AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 272
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....he Unit No. ME TW-02/0501 purchased from the Respondent in the Respondents project M3M Escala", situated at Sector-70A, Gurugrarn, Haryana on introduction of GST w.e.f. 01.07.2017. in terms of Section 171 of the CGST Act, 2017. 2. The DGAP in his Investigation Report dated 27.10.2020. has inter-alia, submitted as under:- 2.1 The aforesaid application was examined by the Standing Committee on Anti-Profiteering, in its meeting held on 06.12.2019. the minutes of which were received by the DGAP on 20.12.2019, wherein, it was decided by the Standing Committee on Anti-Profiteering to forward the application to the DGAP to conduct a detailed investigation in the matter Accordingly, the DGAP had initiated an investigation to collect necessary evidence to determine whether the benefit of ITC had been passed on by the Respondent to his customers in respect of construction service supplied by the Respondent. The period of investigation covered by the DGAP in the instant case is from 01.07.2017 to 30.11.2019. 2.2 After receiving the reference from the Standing Committee on Anti-Profiteering, a Notice was issued to the Respondent on 28.12.2019, under Rule 129 of the Rules, calling upon....
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....-iterated as under: - (a) With respect to the benefit of ITC available, the same was dependent upon various factors such as stage of construction, negotiation with vendors etc. The following three factors were comprehensive and must be considered for calculating the quantum of benefit: - • Benefit of Transitional stock carried forward in Tran-1 Form. Saving of taxes on Goods/ Services to be purchased in GST regime for completion of the project. Benefit on account of reduction in prices after negotiation with contractors. (b) He had estimated the additional benefit which shall accrue to him in "ESCALA" project based on the above factors, Accordingly, he had passed on the benefit on the basis of the area to the eligible customers of Project "Escala" by way of commensurate reduction in prices due to expected additional ITC accrued to the Respondent under the GST regime. (c) The below table summarises the saleable area and number of units in the project Escala undertaken by the Respondent. Project Name Launch Period Saleable Area (in sq.ft.) Number of Units ESCALA Pre-GST regime 2.89,390 152-Residential (d....
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....od July, 2017 to November, 2019. (c) Tran-1 and Tran-2 for the period July. 2017 to December, 2017 (d) Electronic Credit Ledger for the period July. 2017 to November, 2017. (e) Copies of VAT returns (including all annexures) & ST-3 returns for the period April. 2016 to June. 2017. (f) Copies of all demand letters issued and sale agreement made with the Applicant. (g) 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 November, 2019 for the project "ESCALA". (h) CENVAT/lnput Tax Credit Register for the FY 2016-17, 2017-18. 2018-19 and for the period. April, 2019 to November, 2019. (i) List of home buyers in the project "ESCALA' along-with details of benefit passed on. (j) Brief profile of the Respondent (k) Sample copies of credit notes of benefit passed to 117 customers 2.7 Vide the Notice dated 26 12.2019, the Respondent was informed if any information/documents were provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was....
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....g higher amount of tax and making leaser payment to the Government account, it is submitted that the issue related to lesser payment of tax was not going to affect the profiteering and the DGAP was not the proper Authority to look into this aspect. 2.11 The Respondent vide letter dated 05.03.2020 submitted copy of demand letters issued to the Applicant No. 1. The details of schedule of payment in installment plan was furnished in table-A below:- Table A Sr.No. Linked Stages Description 1. 10% of BSP less Booking Amount 10% of Basic 2. Within 90 days of Booking 10% of Basic 3. On Completion of Basement Roof Slab 10% of Basic 4. On Completion of 4th Floor Roof Slab 10% of Basic 5. On Completion of Top Floor Roof Slab 20% of Basic 6. On Completion of Internal Plaster 10% of Basic 7. Upon Application for Occupation Certificate 10% of Basic 8. Within 30 days of Notice for Possession 20% of Basic + 100% of Car Parking + 100% of IFMS + 100% Registration Charges +100% of Applicable Stamp Duty + 100% of Community Club Membership + 100% of DC + 100% of PLC 2.12 Another relevant point In this regard was ....
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....his output liability and no refund of unutilized ITC shall be allowed under Section 54 (3) of the CGST Act, 2017. Further, In the case of Respondent, it was observed from the schedule of payment ("Table A") for a homebuyer that the payment to be made by him was directly linked with the construction of the project. The contention of the Respondent made in this para was incorrect as Section 171 was lucid that any additional benefit accrued to him on account of GST implementation was to be passed on to the eligible buyers as per his payment made. ITC benefit, if any, had to be passed on to each customer. Therefore, comparing ITC to Turnover ratio in pre-GST post-GST period to arrive at a figure on individual level which was proportionate to his payment made to the Respondent was correct in terms of Section 171. The costing of the project was also nisi seen as the issue pertains to extending the additional benefit on account of rate reduction or increase in Input Tax Credit. 2.14 The contention of the Respondent that absence of prescribed method/formula for calculation of profiteering and following a method on case-to-case was arbitrary and thus, the investigation was liable to be s....
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....etermining methodology to compute 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 was 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. Further, applying the same mathematical methodology of FMCG Sector to a supplier of a cinema sector would in fact lead to erosion of justice in the name of uniformity. 2.15 The Respondent also contended that the investigation cannot go beyond the application submitted by the Applicant No 1 In this regard, reference was made to 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 ITC shall be passed on to the recipient by way of commensurate reduction in prices". Thus, the legal requirement was abundantly clear that in the event of a benefit of ITC or reduction in rate of tax, there must be a commensurate reducti....
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.... The Area pertains to 108 five units against whom demand was raised by the Respondent during the period 01.04.2016 to 30.06.2017 ** The Area pertains to 114 live units against whom demand was raised by the Respondent during the period 01.07.2017 to 30.11.2019 2.18 From the above table-'B', it was clear 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 3.28% and during the post-GST period (July, 2017 to November, 2019), it was 4.44% in Project "ESCALA". This clearly confirms that post-GST, the Respondent had benefited from additional ITC to the tune of 1.16% (4.44% (-) 3.28%] of the turnover. 2.19 The Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate was 12% for flats. Accordingly, on the basis of the figures contained in table- 'B' above. the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST and post-GST periods as well....
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....87,75,787/- to 110 homebuyers In order to cross check the claim of the Respondent, e-mails were sent to the 35 buyers Out of these 16 buyers apart from the Applicant No. 1 had confirmed the receipt of payment made by the Respondent which was about 14% of the homebuyers list submitted by the Respondent. The details of confirmation of the receipt of payment received through e-mails were enclosed with the report No buyers had responded in the negative. Further, it also appeared that in some cases. the Respondent had passed on the benefit of ITC more than the required commensurate benefit whereas in some cases, the benefit of ITC passed on was to be passed on and the ITC benefit claimed to had been passed on to the Applicant No. 1 and other home buyers, was furnished in table-'D' below:- Table-'D' (Amount in Rs.) Sr.No. Category of Customers No. of Units Area (in Sqf) Amount Received Post GST Profiteering Amt. as per Annex-19 Benefit passed on by the Respondent Difference A B C D E F G H=F-G 1. Applicant 1 1638 57,50,705 74,713 72,858 1,855 2. Other Buyers 83 1,45,461 36,52,25,504 47....
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....her, from the above it was also observed that the Respondent was yet to pass on an additional amount of Rs. 4,09,720/- as mentioned at Sr.No.1, 3 & 4 of the Table-D which included both the profiteered amount @ 1.16% of the base price and GST on the said profiteered amount from the 30 other flat owners and the Applicant No. 1. The Applicant No. 1 and 113 other recipients are identifiable as per the documents provided by the Respondent, giving the names and addresses along with unit nos. allotted to such recipients. As observed earlier, the Respondent had supplied construction services in the State of Haryana only. 2.26 As aforementioned, the present investigation covers the period from 01.07.2017 to 30.11.2019, however, the Respondent received Occupation Certificate in the month of October, 2018 and therefore investigation with respect to unsold units would not form the part of profiteering. 3. The above Investigation Report was received by this Authority from the DGAP on 28.10.2020 and was considered in its sitting held on 03.11.2020 and Notice dated 05.11,2020 was issued to the Respondent and the Applicant No. 1 directing them to explain why the Report dated 27.10.2020 furni....
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....t of the apartments cost at the time of booking and the rest after possession. The possession is supposed to be provided in the GST regime. In such a case, the quantum of input Tax Credit will be proportionately higher in the initial period as compared to the turnover. Accordingly, the ratio of Input Tax Credit to turnover will not reflect the correct position of benefit accrued to the developer. 5.1.4 The additional Input Tax Credit in the hands of the Respondent in terms of Section 171 of the CGST Act shall reflect such Input Tax Credit on goods or services which was not available earlier. However, the above approach for calculating the additional benefit accrued to him considered the change in rate of tax on input goods and services whose credit was available earlier also and has not considered the lax cost which was earlier blocked in the hands of the Respondent Hence, the above approach of comparison of ITC to turnover ratio for pre GST and post GST period is not a correct approach. 5.2 The investigation cannot go beyond and the application submitted by the Applicant no. 1 5.21 The investigation cannot go beyond the application submitted by the Applicant No 1. 5.2.....
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.... cannot travel beyond the scope of a show cause notice. In this regard reliance is placed on the case of Toyo Engineering India Limited vs. Commissioner of Customs, Mumbai reported at 2006 (201) ELT 513 (S.C.) wherein the Hon'ble Supreme Court held that the department cannot travel beyond the show cause notice. The extract of the relevant portion of the judgment is provided below for quick reference. "16. Learned counsel for the Revenue tried to raise some of the submissions which were not allowed to be raised by the Tribunal before us, as well. We agree with the Tribunal that the revenue could not be allowed to raise these submissions for the first time in the second appeal before the Tribunal. Neither adjudicating authority nor the appellant authority had denied the facility of the project import to the respondent on any of these grounds. These grounds did not find mention in the show cause notice as well. The Department cannot be travel beyond the show cause notice. Even in the grounds of appeals these points have not been taken." (Emphasis Supplied) 5.2.9 Similarly, In the case of Reckitt & Colman of India Ltd vs. Collector of Central Excise, reported at 1996....
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....igation of contravention of Section 4 of the Act by the OP, being dehors the directions given to the DG, is ultra vires the scope of investigation deserves to be disregarded. 5.2 12 Accordingly, in the light of the aforementioned discussion, it was contended that the Report should be restricted to the Applicant No. 1 who has filed the application to concerned committee. 6. The Respondent's above submissions were forwarded to the DGAP to file his clarifications under Rule 133(2A) of the CGST Rules, 2017 The DGAP furnished his clarifications dated 15.02 2021, which are summarised as follow:- 6.1 Comparison of ratio of Input Tax Credit to turnover for re-GST period and GST period is not the correct mechanism for calculation of Anti-Profiteering amount. 6.1.1 Section 171 refers to Input Tax Credit, whereas prior to introduction of GST the credit taken against inputs or services was called CENVAT or VAT. Goods & Service tax subsumed all indirect taxes and accordingly the nomenclature of different types of credits was changed to Input Tax Credit. However, the nature and functionality of credit taken on inputs/services continues to remain the same. Although Section 121 ref....
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....nment may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether Input Tax Credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him "Therefore, the above Section has already given powers to the Authority to expand the scope of the investigation to all the supplies made by a registered person. This Section empowers the Authority to examine if the benefit of the Input Tax Credits and reduced tax rates have been passed by him or not. Since, the Section doesn't mention about any particular recipient it implies that all the supplies made by a registered person to all his recipients need to be examined from the perspective of passing on the benefits to each buyer. Therefore. all the supplies are required to be investigated because there is a single GST return for all the supplies made by a particular registered person. and there is also a single credit entry in the ITC ledger of the registered person. It is not possible to earma....
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....India Pvt. Ltd. and Ors vs, Hyundai Motors India Limited 2017 CompLR 586 (CCI) is not relevant and applicable in this matter as reasons cited in above pares, 7. Since, the quorum of the Authority of minimum three Members, as provided under Rule 134 was not available till 23.02.2022, the matter was not decided. With the joining of two new Technical Members in February 2022, the quorum of the Authority was restored from 23.2.2022, and a copy of the above clarifications dated 04.03.2021 was supplied to the Respondent to file his re-joinder. rf any. and personal hearing was scheduled to be held on 23.03.2022 However, the Respondent, vide his email dated 23.03.2022, had requested for adjournment of his personal hearing due to some medical issues. Hence, personal hearing was rescheduled to be held be on 29.04 2022 by the Authority. However, vide Email dated 29,04.2022, the Respondent had filed his written submissions dated 06.04.2022 and further stated that he did not want any personal hearing. In the matter. The Applicant No 1, vide his Email dated 28.04.2022, also submitted that he had nothing more to add to his submissions made earlier. However, the Applicant No. 1 had requested fo....
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.... has also confirmed receiving an amount of Rs. 72,858/- from the Respondent. The Respondent had submitted that he had passed on the benefit of Rs. 87,75,787/- to 110 homebuyers who had already booked their fiats up to 30.11.2019. The period of investigation covers the period from 01.07.2017 to 30.11.2019, however, the Respondent had received Occupancy Certificate (OC) in October, 2018, and therefore, investigation with respect to unsold units did not form the part of profiteering as calculated by the DGAP. 9. In view of the above facts, the Authority finds that the benefit of additional Input Tax Credit of 1.16% of the turnover has accrued to the Respondent for the project "M3M Escala". This benefit was required to be passed on to the recipients. Thus, Section 171 of the CGST, 2017 has been contravened by the Respondent, inasmuch as the additional benefit of ITC @ 1.16% of the base price received by the Respondent during the period 01.07.2017 to 30.11.2019, was required to be passed on by the Respondent to 114 recipients including the Applicant no. 1. These recipients are identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit....
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....every recipient and this Authority is empowered to examine whether these benefits have been passed on or not To assist this Authority while making such examination, an investigating agency designated as the DGAP has been created under Rule 129 of the CGST Rules, 2017 to conduct detailed investigation and submit Report to this Authority under Rule 129 (6) to determine whether the above benefits have been passed or not in terms of Section 171 (1) and Rule 133 (1) of the above Rules Under Rule 129 (2) the DGAP has mandate to conduct investigation and collect necessary evidence to determine whether these benefits have been passed on, Further, the Government of India, Ministry of Finance, Department of Revenue. Central Board of Indirect Taxes and Customs vide its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34^th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a. "Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by ....
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....ection 171 (2) which was in the statute since the inception of the CGST Act, 2017. 11.4 The cases of M/s U. P. Sales & Services vs Mis Vrandvaneshwaree Automotive Pvt Ltd. and Shri Rishi Gupta vs M/s Flipkart Internet Pvt. Ltd. are not relevant to the present case. as the facts of each case are different and consumer welfare is the center of Section 171 Further, the above relied upon case was a case of Nil profiteering, so the Authority did not find merit to extend the scope of investigation beyond one product The objective of Section 171 of the CGST Act, 2017 is to ensure that the benefit of ITC and rate reduction is passed on to each beneficiary. In the present case, it is found that the Respondent has not passed on the benefit of ITC to the all the flat/buyers in his project namely 'M3M Escala'. Therefore, profiteering cannot be limited to the Applicant No 1 only. 11.5 The Respondent has also contended that there is no provision under the Central Goods and Services Tax Act, 2017 and the Rules made thereunder, that enables the DGAP to suo-moto assume jurisdiction. The Authority finds that it is a creation of the Statute, namely the GGST Act, 2017. The powers, functions ....
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....mes to Rs 74,80,399/- which includes GST (including Rs 74.713/- of the Applicant No. 1). The Respondent has claimed that he had already passed on a substantial amount of GST ITC per the requirements of Section 171 of the CGST Act. 2017 to the homebuyers. The Respondent had submitted that he had passed on the benefit of Rs. 87,75,787/- to 114 homebuyers/customers The Respondent has also claimed that he has passed on excess ITC benefit of Rs. 17,25,108/- to 83 buyers/customers. The DGAP has responded to such claims as tabulated at Table D above and found that Respondent has not passed commensurate benefit to all homebuyers/customers. The provision of law mentioned herein above provide that benefit of the ITC needs to be provided to each and every supply in the commensurate manner. As such, the excess of the ITC benefit provided to same of the homebuyers/customers cannot be offset against others to whom less ITC benefit has been provided or no benefit have been provided at all The details of all eligible homebuyers/customers and the amount of the benefit to be passed on to each of them is enclosed as the Annexure-A to this Order. 13. From the above discussions. the Authority determ....
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..../local language with the details r.e. Name of the builder (Respondent) - M/s. M3M India Pvt Ltd. Project-"M3M Escala". Location- Gurugram. Haryana and amount of profiteering Rs. 74,60,399/- so that the Applicant No. 1 along with Non-Applicant homebuyers/customers can claim the benefit of ITC which has not been passed on to them. Homebuyers/customers may also be informed that the detailed NAA. Order is available on Authority's website www.naa.gov.in. Contact details of concerned Jurisdictional Commissioner CGST/SGST for compliance of this Authority's order may also be advertised through the said advertisement. 16. Further, this Authority as per Rule 136 of the CGST Rules 2017 directs the concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the compliance of this order to the Authority and the DGAP within a period of 4 months from the date of this order. 17. Further, the Hon'ble Supreme Court, vide its Order dated 23.03.2020 in Suo Moto Writ Petition (C) No. 03/2020 while taking suo-moto cognizance of the situation arising on account of the Covid-19 pandemic. has extended the period of limitation prescribed under the general law of li....
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....W-02/0802 54,958 14 Mr. ARVIND SURI ME TW-02/1101 33,327 15 Mr. CHANDRA BHAN SHARMA ME TW-02/1201 34,071 16 Ms. VAGDA KANWAR TRIVEDI ME TW-02/1504 30,719 17 Mr. ABHISHEK BANSAL ME TW-02/1502 48,869 18 Mr. KAILASH KUMAR JAIN ME TW-02/1602 57,982 19 Mr. RETESH KUMAR BHUMBAK ME TW-02/1704 86,201 20 Mr. GAURAV JUNEJA ME TW-02/1804 41,226 21 Dr. MEENAKSHI TYAGI ME TW-01/0702 87,109 22 Mrs. MAMTA SHARMA ME TW-01/0703 30,221 23 Mrs. RITU JAIN ME TW-01/0701 43,686 24 Ms. SHVETA VOHRA ME TW-01/0903 61,454 25 Mr. KULDEEP ME TW-01/0904 33,884 26 Mr. ASHEESH GOYAL ME TW-01/0901 42,455 27 Mr. MAYANK SALWAN ME TW-01/1903 61,258 28 Ms. DIVYA SANSI ME TW-02/0704 108,094 29 Ms. NIVEDITA SINHA ME TW-02/1004 88,772 30 Mr. GIAN CHAND GOYAL ME TW-02/1503 166,028 31 Mr. SHANTANU DEY ME TW-02/1701 73,585 32 Mr. ATIN KAPUR ME TW-01/1704 68,018 33 Mr. BUAN KUMAR CHOUDHURY ME TW-02/0301 74,582 34 Mr. MADHUR DHAWAN ME TW-02/0401 74,068 35 Mr. ASHISH GU....