TaxTMI 
TaxTMI 
2022 (9) TMI 726
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....ng profiteering by the Respondent in respect of purchase of a flat in the Respondent's project "Bhagwati Eminence", situated at Plot 7/7A, Sector-13, Nerul, Navi Mumbai. The Applicant No. 1 alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price against payments due to him. The Applicant No. 1 also stated that on raising concern to the Respondent, he was informed that already a discount of 3% had been given to him on the 12% GST and remaining 4% of the ITC will be used by the promoters without passing it on to the customers on the reasoning that GST ITC refunds process was unclear, complex and uncertain. Further, on being asked about who keeps the remaining part of ITC after the 3% discount given to the customer from the 12% GST, the Applicant No. 1 received the following reply vide email dated 06.07.2019 which reads as "Before 31/03/2019 builder has already paid 12% on the due amount so obviously the amount goes to the government tax." The Applicant No. 1 submitted the following documents along with his application: (a) E-mails of correspondence with Respondent requesting to pass on ....
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....9.2020 issued by Central Government under Section 168A of the Central Goods and Services Tax Act, 2017 wherein it was provided that: "any time limit for completion or compliance of any action, by any authority, has been specified in, or prescribed or notified under section 171 of the said Act, which falls during the period from the 20th day of March, 2020 to the 29th day of November, 2020, and where completion or compliance of such action has not been made within such time, then, the time-limit for completion or compliance of such action, shall be extended up to the 30th day of November, 2020." 7. The Respondent even after several reminders and summons had not furnished all the required documents/information to DGAP to investigate the matter. Therefore, the DGAP vide letters dated 06.07.2020, 03.09.2020 and 07.09.2020 had requested the Jurisdictional CGST authorities to deploy an officer to collect requisite documents from the Respondent and forward the same to him to investigate the matter under section 171 of the CGST Act 2017. Accordingly, the aforesaid authorities had collected the documents as sought by DGAP, from the Respondent by visiting his premises and forward....
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....ion of Maharashtra Ltd., (CIDCO) along with receipts of payments of Service Tax. (k) Copy of project report submitted to RERA. (I) Details of Service Tax and GST turnover, output tax liability payable and input tax credit availed for the project "Bhagwati Eminence". (m) List of home buyers in the project "Bhagwati Eminence" reconciling with ST-3/GSTR-3B returns., and no information/documents was classified by the Respondent as confidential in terms of Rule 130 of the Rules 2017. 10. The DGAP had scrutinized the submissions/replies of the Respondent, Applicant No. 1 and the documents/evidences on record and submitted his Investigation Report dated 04.112020 to this Authority, wherein the DGAP has inter alia stated that:- (i). The main issues for determination were:- * Whether there was benefit of reduction in the rate of tax or input tax credit on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017 and if so. * Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. (ii).....
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....omplex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier". Thus, the input tax credit pertaining to the residential units and commercial shops which are under construction but not sold is provisional input tax credit which may be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the completion certificate, in terms of Section 17(2) & Section 17(3) of the Central Goods and Services Tax Act, 2017, 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 ....
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....1's unit). As mentioned above, the impugned project did not appear to be Affordable Housing Project and the Respondent was not eligible for lower rate of GST. Further, vide e-mail dated 06.07.2019 sent to the Applicant No. 1 whereby, Mr. Rocky Vora, Authorised Signatory & Partner of "Bhagwati Infra" informed that "Before 31/3/19 builder has already paid 12% on the due amount so obviously the amount goes to govt. tax." However, as mentioned, the Respondent has discharged his output liability @ 8% GST (along with 1/3rd abatement for land value), resulting into the short payment of tax. (vi). As per the demand letters & payment receipts submitted by the Applicant No. 1, the Respondent had collected 9% net GST (after giving 3% GST discount from 12%) from him and discharged the output effective GST @ 8% on the Applicant No. 1 's unit. Therefore, the Respondent appeared to have contravened the provisions of Section 76 of the Central Goods and Services Tax Act, 2017 Tax collected but not paid to Government which reads as "(1) Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provi....
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....51 1,96,476 1,80,61,618 5. Total Turnover as per list of Home Buyers (Net of Cancellation) (E) 4,00,65,553 68,40,053 4,69,05,606 57,36,66160 6. Total Saleable Area (in Sq. mtr.) (F) 4,812 4,812 7. Total Sold Area (in Sq. mtr.) relevant to turnover (G) 747 3,842 8. Relevant ITC [(H)=(D)*(G)/(F)) 30,503 1,44,20,660 9. Ratio of CENVAT/ Input Tax Credit [(I) -- (H)/(E)] 0.07% 2.51% *Note: Excluding CENVAT Credit of Rs. 3,58,20,322/- towards Service tax paid to CIDCO as discussed in para 10 (ii) supra. (ix). In view of the above Table-'A', it is clear that the input tax credit as a percentage of the turnover during the pre- GST period (April, 2016 to June, 2017) and the post- GST period (July, 2017 to September, 2019), were 0.07% and 2.51% respectively were available to the Respondent which confirms that the Respondent had benefited from additional input tax credit to the tune of 2.44% (2.51% - 0.07%) of the turnover. Accordingly, the profiteering was examined by comparing the applicable tax rate and input tax credit available in the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.5....
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.... is inclusive of benefit of input tax credit required to be passed on to the Applicant No. 1. (xi). The Respondent has supplied construction services in the State of Maharashtra only. (xii). The above computation of profiteering is with respect to all 65 flats and 6 shops which were booked till 30.09.2019 by the Respondent. The Respondent had claimed to pass on an amount of Rs. 61,83,525/- to 21 home buyers but he failed to submit documentary evidence to substantiate the same. (xiii). In conclusion, the benefit of additional input tax credit to the tune of 2.44% of the turnover, has accrued to the Respondent in post-GST and the same was required to be passed on by the him to the respective recipients. On this account, the Respondent is required to pass on the benefit of input tax credit amounting to Rs. 1,56,77,149/- to the Applicant No. 1 and 70 recipients other than Applicant No. 1 who are identifiable as per the documents provided by the Respondent. Therefore, this amount of Rs. 1,56,77,149/- is required to be returned to such recipients. (xiv). As the present investigation covers the period from 01.07.2017 to 30.09.2019 hence profiteering, if....
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....plier to pass on the benefit when there is reduction in rates or benefit of ITC availed by him but in the instant case, there were no reduction in rates. (iii). Entire investigation is without jurisdiction as the Anti-profiteering Authority is acting as proper officer/adjudicating Authority / Commissioner issuing Show Cause Notice. Allegations made under para 17 and 22 of the DGAP's Report, can be dealt under Section 73/74 of the CGST Act 2017 by the Proper officer only who is defined under Section 2 (91) and having powers to adjudicate the matter under Section 73/74 of the said Act. (iv). The DGAP has neither made available to him the application filed by the Applicant No, 1 which could be a fake, motivated and malafide complaint, for verification nor examined the such applicant. Therefore entire proceeding is bad in law. * Denial of Cenvat Credit of Rs. 3,58,20,322/- towards service tax paid to CIDCO is incorrect and bad in law:- (a) The DGAP has excluded the Cenvat credit of Rs. 3,58,20,322/- while calculating the total credit availed by him (the Respondent) on the amount paid to CIDCO towards one lease premium on allotment of plot for the imp....
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....he benefit of the Tax credit, treated as profiteering, was broadly computed by applying the ratio of such differential credit to the post-GST turnover. That methodology, however, sought to compute benefit to be passed on to various customers on an average basis and without considering various factors such as the stage of construction at which a contract with a particular customer was entered, schedule for milestone payments, change in rate of tax on procurements in pre and post GST regime, etc. (c) The present Report of the DGAP had ignored the benefit of 3% on GST rate passed on to the Applicant No. 1. The period and rate of interest or provision was not specified on which basis interest was calculated. (d) The present Report of the DGAP presumed that no change in cost and rate of tax on inputs has occurred. The present Report had not led in any evidence in support its allegations. (vii). In terms of Section 17 (2) and 17 (3) of the CGST Act 2017, he was required to reverse the proportionate credit to the extent of flats sold after receipt of Completion Certificate and the same would be considered implication on the credit availed by him. Hence the actua....
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....m which should be passed on to recipients. In pre-GST regime, various taxes and cesses were being levied by the Central and State Governments where ITC was restricted upto some of the taxes. In the case of Construction Services, ITC was available only on service tax paid on input services. ITC on Central Excise Duty paid on inputs was not allowed. Such input taxes, the credit of which was not allowed in pre-GST regime, used to get embedded in the cost of goods/service supplied, resulting increase in price. Whereas in post GST, unless specifically denied, ITC is available on the GST paid on all inputs and input services. Therefore such additional benefit of ITC accrued to the supplier required to be passed on to the recipients by way of commensurate reduction in price in terms of Section 171 of CGST Act, 2017. (iii). Upon the contention mentioned at para 11 (iii) supra:- The above said Report dated 04.11.2020 submitted by the DG, DGAP in terms of Rule 129 (6) of the CGST Rules 2017, who is the proper officer in terms of Section 2 (91) of the CGST Act 2017 read with Section 3 of the said Act which inter alia includes Director General of Central Tax under clause (b).....
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....hange in cost is wrong and hence denied. In this regard, DGAP has submitted that the increase in the cost of inputs and input services might be a factor for determination of price but that factor was independent of the output GST rate. As there was no cost escalation clause in the agreement entered by the Respondent with the home buyers, the increase in cost, if any is a kind of business risk which must have been factored in by the Respondent at the time of entering into agreement. The Respondent could not claim to set off such increase in his cost with the benefit of ITC which is the sacrifice of precious tax revenue made from the kitty of the Central and the state government and required to be passed on to the end consumers who bear the burden of tax. (vii). Upon the contention mentioned at para 11 (vii) supra:-The ITC pertaining to the unsold units was outside the ambit of the investigation and the respondent is required to recalibrated the selling price of such units to be sold the prospective buyers by considering the net benefit of additional input tax credit available to him post GST as per CGST Act 2017 and Rules made thereunder. Therefore the proportionate credit ....
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....n by the supplier to the Respondent. In pre-GST regime, various taxes and cesses were being levied by the Central and State Governments where ITC was restricted upto some of the taxes. In the case of Construction Services, ITC was available only on service tax paid on input services. ITC on Central excise duty paid on inputs was not allowed. Such input taxes, the credit of which was not allowed in pre-GST regime, used to get embedded in the cost of goods/service supplied, resulting increase in price. Whereas in post GST, unless specifically denied, ITC is available on the GST paid on all inputs and input services. Therefore such additional benefit of ITC accrued to the supplier required to be passed on to the recipients by way of commensurate reduction in price in terms of Section 171 of CGST Act, 2017. 13. The above said clarifications dated 24.02.2021 of the DGAP, have been supplied to the Respondent as well as the Applicant No. 1 for their consolidated submissions on it. Accordingly the Respondent vide letters dated 02.04.2021 and 09.04.2021 has submitted his replies on the above said clarifications of the DGAP wherein the Respondent reiterating his previous argument....
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....1 8,24,642 8.00% 11 May-18 128,94,165 - 5,15,767 5,15,767 10,31,534 8.00% 12 Jun-18 200,02,296 - 8,00,092 8,00,092 16,00,184 8.00% 13 Jul-18 177,16,273 - 8,74,075 8,74,075 17,48,150 9.87% 14 Aug-18 198,23,331 - 10,03,264 10,03,264 20,06,528 10.12% 15 Sep-18 146,96,923 - 8,33,086 8,33,086 16,66,172 11.34% 16 Oct-18 140,42,423 - 7,56,450 7,56,450 15,12,900 10.77% 17 Nov-18 774,01,002 - 39,88,831 39,88,831 79,77,662 10.31% 18 Dec-18 84,38,675 - 3,98,547 3,98,547 7,97,094 9.45% 19 Jan-19 881,04,733 - 41,96,515 41,96,515 83,93,030 9.53% 20 Feb-19 67,49,001 - 2,72,580 2,72,580 5,45,160 8.08% 21 Mar-19 162,87,129 - 9,67,228 9,67,228 19,34,455 11.88% 22 Apr-19 463,69,000 - 21,55,760 21,55,760 43,11,520 9.30% 23 May-19 8,41,500 - 37,490 37,490 74,980 8.91% 24 Jun-19 363,16,641 - 21,78,998 21,78,998 43,57,997 12.00% 25 Jul-19 469,20,325 - 28....
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....e Respondent has not reduced the basic prices of his flat/shops by 2.44% due to the additional benefit of ITC. Accordingly, he has contravened the provisions of Section 171 of the CGST Act, 2017 and Rules made thereunder. The DGAP had concluded that the benefit of Rs. 1,56,77,149/-(including GST@ 12%) was to be passed on by the Respondent to the flat/shop buyers for the period from 01.07.2017 to 31.03.2019 under the provisions of Section 171 of the CGST Act, 2017. The above computation of profiteering made by the DGAP is with respect to 65 flats and 6 shops which were booked till 30.09.2019 by the Respondent. Although, the Respondent had claimed to pass on an amount of Rs. 61,83,525/- to 21 home buyers but he failed to submit documentary evidence to substantiate his said claim. 17. The Authority finds that the DGAP has computed the ratio of CENVAT as a percentage of the turnover for the pre-GST period and compared it with the ratio of ITC to the turnover for the post-GST period, and then computed the percentage of the benefit of additional ITC which the Respondent was required to pass on to the flat/shop buyers. The above ratios had been computed by the DGAP based on the data/de....
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....om his recipients of supply, albeit having paid such part from his own resources, is incorrect, unsubstantiated and untenable. 20. The Respondent has claimed Cenvat credit of Service Tax amounting to Rs.3,58,20,322/- paid to CIDCO towards one time lease premium whereas, Section 66D(d)(iv) of the Finance Act 1994, covers 'renting or leasing of agro machinery or vacant land with or without a structure incidental to its use' under the Negative list of services. Since leasing of vacant land was exempted from Service Tax and covered in the Negative list at the relevant time, no credit of any 'amount' paid towards one time lease premium for vacant land, can be allowed as per Finance Act 1994 readwith Cenvat Credit Rules 2004. The Respondent has not produced any documents to this Authority that Department has assessed the said ST-3 Returns of claiming of Cenvat credit and the same was allowed. Hence, this Authority agrees with the Reports of the DGAP in this regard and holds that, the amounts of pre GST and GST period credits and calculations as tabulated, in Tables A & B of the DGAP Report as reproduced above, are correct and in accordance with the methodology adopted by the DGAP in s....
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....r Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Mumbai, Maharashtra to monitor compliance of this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as determined by the Authority, is passed on to all the eligible home buyers/shop buyers/ recipients of supply. It may be ensured that the benefit of ITC is passed on to each home buyer/shop buyer/ recipient of supply as per Annexure-A attached with this Order along with interest @18% as prescribed. In this regard an advertisement of appropriate size to be visible to the public may also be published in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of Respondent M/s Bhagwati Infra, 1306, Real Tech Park, Plot No. 39/2, Sector-30A, opp. Vashi Railway Station, Vashi, Navi Mumbai- 400 705, for their Project "Bhagwati Eminence", situated at Plot 7/7A, Sector-13, Nerul, Navi Mumbai and amount of profiteering Rs. 1,56,77,149/-, so that his concerned home buyers/shop buyers/ recipients of supply can claim the benefit of ITC if not passed on. Home buyers/shop buyers/ recipients of supply may also be informed that ....
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....the subject project "Bhagwati Eminence" and hence there is every possibility that similar contravention may has taken place with his other projects. This Authority in terms of Rule 133 (5)(a) of the CGST Rules 2017 also directs the DGAP to investigate profiteering in relation to other Projects executed by the Respondent if any, under the provision of section 171 of the CGST Act 2017. 28. In view of prevailing Covid pandemic, the Hon'ble Supreme Court had by its Order dated 10.01.2022 passed in M. A. no. 21/2022 in M.A. no. 665/2021 in Suo Moto Writ Petition (C) No. 3 of 2020 directed as under:- "(i). The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. (ii). Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. (iii). In case where the limitation would have expired during th....
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....836 71,830 7 MANJIRI NITIN PRABHUGAONKAR 0503 47.01 13,500,000 1,100,000 132,000 1,232,000 30,061 8 SANTHA NAIR 0504 67.33 9,915,000 2,673,500 320,820 2,994,320 73,061 9 Arpit Gupta 0601 67.33 12,000,000 10,115,250 1,213,830 11,329,080 276,430 10 jitendra gupta 0602 47.01 10,000,000 10,000,000 1,200,000 11,200,000 273,280 11 VIDHYASANKAR 0603 47.01 11,440,000 2,076,400 12 MANOJ SHARMA 0604 67.33 12,200,000 4,600,000 249,168 552,000 2,325,568 56,744 5,152,000 125,709 13 VIRENDRA VERMA 0701 67.33 11,243,500 9,070,065 1,088,408 10.158.473 247,867 14 SHANKAR UGHADMATHE 0704 67.33 16,085,000 4,134,000 496,080 4,630,080 112,974 15 SHWETANK CHAUBEY 0801 67.33 10,896,000 9,706,400 1,164,768 10,871,168 265,256 16 M/S.ENABLER BUSINESS SOLUTIONS PVT. LTD. 0802 47.01 7,680,000 4,412,000 17 Rajesh Nair 0803 47.01 7,680,000 2,112,000 18 KRISHNAN UMASHANKAR 0804 67.33 10,170,000 4,453,000 529,440 ....
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....8 40 SARITA MEENA 1502 47.01 9,500,000 8,550,000 1,026,000 9,576,000 233,654 41 MADHAVAN NAIR 1503 47.01 13,880,000 13,220,000 1,586,400 14,806,400 361,276 42 PANAATHIL S. NAIR 1504 67.33 16,910,000 4,463,000 43 Abhijit Subhash Shirodkar 1601 67.33 9,930,000 2,437,000 535,560 292,440 4,998,560 121,965 2,729,440 66,598 44 MRS.RACHNA UDAY KUMTHEKAR 1602 47.01 15,750,000 14,175,000 1,701,000 15,876,000 387,374 45 JAI PRAKASH SINGH 1603 47.01 15,820,000 14,238,000 1,708,560 15,946,560 389,096 46 ARJUN AWATE 1604 67.33 14,000,000 13,190,000 1,582,800 14,772,800 360,456 47 SAMEER NAIR 1701 67.33 16,500,000 5,565,500 667,860 6,233,360 152,094 48 MUKESH KARN 1702 47.01 10,500,000 9,450,000 1,134,000 10,584,000 258,250 49 RAJESH SHINDE 1703 47.01 7,280,000 2,300,000 276,000 2,576,000 62,854 50 RAJESH SHINDE 1704 67.33 11,418,000 3,427,085 51 GOVERDHAN BHUTADA 1801 67.33 15,411,700 13,870,53....