TaxTMI 
TaxTMI 
2022 (5) TMI 973
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.... flats after issuance of completion certificate did not attract GST, he had alleged that the Respondent had charged GST @ 18% on the Preferential Location Charges (PLC). The Haryana State Screening Committee on Anti-Profiteering had examined the said application and forwarded it with its recommendation, to the Standing Committee on Anti-Profiteering for further action, in terms of Rule 128 of the Rules. Further the aforesaid reference was examined by the Standing Committee on Anti-Profiteering in its meeting, the Minutes of which were received in the DGAP, whereby it was decided to forward the same to the DGAP, to conduct a detailed investigation in the matter. Sh. Sudhir Jain had submitted a demand letter along with his application. 2. This Authority went through the aforesaid Investigation Report dated 31.08.2020 submitted by the DGAP and passed an Interim Order No. 38/2020 dated 11.12.2020 and made the following observations:- "25. It has also also been observed from the submissions of the Respondent that he is executing another project viz. "The Ultima" in the same "DLF Garden City", situated in Gurugram, Haryana in respect of which the DGAP has not conducted any investigati....
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....P has issued a notice dated 23.09.2021 calling for information in respect of all the projects covered under the same GST Registration No. of the Respondent to determine whether the benefit of ITC had been passed on by him to the recipients in respect of construction service supplied by him for all the projects and the Respondent was further requested to furnish the fresh requisite information/data for the period up to November, 2020. 6. It has also been claimed by the DGAP that the period covered by the current investigation was from 01.07.2017 to 30.11.2020. Though the Respondent claimed that the Occupation Certificate in all three projects were received from the competent authority prior to 30.11.2020 but the Respondent, vide his submission dated 12.12.2021, had confirmed that the in respect of payment plan, the customers have opted for payment plans as per their convenience and same will be mixed. Therefore, since the occupation certificates have been received in respect of all the 3 projects by the Respondent but the nature of agreements as claimed by the Respondent were linked with construction plan as well as payment plan i.e., mixed, the investigation has been carried out u....
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....tition and the accompanying application for interim relief. The Writ Petition has been re-notified by the Hon'ble Court for further hearing to 06.12.2021. c) That the Respondent was incorporated in the year 1963 and is one of the Largest Real Estate Developers of the country. He has various commercial and residential projects in the state of Haryana. Delhi, and Uttar Pradesh etc. His operations spanned all aspects of real estate, from the identification and acquisition of land, to planning, execution, construction and marketing of projects. He is also engaged with other services such as leasing, maintenance etc. The development business of the Respondent is involved in the sale of residential spaces, select commercial offices and commercial complexes. d) The main projects executed by the Respondent from 01.07.2017 along with the Occupancy Certificates (OC) for these projects were received is as follows :- S.No. Projects Date of OC 1. The Camellias 27.07.2017 2. The Sky Court 17.07.2017 3. The Crest 24.07.2017 4. The Ultima (Tower-E,H,J,K,L & EWS) 11.06.2018 5. The Ultima (Tower-A,B,N,Q.R & Shops) 05.02.2019 e) That the Respondent has reported....
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.... b. GSTR-9 for the year 2017-18. 2018-19 and 2019-20. c. Trans-1 for the period July, 2017 to December, 2017. d. VAT and ST-3 Returns for the period April, 2016 to June, 2017. e. Details of applicable tax rates, Pre-GST & Post-GST. f. Balance sheet for the FY 2016-17, 2018-19 & 2019-20. g. Cenvat/Input Tax Register for the F.Y 2016 -17, April, 2017-June, 2017, July, 2017-March, 2018, 2018-19, 2019-20 and April 2020 to November, 2020. h. List of all Construction projects of the Noticee in the State of Haryana other than The Sky Court" on which the Noticee is availing ITC from common pool, along with RERA Registration No's, that is, all the projects covered under GSTN:06AAACD3494N 1ZC. i. Copy of demand letters/Sale agreement/contract issued to the home buyers for Ultima, Crest & Camellias project. (Sample basis). j. Copy of the RERA Certificate for the project Ultima Phase-II. k. Tower-wise status of all projects as on 30-11-2020 having sold & unsold units with respective area in sq. ft. along with the copies of occupancy certificates. I. Details of VAT, Service Tax, ITC of VAT, Cenvat Credit for the period April, 2016 to June, 2017 and output GST and ITC o....
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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". Therefore, the ITC pertaining to the unsold units might not fall within the ambit of the investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST. 13. Further the DGAP has submitted that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail CENVAT of Service Tax paid on input service....
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.... the figures contained in Table 'A', above, the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period in respect of project "The Camellias". has been furnished by the DGAP in Table-B below:- Table-B - Project "The Camellias" (Amount in Rs.) S. No. Particulars 1. Period A July, 2017 to November, 2020 2. Output tax rate (%) B 12.00% 4. Increase in ITC availed post-GST (%) C= 1.84% less 0.67% 1.18% 5. Analysis of Increase in ITC: 6. Total Basic Demand during July, 2017 to December, 2019 D 5,48,89,78,351 7. GST @12% E=D*12% 65,86,77,402 8. Total demand F=D+E 6,14,76 55,753, 9. Recalibrated Basic Price G=D*(1-C) or 98.82% of D 5,42,43,80,017 10. GST @12% H=G*12% 65,09,25,602 11. Commensurate demand price I=G+H 6,07,53,05,619 12. Excess Collection of Demand or Profiteered Amount J=I-F 7,23,50,135 15. Similarly the details of the ITCs availed by the Respondent, his turnovers from the project "The Crest", and the ratios of ITC to turnovers, during the p....
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....ate demand price I=G+ H 97,15,02,149 12. Excess Collection of Demand or Profiteered Amount J=1-F 12,94,35,170 17. Similarly, the details of the ITCs availed by the Respondent, his turnovers from the project "The Ultima", and the ratios of ITCs to turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to November, 2020) periods have been furnished by the DGAP in Table-E below:- Table-E - Project "The Ultima" (Amount in Rs.) S.No. Particulars April, 2016 to June, 2017 July, 2017 to November, 2020 (Pre-GST) (Post-GST) 1. CENVAT of Service Tax Paid on Input Services (A) 17,57,99,658 0 2. ITC of VAT Paid on Purchase of Inputs (B) 0 0 3. Total CENVAT/VAT/ITC Available (C=A+B) 17,57,99,658 0 4. ITC of GST Available (D) 0 40,36,17,830 5. Total Turnover from Residential Area (E) 2,34,91,80,023 29,21,24,530 6. Total saleable area in Sq Ft. (F) 21,80,054 21,80,054 7. Sold Area relevant to turnover in Sq Ft. (G) 7,13,003 2,75,586 8. ITC proportionate to Sold Area (H)= (C or D)* G/F) 5,74,96,596 5,10,09,684 9. Ratio of Cenvat/ITC to Turnover (I=H/E*100) 2.45% 17.46% It is clear from the above Table `E, that ....
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....s. 4,91,23,070/-. Further, the Respondent had submitted the lists of home buyers of all the above three projects and had claimed that he had passed on the benefit of ITC and mentioned the amount of benefit of ITC passed on against each home buyer of respective projects. The Respondent had claimed that benefit of ITC was passed on to the home buyers of the projects "The Camellias" to the extent of Rs. 6.96,08,150/-, "The Crest" of Rs. 4.59,47,817/- and "The Ultima" of Rs. 5,58,32,865/-. However, to support his claim of benefit of ITC having been passed on, the Respondent has not submitted any documentary evidence i.e., copies of cheques, copies of Credit Notes issued to home buyers, copies of Ledger Accounts of the home buyers maintained by the Respondent. Furthermore, the Respondent had not provided the email ids/phone numbers of the home buyers to enable the DGAP to verify the authenticity of the Respondent's claim from the respective home buyers. Therefore, on the basis of above; claim of the Respondent was not verifiable and thus the same had not been appropriated against the profiteered amount as computed by the DGAP. Further, on the basis of the details of outward supplies....
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.... above Report of the DGAP was considered by this Authority and it was decided to allow the Respondent to file his consolidated written submissions by 16.03.2022. A notice dated 02.03.2022 was also issued to the Respondent asking him to explain why the Report of the DGAP dated 16.12.2021 should not be accepted and his liability for violating the provisions of Section 171 of the above Act should not be fixed. 23. The Respondent filed his consolidated written submissions dated 06.05.2022 vide which he has submitted that:- a) The three projects in question were not registered under RERA as the projects did not qualify as RERA projects. b) The order dated 11.12.2020 of this Authority and the DGAP's notice dated 23.09.2021 were challenged before the Hon'ble Delhi High Court in Writ Petition (Civil) No. 12329/2021. The writ petition was disposed off as withdrawn on 03.01.2022 with liberty to raise all the grounds urged in the petition as also such other grounds which may be available in law, with the appropriate legal authority. c) In the pre-GST regime, various duties/taxes like Central Excise Duty, VAT on purchase of inputs were becoming a cost. On introduction of GST, th....
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....(4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy' iv. ITC means credit of input tax, and input tax means CGST, SGST, UTGST and IGST. Based on the definition of ITC and input tax, it would mean benefit in the form of availability of ITC of GST charged on procurement of certain goods/services, which was earlier not available as ITC (either fully or partially) but became now available as ITC. For instance, under section 17(5)(a) of the CGST Act, ITC in respect of motor vehicles was not available (except in certain cases) and the said bar was on ITC in respect of all types of motor vehicles, irrespective of seating capacity. This was subsequently amended by the CGST (Amendment) Act, 2018 to provide that ITC shall not be available only in respect of motor vehicles having seating capacity of not more than 13 persons (including the driver), except in certain cases. The effect of this amendment was that in respect of motor vehicles exceeding the seating capacity of 13....
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....ess conferment of suo moto power on this Authority or the DGAP to order investigation against any person, this Authority and the DGAP could act only based on the application filed by an interested party or Commissioner or any other person. Since in the present case, the investigations had been initiated pursuant to this Authority's direction. it was nothing but suo moto initiation of action which could not be allowed. In fact, this Authority at para 25 of its order dated 11.12.2020 records that after taking suo mote cognizance directed the DGAP in respect of Respondent's project, The Ultima". Consequently, the order dated 11.12.2020 of this Authority and the DGAP's report dated 16.12.2021 had no legal sanctity and it was without authority or jurisdiction. iii. The Respondent has placed reliance on the judgment of the Hon'ble Supreme Court in Gujarat Urja Vikas Nigam Limited vs. Solar Semiconductor Power Company (India) Private Limited and Ors. (2017) 16 SCC 498, wherein it was held that Electricity Commission being a creature of statute cannot assume to itself any powers which were not otherwise conferred on it. Furthermore, in Rajeev Hitendra Pathak and Ors. v. A....
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....d wrongly charged GST @ 18% on the Preferential Location Charges on the sale of flat to him after the issuance of completion certificate. It is submitted that there was no allegation of any violation of Section 171 of the CGST Act by him. viii. That this Authority itself observed that the Applicant had made no allegation of violation of Section 171 in the application. Therefore, it is submitted that neither the DGAP nor this Authority had any jurisdiction to investigate pursuant to application/complaint made by Sh. Sudhir Jain. There was no legal basis for this Authority to direct investigations in Respondent's other projects as there was no complaint against the Respondent, alleging violation of Section 171 of the CGST Act. Thus, proceedings initiated against the Respondent were required to be dropped on this ground alone. ix. That the directions of this Authority vide its order dated 11.12.2020 were only in respect of Respondent's project namely, The Ultima". The DGAP had no authority to investigate Respondent's projects namely "The Camellias" and The Crest". The DGAP did not have any authority or jurisdiction to conduct suo moto investigations. g) ABSENCE OF AN....
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....o present his case and / or address the concerns which Sh. Sudhir Jain might have had in this regard. The matter was referred by the Standing Committee to the DGAP without granting any opportunity to the Respondent. In the absence of the same, there was gross violation of the principles of natural justice. The proceedings initiated in gross violation of the principles of natural justice could not be considered as valid and the same were liable to be dropped on this ground alone. ii. That the present proceedings have been issued in violation of principles of natural justice as show cause notice has not been issued to the Respondent proposing the action to be taken by this Authority. Moreover, the investigation was initiated basis the application filed by Sh. Sudhir Jain and the Respondent was not given any chance to clarify or explain its communication. iii. That based on the powers conferred on this Authority under Rule 133 of the CGST Rules, 2017, it could be said that this Authority's order could give directions to the person who has been held as having violated Section 171. It is submitted that the order required to be passed by this Authority under Section 171 would det....
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....ly of goods or services or the benefit of ITC had been passed on by the registered person to the recipient by way of commensurate reduction in prices. It was pertinent to note that as on date, CGST Rules had not prescribed any procedure/ methodology/ formula/ modalities for determining/ calculating 'profiteering'. iii. The Procedure and Methodology and Procedure issued by the Authority on 19.07.2018 only provided the procedure pertaining to investigation and hearing. However, no method/formula had been notified/prescribed pertaining to calculation of profiteering amount. iv. That under CGST Act or Rules made thereunder; there was no indication, let alone description as to how to conclude that there was profiteering due to reduction in rate of tax or benefit of ITC. Whether such computation had to be done customer-wise, project-wise or entity-wise, etc. Further, there was no indication in section 171 of the CGST Act as to its applicability in respect of transactions from pre-GST to GST regime. Rules did not throw any clarity on this issue as well. In the absence of the same, there was lack of transparency and the results could vary from case to case resulting in arbitrar....
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....ges bearing a singular MRP, the authorities under the Act cannot possibly assess the components of such a composite package separately. Such an exercise, if undertaken, would also fall foul of the principles enunciated by the Supreme Court. In this regard, reliance has also been placed on the case of Union of India vs. Suresh Kumar Bansal reported as 2017 (4) G.S.T.L. J128 (S.C.), wherein it was confirmed by the Hon'ible SC that explanation added to Section 65 (105) (zzzh) of the Finance Act, 1994 vide the Finance Act, 2010 expanding scope of taxability of Construction of Complex intended for sale by builders, was ultra vires as there was no statutory mechanism to ascertain value of service component of subject levy. vii. That this Authority was itself using different methodology to ascertain 'profiteering' in the cases before it. In some cases, the Authority had restricted itself to the goods mentioned in the application, while in some it had considered business as a whole. In the facts of the case, analysis had been done for all the projects combined whereas in other cases, analysis was done only for the project of the flat buyer who filed the application. This shows th....
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.... the commencement of the projects. Likewise, units might be sold after the completion of the project as well. Thus, receiving of inputs/input services and taking credit of the same did not have any immediate/direct relation with the turnover in real estate sector. Accordingly. calculating profiteering on the basis of turnover could not reflect the correct outcome of benefit of credit to the Respondent. iii. The method would result in incorrect computation of benefit for the following reasons/ assumptions:- a. Construction Project Life cycle effect had been ignored and it had been assumed that uniform expenses were incurred throughout the lifecycle of the project. In other words, this methodology assumed that uniform expenses were incurred throughout the project lifecycle and that turnover would also be uniform, which practically varies a lot given the market conditions and was objectively, an incorrect assumption to make. b. The turnover would vary as per the market conditions and it was difficult to maintain the ratio of the same in proportion to procurement in a real estate sector. For example, turnover would be less in lean period while credit would still be higher due to ....
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....f inputs ITC under GST Cost to Respondent (equal to basic price, since ITC fully available) Amount demanded from customer (i.e. turnover) Profit Ratio of ITC to turnover 1. 28% 100 28 100 110 10 25.45% 2. 18% 100 18 100 110 10 16.36% 3. 12% 100 12 100 110 10 10.90% h. As could be seen from the above, difference in rate of GST was leading to change in ITC to turnover ratio, which would change the benefit of ITC. However, it was submitted that the rate of GST did not determine the actual benefit. Rather, the duties / taxes and rates in pre-GST regime which were non-creditable but had become creditable in the GST regime alone determine the benefit. The benefit needed to be computed based on the tax rates prevailing in pre-GST regime, and the rate of GST charged by suppliers was irrelevant for determination of benefit derived by the Respondent That the additional ITC in the hands of Respondent in terms of Section 171 of the CGST Act should reflect such ITC on goods or services which was not available earlier to the Respondent. However, the approach adopted by DGAP for calculating the additional benefit accrued to the Respondent was based on the change in ....
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....ed the proposal and the challenges faced by the sector. He stated that there was a slowdown in the sector which impacted creation of employment in the economy and consequently affected the allied sectors such as steel, cement, paints and other construction items. It, therefore, impacted the availability of inventory in the market and ultimately tax revenue. He added the principal reasons identified for this situation were: a... b... c. It was also a fact that builder paid tax of 28% on cement, 18% on majority of other input items and 12% on some other materials and combined ITC available to him for payment of his output tax came to 8-9%. Eventual tax burden on him would be 12% minus the ITC available to him". n. that the percentage of credit to turnover (in the GST regime) in the Respondent's case also has varied from 1.84% (for the project The Camellias") to 17.46% (for the project The Ultima"). o. Comparing the pre-GST credit to turnover ratio to the post-GST ratio will therefore never yield the correct outcome of benefit of credit. It is therefore submitted that the method adopted by DGAP is wholly incorrect, without any logic. The report of the DGAP is therefore l....
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....nd and not towards the services provided by Respondent. Accordingly, it was submitted that for the purpose of calculation of profiteering, if any, the value of land needed to be excluded. iv. In this regard, reference could be drawn to the Order of this Authority in the case of M/s. Bhartiya City Developers Pvt. Ltd. The DGAP excluded value of land from its profiteering calculation in Table H of its report and the same was upheld by the Authority. The relevant extract of order passed by the Authority was provided below:- "21.. On the basis of the figures contained in Table- 'G' above the recalibrated base price and the excess collection (Profiteering) during the pre-GST and the post-GST periods, has been tabulated by the DGAP in Table-'H' below:-. (Amount in Rs.) S.No. Particulars Pre-GST Post- GST 1. Period A April, 2016 to June, 2017 July, 2017 to August, 2018 2. Output tax rate on Construction Service (%) B 16.15 18.00 3. Ratio of CENVAT/ ITC to Total Turnover as per Table - I above (%) C 4.32 6.55 4. Increase in ITC availed post-GST (%) D=6.55% less 4.32% - 2.23 5. Analysis of Increase in ITC: 6. ....
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....0 and 12% GST on top of it = INR 11.2 profiteering). ii. That while arriving at the total alleged profiteering amount, the DGAP had incorrectly inflated the profiteering amount by adding 12% GST to the base price demanded by Respondent and comparing it with the commensurate base price including 12% GST, without adducing grounds as to why this amount had been added. iii. That whatever amount was charged as GST by the Respondent had been duly deposited in government account. There had been no allegation that the amount collected as GST had not been paid to the government. Once it was accepted that such amount was also tax and the public exchequer was not deprived of such sum, it failed to appeal to reason that the same tax amount could be demanded again from the Respondent or return of such tax amount in the homebuyers could be ordered. iv. It was an undisputed fact that the Respondent charged GST from his customers, over and above the value of services supplied by him, i.e., on ex-tax basis. It was also undisputed that the Respondent deposited the amount collected by him as GST, by filing monthly returns in Form GSTR-3B. Therefore the amount of GST collected by the Respondent ....
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....dispute by the DGAP on this aspect, the Respondent submitted that addition of 12% GST to calculate the alleged profiteering amount was incorrect, not sustainable and liable to be rejected. Therefore. the Respondent humbly submitted that out of the total amount of profiteering of Rs. 25,09,08,375/-, an amount of Rs 2,68,83,040 should be reduced from the total profiteering alleged by DGAP. Project wise GST amount is tabulated below:- (Figures in Rs.) Project wise GST component in the alleged profiteering amount Project Profiteering amount alleged by DGAP GST component Revised profiteering amount The Camellias 7.23,50,135/- 77,51,800/- 6,45.98,335/- The Crest 12,94,35,170/- 1,38,68,054/- 11,55,67,116/- The Ultima 4,91,23,070/- 52.63.186/- 4,38,59,884/- Total 25,09,08,375/- 2,68,83,040/- 22,40,25.335/- m) DGAP ERRED IN CONSIDERING (1) THE PERIOD POST RECEIPT OF COMPLETION CERTIFICATE (2) CONSIDERING THE SAME AREA ON BOTH SIDE OF THE PAYMENT RECEIVED OR DEMAND RAISED DURING THE PRE GST-PERIOD AS WELL AS POST GST PERIOD IRRESPECTIVE OF THE QUANTUM:- i. That this Authority vide its order dated 11.12.2020 had rejected DGAP's earlier report (for the project, "S....
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....,00,000/- was still payable by him as on 30-11-2020, the area of 3,000 Sq Ft. has been considered under pre-GST period as well as GST period, the same has resulted in wrong computation of profiteering. n) THE RESPONDENT HAS ALREADY PASSED ON THE BENEFIT OF ITC TO THE TUNE OF RS. 17,13,88,832/- FOR THE THREE PROJECTS COMBINED:- i. That without prejudice to the above, the Respondent vide his submissions dated 11.12.2021 (Annexure 12 of the DGAP's report) in excel sheets submitted to the DGAP the total amount of benefit passed on to the eligible flat buyers. It is submitted that Respondent has passed on benefit to all the flat buyers who had booked flats prior to issuance of occupation certificate and prior to introduction of GST i.e., 01.07.2017. ii. Along with the amount of benefit passed on, the excel sheets also contained information such as customer code. booking date, unit number. saleable area, total agreement value, demand raised and advances received, balance demand to be raised etc. iii. The Respondent, in total, has passed on the benefit of ITC to the tune of Rs. 17,13 88 832/- to the flat buyers of the three projects. The project-wise bifurcation of the benefit....
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....tirety. 24. Vide the above submissions dated 06.05.2021 the Respondent has further stated that he did not want any personal hearing in this matter. 25. This Authority has carefully considered the Report filed by the DGAP, all the submissions and the documents placed on record and the arguments advanced by the Respondent. It is found that the Respondent is executing four projects namely The Sky Court', `The Ultima', 'The Crest' and The Camellias' under single GST registration. This Authority vide its I.O. No. 38/2020 dated 11.12.2020 passed in respect to the project `The Sky Court has directed the DGAP under Section 171 (2) of the CGST Act, 2017 to investigate all the projects of the Respondent on which the Respondent is availing ITC from the common pool and to determine whether the Respondent has passed on the benefit of ITC to his buyers of each project which were executed by the Respondent or not. Hence, the present investigation has been carried out by the DGAP with respect to the three projects namely 'The Ultima,', 'The Crest' and 'The Camellias' other than 'The Sky Court' which has been separately investigated by the DGAP ....
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....he Respondent has become entited to ITC as Central Excise Duty, Sales Tax and Entry Tax which was not available to him in the pre-GST regime, which has been turned as benefit of ITC which is required to be passed on as per Section 171 by the Respondent. ITC has been duly defined in the CENVAT Credit Rules, 2004, the Haryana VAT Act, 2003 and the CGST Act and hence there is no ambiguity in computing the additional benefit of ITC. Hence, there is no need to further define the reduction in the rate of tax or the benefit of ITC'. Further, the benefit of additional ITC would depend on the comparison of the ITC/CENVAT which was available to the Respondent in the pre-GST period with the ITC available to him in the post GST period w.e.f. 01.07.2017. Without comparing the pre and post GST ratio of CENVAT/ITC to turnover, the exact quantum of profiteering amount cannot be determined. Hence, to arrive at the benefit of additional ITC, the comparison of CENVAT with ITC is within the scope of Section 171 of the Act. 28. The Respondent has further contended that there was no complaint filed by any flat buyer/customer with respect to the three projects namely "The Camellias", "The Crest" an....
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....rms of Section 171 of the Central Goods and Services Tax Act. 2017 and the rules made thereunder. b. Responsibility for coordinating anti-profiteering work with the National Anti-profiteering Authority, the Standing Committee and the State level Screening Committees." Therefore, the Authority finds from the above provisions that the Office of the DGAP has been charged with the responsibility of conducting detailed investigation to collect evidence necessary to determine whether both the above benefits have been passed on or not in terms of the provisions of Section 171 of the CGST Act, 2017 and the Rule 129. The above Rule has been framed by the Central Government under Section 164 of the CGST Act, 2017 read with Section 171 (3) which has approval of the Parliament and all the State Legislatures and of the GST Council which is a constitutional body established under 101st Amendment of the Constitution and also has approval of the Central Government and the State Governments. There is no provision in the above Act or the Rules which provides that the investigation shall be limited to the projects against which complaint has been received. Moreover Section 171 (2) of the above Act....
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....ondent being not tenable. 32. The Respondent has also argued that he had not been provided any opportunity of hearing by the Standing Committee to present his case which is gross violation of the principles of natural justice. 33. The Authority finds that, with respect to the above contention of the Respondent, that the procedure of the Standing Committee on Anti-Profiteering has been provided under Rule 128 of the CGST Rules, 2017. Under the above said Rule there isn't any provision of granting personal hearing to the Respondent while forwarding the complaint to the DGAP for investigation. The Standing Committee on Anti-Profiteering on being prima facie satisfied has forwarded the complaint to the DGAP for further investigation. Therefore, the claim of the Respondent is not correct and is not tenable. 34. The Respondent has submitted that in the present proceedings, he has not been issued show cause notice proposing the action to be taken by this Authority. The Report consequent to investigation by the DGAP was neither a show cause notice not could it be treated as substitute to a show cause notice. This Authority should have issued a notice that should contain the descript....
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....or the Procedure and Methodology, the proceedings are arbitrary and liable to be set aside. The Procedure and Methodology issued by the Authority on 19.07.2018 only provided the procedure pertaining to investigation and hearing. However, no method/formula had been notified/prescribed pertaining to calculation of profiteering amount. In the absence of the same, there was lack of transparency and the results could vary from case to case resulting in arbitrariness and violation of Article 14 of the Constitution of India. He has further contended that there was no defined procedure being adopted by the Authority leading to arbitrariness. Thus, there ought to have been a standard methodology to determine the profiteering for real estate sector. To support his claim, the Respondent has relied upon the case of Samsung (India) Electronics Pvt. Ltd. vs. Commissioner of Commercial Taxes U.P. Lucknow reported at 2018 [11] G.S.T.L. 367 and Union of India vs. Suresh Kumar Bansal reported at 2017 (4) G.S.T.L. J128 (S.C.). 37. The Authority finds that. the above contention of the Respondent is without substance as the 'Procedure and Methodology' for passing on the benefits of reduction i....
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....red person. The legislature has deliberately not used the word `equal' or 'equivalent in this Section and used the word `Commensurate' as it had no intention that it should be used to denote proportionality and adequacy. The benefit of additional ITC would depend on the comparison of the ITC/CENVAT credit which was available to a builder in the pre-GST period with the ITC available to him in the post GST period w.e,f. 01.07.2017. Similarly, the benefit of tax reduction would depend upon the pre rate reduction price of the product and quantum of reduction in the rate of tax from the date of its notification. Computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product or unit to unit or service to service and hence no fixed mathematical methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a buyer. Similarly, computation of the profiteered amount is also a mathematical exercise which can be done by any person who has elementary knowledge of accounts and mathematics as per the Explanation attached to Section 17....
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....ised, voiceless and vulnerable. It is abundantly clear from the above narration of the facts and the law that no elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of tax reduction and computation of the profiteered amount. This Authority was under no obligation to provide the same to the Respondent. The Respondent cannot deny the benefit of tax reduction to his customers on the above ground and enrich himself at the expense of his buyers as Section 171 provides clear cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount. Therefore, the Authority finds that the above plea of the Respondent cannot be accepted. Further, with respect to the case i.e. Commissioner of Income Tax v. B. C. Srinivas Shetty, it is mentioned that under Section 171 (1) no tax has been imposed and hence no computation provisions mentioned in the above case are required to be made. Hence, the law settled in the cases relied upon by the Respondent is not applicable in the present case. 38. The Respondent has also submitted that on the issue of prescribing a methodology, a useful recourse could be made to the analogou....
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....ances from the buyers, he is applying the same to purchase material as per the development plan circulated by him to the buyers. The Respondent is also liable to pass on the benefit of ITC in case he sells the flats before receiving the Completion Certificate. Therefore, the Authority finds that the above contention is wrong and accordingly, the comparison of the ratios for passing on the benefit of ITC is correct as per the provisions of Section 171 of the CGST Act, 2017. 41. The Respondent has further contended that the method of comparison of ITC to Turnover for per-GST and post-GST period used for calculation of profiteering would result in incorrect computation of the benefit of ITC as the construction project life cycle effect had been ignored and it had been assumed that uniform expenses were incurred throughout the lifecycle of the project. 42. In relation to the above submission of the Respondent, the Authority finds that, the calculation of profiteering amount has to be done on the basis of ITC earned by the Respondent and the price realised by him from the flat buyers every month as he is utilizing ITC for discharging his output tax liability every month. It has nowher....
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....t to the customers. In this context, it is to state that the change in rate of tax in Service Tax from 15% to 18% is an additional benefit which has accrued to the Respondent in the post-GST period which is required to be passed on to the flat buyers. The Respondent cannot be allowed to appropriate it illegally as it has been given from the public exchequer. The Respondent has not paid even a single penny from his account and therefore. he cannot claim not passing on the benefit of additional ITC to the buyers as he has used the same in discharging his output tax liability. 47. The contention of the Respondent that difference in the rate of GST was leading to change in ITC to turnover ratio, which would change the benefit of ITC is incorrect as difference in the rate of GST has no connection with the calculation of the profiteered amount. 48. The contention of the Respondent that the benefit should be calculated on the basis of the tax rates prevailing in the pre GST regime is incorrect as the additional benefit has to be computed on the basis of the amount of ITC which he has earned in the post-GST period as compared to the pre-GST period. 49. The Respondent has also averred th....
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....ed that if the land value be excluded from the calculation of profiteering, the profiteering amount would reduce to Rs. 16,72,72,250/-. 52. With respect to the above submission of the Respondent, the Authority finds that in the present case, the Respondent has raised invoice to his home buyers which included the consolidated demand of the land and the construction services. No separate demand for the land in the invoice has been issued by the Respondent to his home buyers. The Authority finds that, if the Respondent would have issued separate invoice demanding the cost of land, the amount of GST charged would have been 18% and not 12%. The Authority finds that, had the Respondent excluded the land value from the demand raised to his buyers, the value of land would have been excluded from the perview of profiteering. Therefore, the Authority finds that the facts of the cases relied upon by the Respondent are different from the present case. Hence, the Authority finds that this contention of the Respondent regarding exclusion of land value being untenable cannot be accepted. 53. The Respondent has also contended that the DGAP has incorrectly inflated the profiteered amount by addin....
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....he Ultima (Tower E, H, J, K, L & EWS) and The Ultima (Tower- A, B ,N, Q, R & Shops) on 27.07.2017, 24.07.2017, 11.06.2018 and 05.02.2019 respectively, which is against the directions of this Authority vide its I.O. dated 11.12.2020. 56. In relation to the above submission of the Respondent, the Authority finds that the DGAP in Para 9 of his Report has made it clear that the Respondent in his submissions dated 12.12.2021 has confirmed that in respect of the payment plans the customers have opted for payment plans as per their convenience and same will be mixed. The Authority finds that, since the Occupation Certificates have been received in respect of all the three project by the Respondent but the nature of agreements as claimed by the Respondent were linked with the construction plan as well as payment plan i.e. mixed, the investigation has been carried out up to the period from 01.07.2017 to 30.11.2020 and not upto the date of receipt of the Occupation Certificate in the respective projects, therefore, the Authority finds that the investigation has been correctly done by the DGAP. Accordingly, the Authority finds that the contention of the Respondent is not correct and the peri....
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....ase of S. P. Sampath Kumar v. Union of India & others 1987 SCC Sppl. 734, including in the relatively recent cases of Union of India v. R. Gandhi, Madras Bar Association v. Union of India supra and more recently in Rojer Mathews v. South Indian Bank & Ors. Supra, in which it was held that that the Tribunals which were required to discharge those functions which were earlier being discharged by the Courts should have Judicial Members. In the case of R. Gandhi supra, the Honble Supreme Court was dealing with the challenge to the constitution of the NCLT/NCLAT under the provisions of the Companies Act, 1956. It was inter-alia, held by the Hon'ble Court as follows:- "90. But when we say that the legislature has the competence to make laws, providing which disputes will be decided by courts, and which disputes will be decided by Tribunals, it is subject to constitutional limitations, without encroaching upon the independence of the judiciary and keeping in view the principles of the rule of law and separation of powers. If Tribunals are to be vested with judicial power hitherto vested in or exercised by courts, such Tribunals should possess the independence, security and capacity ....
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.... view taken by this Court in a number of cases. It is also a well-established principle followed throughout in various other jurisdictions as well, that wherever Parliament decides to divest the traditional Courts of their jurisdiction and transfer the lis to some other analogous Court/Tribunal, the qualification and acumen of the members in such Tribunal must be commensurate with that of the Court from which the adjudicatory function is transferred. Adjudication of disputes, which was originally vested in Judges of Courts, if done by technical or non judicial member is clearly a dilution and encroachment on judicial domain. With great respect, Parliament cannot divest judicial functions upon technical members, devoid of the either adjudicatory experience or legal knowledge." (Emphasis supplied) The decision in the case of Namit Sharma v. Union of India (2013) 1 SCC 745 is also instructive, where the Hon'ble Supreme Court was considering the requirement of a judicial mind for performing the functions and exercising the powers of the Chief Information Commission. The Hon'ble Court had originally held that the Information Commissions and the Central Information Commission p....
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....itutional principles of separation of powers and independence of judiciary to direct that the Information Commissions must be manned by persons with judicial training, experience and acumen or former Judges of the High Court or the Supreme Court. The principles of separation of powers and independence of judiciary embodied in our Constitution no doubt require that judicial power should be exercised by persons with judicial experience, training and acumen. For this reason, when judicial powers vested in the High Court were sought to be transferred to the Tribunals or judicial powers are vested in the Tribunals by an Act of the legislature, this Court has insisted that such Tribunals be manned by persons with judicial experience and training, such as High Court Judges and District Judges of some experience. 30...... But, as we have seen, the powers exercised by the Information Commissions under the Act were not earlier vested in the High Court or subordinate court or any other court and are not in any case judicial powers and therefore the legislature need not provide for appointment of judicial members in the Information Commissions. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 31. Perha....
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....f registration under the Act. (iv) to furnish a performance report to the Council by the tenth day of the close of each quarter." The aforementioned duties clearly do not involve settling of any question of law and these are the expert functions being discharged by the domain experts who have experience in the field of indirect taxation. Therefore, the sequitur of the discussion above is that (a) this Authority has not replaced or substituted any function which the Courts were exercising hitherto (b) it was performing quasi-judicial functions but it cannot be equated with a judicial Tribunal (c) it performs its functions in a fair and reasonable manner in accordance with the Act but does not have the trappings of a Court and (d) absence of a Judicial Member does not render the constitution of this Authority unconstitutional or legally invalid. Further, there are several statutory bodies which exercise quasi-judicial functions but they are not required to be composed of Judicial Members. There is no Judicial Member in the SEBI which has been constituted under the Securities and Exchange Board of India Act, 1992. Neither the statute nor any decision of the Court requires the SEBI....
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....ying down the legal principles discussed above. Therefore, in light of the above, it can be concluded that this Authority has not replaced any Courts, cannot be equated to a Court or a Tribunal and hence the mandate of having a Judicial Member cannot be said to apply to this Authority. It is also submitted that this Authority has been constituted as per Section 171 (2), 171 (3) read with Rule 122 of the CGST Rules, 2017. The said Act or the Rules, nowhere mention requirement of a Judicial Member in this Authority. The Parliament, the State legislatures, the Central and the State Government as well as the GST Council in their wisdom, have not found it expedient to constitute this Authority by providing a Judicial Member in this Authority. Hence, the allegations made by the Respondent regarding the unconstitutionality of the Authority are devoid of any legal merit. Moreover, the orders passed by this Authority are subject to judicial review and hence no prejudice would be caused to the Respondent. Hence, the above contention of the Respondent is grossly misplaced and hence, it cannot be accepted. 60. The Authority notes that it has also been alleged by the Respondent that Section ....
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....the GST Council and therefore, constitution of this Authority under above Rules is legal and does not amount to excessive delegation. It is also mentioned that the Rule 122 only prescribes the qualifications of the members of the Authority whereas its constitution has been duly provided in Section 171 (2). Further it has been specifically provided in Section 171 (3) that The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed." and hence, the functions and powers conferred on this Authority under Rule 127 also have mandate of the Parliament, the State Legislatures, the Central and the State Governments as well as of the GST Council and hence the conferring of powers and functions under the above Rules on this Authority does not tantamount to excessive delegation. 62. It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no....
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....for the period from 01.07.2017 to 30.11.2020, in the instant case, as Rs. 7,23,50,135/-, Rs. 12,94,35,170/- & Rs. 4,91,23,070/- for the projects The Camellias', The Crest' and The Ultima' respectively. 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/shops commensurate with the benefit of ITC received by him as has been detailed above. 65. The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 7,23,50,135/-, Rs. 12,94,35,170/- & Rs. 4 91,23 070/- for the projects 'The Camellias, The Crest' and The Ultima' respectively. Hence the Respondent is directed to also pass on interest @ 18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017. 66. The complete list of homebuyers has been attached with this Order, with the details of amount of benefit of ITC to be passed along with interest @ 18% in respect of all the three pro....