TaxTMI 
TaxTMI 
2022 (8) TMI 529
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.... Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of the Flat No. B-1601 purchased from the Respondent in the Respondent's project "Sanghvi Solitaire". situated at Borivali, Maharashtra in terms of Section 171 of the CGST Act, 2017. 2. The DGAP in his Investigation Report dated 23.02.2021, has inter-alia, submitted as under:- 2.1 The aforesaid application was examined by the Standing Committee on Anti-profiteering, in his meeting held on 21.10.2020. the minutes of which were received in the DGAP on 11.11.2020, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly. investigation was initiated to collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. 1 in respect of construction service supplied by the Respondent. 2.2 On receipt of the reference from the Standing Committee on Anti-profiteering, a Nonce was issued to the Respondent on 07.12.2020. calling upon the Respondent to reply as to whether he admit that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate re....
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....x structure which was present before introduction of GST, and therefore the customers would he benefited due to which the adequate safeguard provision were introduced to cover any benefit that accrues due to change in tax legislation to the assessee should be passed on the customers. e. The Complainant who bought the flat in June, 2018 which was much after the introduction of GST and being completely aware, while finalizing the price of the said flat that the adequate tax benefit, if any, had been already considered in the price that was offered to him and after considering the same he agreed to buy the flat. f. Nothing stopped him at the time of buying the flat or entering into the Agreement in June, 2018 to ask further reliefs, if any, which was being sought by the frivolous complaint. filed with an intention to build pressure. g. The complainant was well aware that price of the flat was decided after considering the ITC benefit if any available to the builder and which he agreed while signing the Agreement and therefore, there was no question of any further additional benefit to be given which was already passed onto him in the agreed price. h. The complainant while ente....
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....ll inputs from unregistered dealers. o. M/s Sanghvi Premises Pvt. Ltd was in business of Land Development which had four promoters and each promoter had his respective projects in the company wherein separate accounts was prepared from each promoter's group. Till April 2019 all the promoters had single GST number 27AAAC10598D1ZM (herein after referred to as "'Old number"). p. Prom April 2019 three new numbers were taken amongst which one 27AAACL0598D3ZK (herein after referred to as "new number") were of Mr. Rakesh Sanghvi (Promoter) which had Solitaire project in it. 2.6 Vide the aforementioned letters, the Respondent submitted the following document/information: (a) Brief Profile of the Respondent. (b) Copies or GSTR-1 returns for the period July, 2017 to August, 2020 for old GST number. (c) Copies of GSTR-3B returns for the period 2017 to August, 2020 for old or number. (d) GSTR-9 for old GST number for FY 2017-18. (e) Copies of GSTR-1 returns for the period April, 2019 to September, 2020 for new GST number. (f) Copies of GSTR-3B returns for the period April, 2019 to September, 2020 for new GST number. (g) TRAN-1 For the period July, 2017 to December, 2017. (....
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....artly, except where the entire consideration had been received after issuance of completion certificate, where required, by the competent authority or after his first occupation. whichever was earlier". Thus, the ITC pertaining to the residential units which was under construction but not sold was provisional ITC which might 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 CGST Act, 2017. Which read as under: Section 17 (2) "Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies." Section 17 (3) "The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, s....
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....t-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April. 2016 to 31.03.2019, the details of the ITC availed by them, bib turnover from the project "Sanghvi Solitaire" and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017 and post-GST (July, 2017 to 31.03.2019) periods, was Furnished in table-A below. Table -A Sr.No. Particulars Total (Pre-GST) April, 2016 to June 2017 Turnover (July, 2017 to March, 2019) 1. CENVAT of Service Tax Paid on Input Services used for flats (A) 27,73,302 - 2. Input Tax Credit of VAT Paid on purchase of Inputs (B) - - 3. Total CENVAT/Input Tax Credit Available (C) (A+B) 27,73,302 - 4. Input Tax Credit of GST Availed (D) - 1,03,72,468 5. Turnover for Flats as per Home Buyers List (E) 12,28,57,236 8,24,96,944 6. Total Saleable Area (in SQF) (F) 23,972 23,972 7. Total Sold Area (in SQF) relevant to turnover (G) 10,660 13,088 8. Relevant ITC [(H)=(B)*(G)/(F)] 12,33,247 56,63,059 Ratio of ITC Post-GST [(I)=(H)/(E)] 1.00% 6.86% 2.15 From the above table-'A', it was clear that the ITC as a percen....
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....ount K=G-J 54,14,439 2.17 From table.-'B' above, it was clear that the additional ITC of 5.86% of the turnover should had resulted its the commensurate reduction in the base price as well as cum-tax price, therefore, in terms of Section 171 of the CGST Act. 2017, the benefit of such additional lit was required to be passed on to the recipients. 2.18 The DGAP in his report had mentioned that it was evident from the above calculation explained in Table-I3 on the basis of the aforesaid CENVAT/input tax credit availability pre and post-GST and the details of demand raised by the Respondent from the Applicant and other home-buyers in respect of the units booked by the Respondent as on 31.03.2019. the benefit of ITC that needed to be passed on by the Respondent to the buyers of flats comes to as Rs. 54,14,439/- which included 12% GST on the base amount of Rs. 48,34,321/-. The Homebuyers of the flats/unit no. wise break-up of this amount was given in Annex-11 to the report. This amount was inclusive of profiteered amount of Rs, 10,36,481/-.(including GST) which was the profiteered amount in respect of Applicant No. 1 mentioned at serial no.28 of Annex-11. 2.19 On the basis of the det....
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....n its sitting held on 04.03.2021 and Notice dated 10.03.2021 was issued to the Respondent and the Applicant No. 1 directing them to explain why the Report dated 23.02.2021 furnished by the DGAP should not be accepted and liability of the Respondent should not be fixed for violating the provisions of Section 171 of the CGST Act. 2017. 4. In response to the above said Notice the Respondent had filed his submissions dated 22.03.2021, inter-alia, stating as under:- 4.1 He didn't have any incremental benefit of ITC, rather had diminishing benefit of ITC, based on qualitative factors which had convened his profitable project into loss making as explained below: Particular Period in Months Total Net Percentage Completion for the period Credit availed Pre-GST Regime (April 2016 to June 2017) 15 16.00 27,73,302 Post-GST Regime (July, 2017 to October, 2019) 28 32.00 49,25,599 Proportionate Reasonable Credit based on stage of Completion in GST Regime compared to Pre-GST Regime. 55,46,604 (27,73,302/16*32(Calculation for above) Diminished Benefit in ITC (6,21,005) 4.2 From above, it can be drawn that he had diminished benefit wherein law provides no insurance cover....
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.... "The Purchaser was aware that as per present statue, GST was levied/applicable on the sale price payable" "The Purchaser's hereby undertakes to pay the amount of GST along with each instalments from the effective date and further shall not dispute or object to payments of such Statutory dues". "The Promoter shall not be hound to accept the payments of any instalments unless the same was paid along with the amount of GST Applicable" "Provided further that if on account of change/Amendments in the present statute or laws, statutes, rules, regulations and policies or enactment of new legislation of any new laws by the central and/or state government or any other taxes become payable hereafter on the amounts payable by the Purchasers to the promoter in respect of this transactions and/or aforesaid taxes levied was increased on account of revision by authorities. The Purchasers shall be solely and exclusively liable to bear and pay the same" Thus, on cumulative reading of Clause 8, 12 and 13 the complainant agreed to pay the GST at the applicable rate and also to borne any further tax increase due to change in law. The said clause of the Agreement clearly states that the price w....
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....19 Explanation for Charges 2. Output GST rate (%) B 12 3. Ratio of CENVAT Credit/ITC to Total Turnover as per table -'B' above (%) C 2.97%/0.92% Consequently Charges 4. Increase in ITC availed post-GST (%) D=2.97% less 0.92% 2.05% Consequently Charges 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to March, 2019 (Rs.) E 8,24,96,944 7. GST raised over Base Price (Rs.) F=E*B 98,99,633 8. Total Demand raised G=E+F 9,23,96,577 9. Recalibrated Base Price H=E*(1-D) or 94.14% of E 8,08,05,757 Consequently Charges 10. GST@12% I=H*B 96,96,691 Consequently Charges 11. Commensurate demand Price J=H+I 9,05,02,447 Consequently Charges 12. Excess Collection of Demand or Profiteering Amount K=G-J 18,94,130 Consequently Charges 4.15 The ITC figure mentioned in Table A as arrived by DGAP was Rs. 1,03,72,468 wherein ITC as per his calculation was otherwise, reconciliation along with due explanation was enshrined below- Table C ITC Reconciliation Sr.No. Particular Denotion Amount in (Rs.) Explanation 1. Credit Taken from July 2017 to March 2018 A 42,25,477 &....
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.... suggested by CBIC to reverse so much of credit as on 31st March 2019. since his accounts finalization took time, he had reversed the said amount later on after 31st March 2019 Return. Even though DGAP had restricted his Investigation till 31st March 2019, he should have appreciated that the word "benefit" was of great impart here, the main question in this investigation was only whether he had received incremental benefit of ITC. Where he had reversed the ITC it can tinder no means be said as benefit availed, Hence the said amount would go on to reduce the total lit claimed. 4.19. In relation to Serial No 7 above in Table C, the DGAP again erred in not appreciating the word benefit wherein it was settled law that after OC proportionate credit had to be reversed. Inter alia para 14 of DGAP's report states as follows; Quote "As Regards the reversal of IW On account of Occupation Certificate it was informed that the reversal pertains to unsold units which do not form part of proceeding" Unquote from above it can be drawn that DGAP had been grossly mistaken in considering that whether the GST credit he was taking was claimed or not, if the said credit was liable to be rever....
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....this that till 31 March 2018 he was offering profits in the said projects but tiller introduction of GST huge losses were booked in March 2019 & March 2020 thereby making his profitable project in loss making. 4.22 In relation to figures mentioned in SI No 6. DGAP had erred in not considering 3 Vacant Flats 1801, 1802 & 1902 having total area or 2316 Square Feet in total saleable area, hence now the correct figures stand at 26.288 Square Feet. 4.23 Summing up all the above factors, even though the amount arrived as per table was Rs. 18,94,130/- as profiteering amount. This kind of report where profiteering amount had been calculated even more than the net GST claimed would injure his business to the great extent. He concluded his submission with prayer that Anti-Profiteering provisions were introduced under GST law to prevent buyers from not getting the benefits passed on by the builders, but in his case complainant had abused the said provisions tarnishing the main agenda i.e, whether the benefits had been gained by us due to introduction of GST which was not at all in his case. 5. Copy of the above submissions dated 22.03.2021 furnished by the Respondent, were then supplied th....
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....f GST Availed (D) - 1,03,72,468 5. Turnover for Flats as per Home Buyers List (E) 12,28,57,236 8,24,96,944 6. Total Saleable Area (in SQF) (F) 23,972 23,972 7. Total Sold Area (in SQF) relevant to turnover (G) 10,660 13,088 8. Relevant ITC [(H)=(B)*(G)/(F)] 12,33,247 56,63,059 Ratio of ITC Post-GST [(I)=(H)/(E)] 1.00% 6.86% Table-B Sr.No. Particulars 1. Period A July, 2017 to March, 2019 2. Output GST rate (%) B 12 3. Ratio of CENVAT Credit/ITC to Total Turnover as per table -'B' above (%) C 6.86%/1.00% 4. Increase in ITC availed post-GST (%) D=6.86% less 1.00% 5.86% 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to March, 2019 (Rs.) E 8,24,96,944 7. GST raised over Base Price (Rs.) F=E*B 98,99,633 8. Total Demand raised G=E+F 9,23,96,577 9. Recalibrated Base Price H=E*(1-D) or 94.14% of E 7,76,62,623 10. GST@12% I=H*B 93,19,515 11. Commensurate demand Price J=H+I 8,69,82,138 12. Excess Collection of Demand or Profiteering Amount K=G-J 54,14,439 7.3 The Respondent had submitted revised Table-C to arrive that net GST credit of Rs. 49,25,599/- in place o....
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....the Respondent to tile his re-joinder, if any, and personal hearing was held on 06.06.2022, wherein, the Respondent had re-iterated his previous submissions and tiled his additional submissions dated 18.05.2022, subsequent, to the hearing, wherein, he has re-iterated his previous submissions and inter alia stated as under:- 8.1 He had challenged the methodology adopted by the DGAP in form of comparing ratios of ITC to turnover which was not at all the methodology suggested in any law, the only thing which was relevant in determining the profiteering amount was the word benefit. the only requirement of the law was to determine whether builder had benefited from change in tax regime and thereon whether the same had been passed on to the buyers or not. 8.2 Considering the proportionate methodology with reference to ITC and stage of. completion there was loss of ITC of approx. 6 lakhs, which should have been technically recovered from purchasers as per the agreements. which he had refrained from. 8.3 Moreover, he also emphasised on the date of agreement where it can be appreciated that buyer had entered into the agreement much after the implementation of GST and he was quite matured....
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....o whether Respondent is required to pass on the benefit of input tax credit. As mentioned in earlier paragraphs. DGAP has carried out investigation in the subject matter and collected relevant intimation/evidences from the Respondent and after the analysis of the same the DGAP has come to a conclusion that the Respondent has gained benefit of ITC on the supply of Construction services after the implementation of GST w.e.f. 01.07.2017 and the Respondent was required to passing such benefit to the homebuyers by way of commensurate reduction in prices in terms of Section 171 the CGST Act, 2017 during the period 01.07.2017 to 31.03.2019. The DGAP has concluded that, the benefit of additional Input Tax Credit of 5.86% of the turnover has accrued to the Respondent for the project "Sanghvi Solitaire". This benefit was required to be passed on to the recipients. Thus. Section 171 of the CGST, 2017 has been contravened by the Respondent. in much as the additional benefit of ITC @ 5.86% of the base price received by the Respondent during the period 01.07.2017 to 31.03.2019. has not been passed on by the Respondent to 17 recipients including the Applicant no. 1. these recipients are identifia....
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....centage of turnover i.e. amounts received from recipients of supply during the two periods under consideration. Hence, the TRAN-1 credit, if any, available to the Respondent is. not apportionable as ITC received with respect to turnover for the period from 1.07.2017 onwards. Such credit. if any, would stand reflected in the accounts of the Respondent as credits earned in the pre GST regime (and also prior to 1.04.2016) and lying unutilised and carried forth in the GST regime after 1.07.2017. Likewise, the reversals of ITC, if any, made by the Respondent on account of opting for the Scheme under Notf. No. 3/2019 (CT)(Rate) w.e.f. 1.04.2019 and or on account oft. nits remaining unsold on date of issue of Occupation Certificate in October, 2019, are not from ITC taken during the period 1.07.2017 to 31.3.2019 alone, but, from the common pool of ITC lying in their books of account and attributable to both periods i.e. periods prior to 1.07.2017 (pre GST carried forward) as well as from 1.07.2017. Hence, the reversals of Rs.53,82,926+ Rs. 35,64,714=Rs. 89,47.640/- claimed to have been made by the Respondent. if actually made, do not pertain to reversals of ITC earned from 1.07.2017 onw....
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....ility burden which became available as credit in post-GST period. The Respondent has to pass on the additional benefit ITC which has incurred to him in the post-GST period as compared to the pre-GST period which is the revenue sacrificed by the Central and State. The Governments in the (merest of consumers irrespective of cost dynamics. in accordance with Section 171. Therefore, the only factor which has been considered is additional availability of lit in the post-GST period which was not available in the earlier regime, Further, the DG P in its investigation report dared 25.02.2021 has clearly mentioned that, although, the period of investigation in the present case is from 01.07.2017 to 30.10.2020. the profiteering has been calculated till 31.03.2019. i.e. till the date the Respondent was eligible to avail ITC on the GST paid by him. Hence, the Respondent's contention is not acceptable. 13. The Respondent has alto contended that various factors, that affect the cost of project, were completely ignored by the DGAP white calculating the amount of profiteering. This contention of the Respondent is not correct, as Section 171 of the CGST Act, 2017, only requires passing on the bene....
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....ted to such recipients. From the above discussions. the Authority determines that the Respondent has profiteered an amount of Rs. 54,14,439/- (including Rs. 10,36,481/- of Applicant No. 1). 16. Therefore, given the above facts, the 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/customers commensurate with the benefit of ITC received by him. The details of the recipients and benefit which is required to be passed on to each recipient/ homebuyer (including Applicant No. 1) along with the details of the unit are contained in the Annexure 'A' to this Order. The Authority directs that the profiteered amount as determined shall be passed on/returned by the Respondent to the recipients of supply along with interest @18%., as prescribed under Rule 133(3)(b) of the CGST Rules, 2017, from the date such amount was profiteered by the Respondent up till the date such amount is passed on/retuned to the respective recipient of supply (if not already passed on) within a period of three Months from the date of this Order failing which it shall he recovered as per the provisions of the CGST Act, 2....
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....ll the others projects of the Respondent under the same GST registration which have not yet been investigated in accordance with the provisions of Section 171 of the CGST Act. 2017 and submit the complete investigation report for all the Projects under this single GST registration. 20. 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. 21. Further, the Hon'ble Supreme Court, vide its Order dated 23.03.2020 in Suo Moto writ Petition (C) no. 3/2020, while taking suo-moto cognizance of the situation arising on account of Covid-19 pandemic, has extended the period of limitation prescribed under general law of limitation or any other special laws (both Central and State) including those prescribed under Rule 133(1) of the CGST Rules, 2017, as is clear from the said Order which states as follows:- "A period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall sta....