for the post-GST period from July 2017 to June 2019 it worked out to 5.38%, showing clearly that in the post-GST period, the Respondent has benefited from additional ITC by 3.17% [5.38% (-) 2.21%] of the turnover. 13. The DGAP has further stated that the Central Government had levied GST @ 12% (effective rate) on constructi....
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....unt of ITC, ought to have resulted in a commensurate reduction in the base price as well as the cum-tax price charged by the Respondent from his homebuyers in terms of provisions of Section 171 of the CGST Act, 2017. The DGAP has further reported that having established the instant case to be a case of profiteering, he has quantified the amount of benefit that ought to have been passed on by the Respondent to his recipients/ homebuyers. The said quantification, which factored the payments received by the Respondent from his recipients/ homebuyers, including Applicant No. 1, for the period from 01.07.2017 to 24.01.2018, has yielded that the total amount profiteered, for the relevant period, by the Respondent worked out to Rs. 68,25,245/- (inclusive of GST calculated on the base profiteered amount of Rs. 60,93,969/-). Similarly, for the period from 25.01.2018 to 30.06.2019, the profiteered amount worked out to Rs. 2,02,86,672/-, (including GST@8% on the base profiteered amount of Rs. 1,87,83,9551-). Therefore, taking the above two periods together, the total amount profiteered by the Respondent during the period 01.07.2017 to 30.06.2019 came to Rs. 2,71,11,917/- (inclusive of GST). ....
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....f 716 homebuyers, including the Applicant No. 1 (Sr. 1 & 2 of the above table) by an amount of Rs. 3,91,714/-. 17. The above Report of the DGAP dated 23.03.2020 was considered by this Authority in its meeting held on 28.04.2020 and accordingly, a Notice dated 01.05.2020 was issued to the Respondent to explain why the above-referred Report of the DGAP dated 23.03.2020 should not be accepted and why his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. Further, this Authority, vide Notice dated 01.05.2020, offered the Respondent an opportunity to be heard on 01.06.2020 but due to the Covidl9 outbreak the above-said hearing could not be held. Thus this Authority, vide Order dated 01.06.2020, solicited consolidated written submissions from the Respondent and the Applicant No.1, if any, The Respondent and Applicant No.1 were also informed that personal hearing will be held, preferably through video conferencing, only on specific request. However, the Respondent did not make any specific request for a hearing though he furnished his written submissions vide his replies dated 15.06.2020 and 12.08.2020. Applicant No.1 too furnished his s....
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....concerned with this case and that the Respondent has profiteered by an amount of Rs. 2,71,11,971/- whereas he has passed on only Rs. 2,67,88,794/- to 736 homebuyers as the ITC benefit; further that "Para-7 (C) & Para-17 of the DGAP report dated 23.03.2020" conveyed that the Respondent has submitted the soft copies of the acknowledgment of the receipt of the ITC benefit from only 2 of the total 736 homebuyers and that the acknowledgment of receipt of the ITC benefit in respect of the remaining 734 homebuyers has not been furnished by the Respondent to the DGAP, the reason for which needed to be ascertained. 20. The above Applicant has also submitted that the Respondent has also constructed a commercial complex, comprising more than 50 shops within the overall complex/boundary of the project Suncity Avenue 102. The cost of the construction of this commercial complex might have been factored within the overall construction cost of the complete project, i.e. residential and commercial complex and the Respondent could have furnished misleading information regarding the same before the DGAP; that this aspect needed to be checked since the Respondent would have profiteered from the sai....
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.... passed on by the Respondent to the homebuyers and this fact has been reflected in Paras 17 & 18 of the DGAP Report dated 23.03.2020; that a verification of the documents furnished by the Respondent has revealed that the Respondent has passed on the benefit of ITC as claimed by him; further, that the Respondent had informed the DGAP during the process of investigation that he has constructed 761 residential flats apart from 51 commercial shops; that since none of the shops in the commercial complex was sold during the period of investigation, the turnover and area of the commercial complex has not been taken into consideration while computing the profiteering in respect of homebuyers/ consumers of the residential complex; that, accordingly, the benefit of ITC that needed to be passed on to the homebuyers has been computed considering total ITC available to the Respondent in respect of the project 'Suncity Avenue-102' and the said benefit has been allocated amongst the 736 homebuyers, keeping in mind that out of the 761 residential units, only 736 residential units were sold and other units remained unsold in the relevant period. 22. The abovesaid clarification of the DGAP da....
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....erification. The list of the randomly selected 74 homebuyers along with their residential unit details, is given in the Chart below:- CHART S.No. Customer Name Unit No. 1 Prerit Kumar A1001 2 Satish Kumar A1204 3 Abhai Singh A201 4 Taruna Pundeer A406 5 Virender Kumar A503 6 Sudhanshu Thapliyal A901 7 Bal Kishan Gogia A904 8 Sunil Kumar A908 9 Suraj Devi B004 10 Sheela Devi B1008 11 Rajender Singh B103 12 Bidya Bhushan Bhartiya 81204 13 Gunjan Dewan 81205 14 Devender Yadav B204 15 Suresh Kumar & Surinder Kumar B703 16 Jasvir Singh Yadav 8707 17 Ravi Kumar C003 18 Ekta Yadav & Jitender Yadava C1002 19 Surender Pahuja & Puja Pahuja C1007 20 Sumit Gahlot C108 21 Vidhi Chaturvedi C1104 22 REKHA VIKRAM SINGH C1204 23 Kaneez Fatma C1208 24. MOHAN LAL KAUSHAL & MEENU KAUSHAL C205 25 Shalender Gupta C208 26 Sushma Dutta C305 27 Mayank Bhatnagar & Anita Bhatnagar C402 28 Raman Kumar & Shakuntla C407 29 Madhvi Sharma C503 ....
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....uired under Section 171 of the CGST Act, 2017. While deciding the matter on the above lines, we dismiss, as untenable, the contention of the Respondent that the excess (more than commensurate) benefit amounting to Rs. 3,91,714/- passed on by him to 716 homebuyers/ recipients be adjusted against the 'less than commensurate' benefit passed on to the other 20 homebuyers/recipients because the provisions of Section 171 of the CGST Act, 2017 apply to each supply which implies that each homebuyer/ recipient is entitled to the commensurate benefit due to him in respect of the residential unit supplied to him. The adjustment sought by the Respondent, if agreed, would result in depriving the aforementioned 20 homebuyers of the benefit which would be against the legislative intent of Section 171 (1) of the CGST Act, 2017 and is hence not acceptable. 26. We thus observe that whereas the Respondent was required to pass on the ITC benefit of Rs. 2,71,11,917/- (including GST), in respect of the period July 2017 to June 2019, in terms of provisions of Section 171 of the CGST Act, 2017, he has only passed on Rs. 2,67,88,794/- (including GST) to his homebuyers and that the remai....