TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 461
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....e of Flat in the "Godrej 24" project of the Respondent. II. A Notice under Rule 129 of the CGST Rules, 2017 was issued by the DGAP on 14.01.2019 calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so, to sun moto determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all supporting documents. III. The period of investigation was from 01.07.2017 to 31.12.2018. IV. As per the directions of the Authority issued vide Internal Order No. 08/2020 dated 03.01.2020, the DGAP initiated a re-investigation of the case. The case had been re-investigated on the basis of new data submitted by the Respondent. The main issues/ Paras raised by the Authority vide Internal Order No. 08/2020 and ensuing DGAP findings were as follows:- a) Para 71 "It is further revealed from the record that the Respondent had claimed that the carpet area relevant to turnover considered by the DGAP was incorrect. He had also supplied both the figures which had been claimed to be correct by him as well as those which had been considered by the ....
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.... is a vast difference in the number of units claimed by both the parties the same is required to be reconciled". DGAP's Reply on Para 74 - The contention of the Respondent that the total number of units in his "Godrej 24" Project was 816 in place of 892 units had also been examined. The submission of the Respondent had been verified with the details available on the Maharashtra RERA website wherein tower-wise units had been mentioned and it is observed that there were 815 units. On being pointed out it, had been clarified by the Respondent vide his email dated 24.01.2021 that the number of units in the project was 816, and the number of units registered in RERA was 815 units since one unit is being kept as a guest house to be managed by the society. Accordingly, the element of profiteering had been recalculated as detailed in the following para(s) considering the 816 units claimed by the Respondent. e) Para 75: "The Respondent had also contended that the DGAP had considered the area of cancelled flats while computing the profiteered amount in his Report which had resulted in incorrect profiteering. The above claim of the Respondent is also required to be investigated." DG....
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....- - 3. Input tax credit of GST Availed (C) 12,87,59,004 4. Total CENVAT/Input Tax 1,33,30,931 Credit Available (D)=(A+B+C) 1,33,30,931 12,87,59,004 5. Turnover for Flats as per Home Buyers List (E) 22,10,80,012 1,69,15,88,954 6. Total Saleable Area (in SQF) (F) 9,48,024 9,48,024 7. Total Sold Area (in SQF) relevant to turnover (G) 4,74,873 8,29,064 8. Relevant ITC [(H)=(D)*(G)/(F)] 66,77,573 11,26,02,060 The Ratio of ITC Post-GST [(I)=(H)/(E)] 3.02% 6.66% From the above Table- 'A', it is clear that the ITC as a percentage to turnover as available to the Respondent in the pre-GST regime was 3.02% and the same during the post-GST period had been calculated as 6.66% for the Project "Godrej 24". Therefore, the Respondent had benefited from additional ITC to the tune of 3.64% [6.66% (-) 3.02%1 of the turnover. On the basis of the figures contained in the 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, was tabulated in Table-B b....
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....as a matter of practice to ascertain the genuineness of the claim of the Respondent. Out of the 344 e-mails sent to the major stakeholders, only 86 stakeholders responded. Out of these 59 home buyers had confirmed the receipt of ITC benefit as claimed by the Respondent, 15 stakeholders had denied the receipt of ITC benefit and 12 stakeholders had submitted incomplete replies from which no inference could be drawn. Therefore, the amount of ITC benefit passed onto these 59 home buyers had been considered by the DGAP and due to the absence of warranted documentary evidence in the case of the remaining home buyers, the ITC benefit as claimed to have passed on by the Respondent had not considered by DGAP. A detailed break-up of ITC as claimed to have been passed on by the Notice is shown in Table- C on next page: - Table - 'C' S.No. Category of Customers No. of Units Area (in Sq. Ft.) Demand Raised Post GST Profiteering Amount as per Annex-8 Benefit already passed on by the Respondent (Annex-I) Remarks A B C D E F G I 1. Applicant 1 931 - - - No demand Raised Post GST 2. Home buyers with ZERO demand raised in Post GST period (No ITC benefit passed) 15....
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....eligible ITC benefit to be given (Proportionate ITC to be given - Actual ITC benefit given) A B C Home buyers with excess ITC 28 (54,29,635) 32,89,455 -21,40,180 Home-buyers with deficit ITC 31 (37,35,333) 37,71,438 36,105 Total 59 91,64,968 70,60,893 36,105 V. The excess amount of ITC benefit Rs. 21,40,170/- given to the 28 home buyers (categorized as home-buyers with excess ITC) and the difference amount of Rs. 36,105/-which had to be given to the 31 home buyers (categorized as home-buyers with deficit ITC) was accordingly adjusted from the total computed amount of profiteering i.e., Rs.6,89,92,698/- as shown below: - Table 'E' Computed profiteering amount for 719 home buyers (Annex -8) Final amount of profiteering = Computed amount of profiteering - adjusted ITC benefit from Table D 6,89,62,698 6,19,37,910=6,89,62,698-(32,89,455+37,35,333) It appears that post-GST, a benefit of additional ITC to the tune of 3.64% of the turnover was accrued to the Respondent and the same was required to be passed on by the Respondent to the eligible recipients. On this account, the Respondent had been found to have profiteered an am....
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....cant in GST period. The Applicant in its applications has also admittedly pointed out that the Respondent has passed on GST benefit of 3.88% of the turnover. The same way UST benefit was passed back to all other customers falling in Category "A". The proof of benefit passed on to all the customers along with the amount of benefits passed on have been submitted to DGAP. A.4 The undertakings of 17 customers evidencing that customers have received the benefit of input tax credit as per Section 171 of the CGST Act, 2017 have been submitted to DGAP. But DGAP has not considered the benefit passed on by Respondent in the computation of profiteering without any logical basis. A.5 Once the benefit has already been passed to the customers it cannot be alleged that Respondent has violated the provisions of section 171 of CGST Act and for this reason alone, the proceedings initiated against the Respondent are to be dropped. B. The verification exercise carried out by DGAP on the benefit passed on by respondent is arbitrary and incorrect. The Respondent provided various details to substantiate that benefit of ITC has already been passed on by Respondent to its eligible customers which inclu....
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....ed by the NAA u/r 133 (4) of the CGST Rules, if a fresh time limit is made available to DGAP to furnish report based on further investigation to be carried out by it and for NAA to pass an order, it will lead to a situation where the proceedings will not attain finality at any point of time. C.3 Therefore, the DGAP furnished its original report to NAA on 26.06.2019, the NAA is required to pass a final order within 6 months from 26.06.2019, that is by 25.12.2019, after carrying out the entire process, including further investigation by the DGAP u/r 133(4), if required. C.4 Accordingly, it is submitted that in the present facts, since the time limit has already expired, the entire proceedings are barred by limitation and need to be dropped on this ground alone. C.5 The Respondent placed reliance on the judgment in the case of the Hon'ble Supreme Court in L. Chandra Kumar v Union of India reported at (1997) Supreme Court Cases 261. D. Fresh negotiations/bookings on or after 01.07.2017 shall be excluded from the calculation of the profiteering amount. D.1 The supplies which arc provided fully in GST regime are not covered into the anti-profiteering provisions directly. D.2 Se....
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.... not only the value of taxable construction services, rather it also collects the value of land from its customers. Further, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building are not treated as supply as per Schedule III of the CGST Act. Further, it is submitted that sale of land is covered under stamp duty regulations and appropriate stamp duties are paid on the same. E.2 The Respondent placed reliance on the case of Union of India vs. Suresh Kumar Bansal reported at 2017 (4) G.S.T.L. J128 (S.C.), wherein it was confirmed by the Hon'ble SC that explanation added to Section 65 (105)(zzzh) of the Finance Act, 1994 vide the Finance Act, 2010 expanding the 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 since service tax cannot be levied on the value of an undivided share of land acquired by a buyer of a dwelling unit. E.3 Accordingly, it is submitted that the calculation of profiteering shall exclude the value of land from its computation. E.4 Further, it is relevant to mention here that GST provisions t....
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....of inputs/input services and taking credit of the same does not have an immediate and direct relation with the turnover in real estate sector. Accordingly, calculating profiteering on the basis of turnover could not reflect the correct outcome for the Respondent. F.3 Respondent submitted that the calculation of alleged profiteering based on the comparison of ratio of input tax credit to turnover for pre-GST period and GST period would lead to incorrect results due to following reasons/assumptions - * The construction Project Life cycle effect has been ignored, and it has been assumed that uniform expenses are incurred throughout the lifecycle of the project. * The turnover would vary as per the market conditions and it is difficult to maintain the ratio of the same in proportion to procurement in a real estate sector. * Input Tax Credit is an absolute number that would vary as per the Govt. rate policies which can significantly vary the ratio as calculated by the Ld. DG to assess the anti-profiteering benefit. * Reversal of Input Tax Credit in future due to receipt of Completion Certificate may also have a bearing on Input Tax credit availed by the supplier/developer. Such....
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....eged profiteering amount has already been deposited with Government and there is no factual dispute by the DGAP on this aspect, the addition of 12% GST to calculate the alleged profiteering amount is incorrect, not sustainable and liable to be rejected. H.4 Accordingly, an amount of INR 73,88,861/- needs to be excluded from the total profiteering determined in the DGAP report. I. The standing committee has erred in referring the matter to the DGAP for further investigation. I.1 Respondent submitted that in the present case, the Standing Committee has erred in referring the matter to the DGAP for further investigation. This is for the reason that, GST benefit to the tune of only 3.88% of the turnover has been passed on by the Respondent but the total cost has gone up from Rs. 60.29 Lacs (Rs. 49.79 lacs + Service Tax) to Rs. 62.29 Lacs (RS.47.88 lakhs +GST). On the basis of this increase in total cost, it was alleged that entire GST benefits were not passed by the Respondent. It is submitted that the said fact cannot be considered as a prima facie evidence to say that the Respondent has profiteered in the GST regime. The submissions, in this regard, are given in the forthcoming pa....
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....e decision of- * Kerala State Screening Committee on Anti-Profiteering, Director General Anti-Profiteering v. M/s Pulimoottill Silks reported at 2019 (2) TMI 296 - THE NATIONAL ANTI-PROFITEERING AUTHORITY. * Kerala State Screening Committee on Anti-Profiteering, Director General of Anti-Profiteering, Central Board of Indirect Taxes & Customs v. M/s Velbon Vitrified Tiles Pvt. Ltd. reported at 2019 (3) TMI 370 -THE NATIONAL ANTI-PROFITEERING AUTHORITY J.5 It is submitted that it is a settled principle of law that an order adjudicating a show cause notice 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. CC, Mumbai reported at 2006 (201) E.L.T. 513 (S.C.) and Reckitt & Colman of India Ltd. vs. CCE, reported at 1996 (88) E.L.T. 641 (S.C.) J.6 On the basis of the aforementioned discussion, it is submitted that like an order cannot travel beyond a show cause notice, the investigation and report of the DGAP, cannot go beyond the application which acts as a basis of the investigation. J.7 Thus, in light of the aforementioned discussion, the report should be restricted to the Applicant who has a....
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.... credit, to the recipient by way of commensurate reduction in price. L.2 The Respondent submitted that the benefit of ITC can only arise within the GST regime, on a change in the provision relating to ITC, and transition from pre-GST to GST regime may entail certain benefits which the Respondent may pass on to its customers. However, the same cannot be considered as a benefit of ITC to invoke the provisions of section 171. The comparison of the input tax credit with the CENVAT credit that existed under the CENVAT Credit Rules, 2004, and the respective VAT Acts to arrive at the benefit of ITC is beyond the scope of Section 171 of the CGST Act. M. Proceedings initiated violate the principles of natural justice. M.1 The Respondent submitted that in the absence of providing an opportunity to rebut the claims of customers who have denied receiving the benefit of the credit, the present proceedings violate principles of natural justice. Respondent contends that the DGAP has incorrectly denied deduction to Respondent for the benefit passed on by it, to customers who have denied having received the benefit. It is submitted that if some customers denied having received the benefit, the R....
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....eged profiteering figures are less than the benefit already passed on by the Respondent. As per Section 171 of CGST Act 2017, any benefit of tax reduction has to be passed on at the level of each supply to each buyer and in case it is not passed on, the profiteered amount has to be calculated on each supply. Each customer is entitled to receive the benefit of tax reduction on each product purchased by him. The word commensurate" mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product based on the tax reduction as well as the existing base price (price without GST) of the product. The computation of commensurate reduction in prices is purely a mathematical exercise that is based upon the above parameters and hence it would vary from product to product. In the instant case, the contentions of the Respondent are erroneous as the total benefit passed on may be more in percentage, as compared to the percentage worked out in Report but the Respondent has not passed the benefit of additional ITC commensurately to all the buyers by the way of commensurate reduction prices. b. The ....
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....period. Whatever the negotiated price, the benefit of additional ITC has to be specifically passed on to all the recipients by the Respondent. This benefit has to be passed on over and above any other kind of negotiations made with the homebuyers. d. The land value shall be excluded from the calculation of the profiteering amount. The sale of land being a transfer of immovable property and license approvals are outside the ambit of both Service Tax as well as GST. There is no implication of the cost of land in arriving at the ratio of total credit available to the Respondent, as abatement for the same is provided in the determination of taxable turnover. Further, the cost of land, land development rights, license approvals, etc. are integral parts of the cost of the project and are already accounted for in the turnover i.e., demands made from the flat buyers. This has no relevance whatsoever in the determination of the benefit of the additional input tax credit that accrues to a supplier (here the Respondent) due to the implementation of GST, which is required to be passed on to the recipients (here the flat buyers) in terms of Section 171 of the CGST Act, 2017. e. Comparison....
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....Since the recipient of supply has borne the entire burden of profiteered amount as well as GST on that amount, the Respondent is obliged to pass on the entire amount to the flat buyers in terms of Section 171 of the CGSR Act, 2017, irrespective of the fact that the said GST amount has been deposited with the Government. g. The report cannot go beyond the application submitted by the applicant vide letter dated 12.10.2018. The contention of the Respondent that the investigation by the Directorate General of Anti-profiteering for transactions other than that of the complainant is whole without jurisdiction and illegal is also not correct. Section 171 (1) of the GST Acts, states that "Any reduction in the rate of tax on any supply of goods or services or the benefit of the input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." It is clear from the perusal of the above provision that it mentions "benefit of the input tax credit shall be passed on to the recipient" which does not mean that the benefit of the input tax credit is to be taken only for the applicant or the complainant or to the alleged unit. Therefore, the benefit of the input ....
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....said report should not be accepted. 5. Applicant No. 1 vide his submissions dated 17-10-2021, 21-5-2022, 11-06-2022, and 16-08-2022 had inter-alia submitted the following points:- a) Anti-profiteering amount should have been in range of 6.1% to 7% as in this project entire work was carried out in post-GST period and major part of the consideration for flats/units was received in post-GST period. b) Period covered under DGAP Investigation report is small i.e. from 1/7/2017 to 31/12/2018, and the actual construction work stared from March/April 2018. The period covered under investigation is not sufficient to reflect correct picture of profiteering. c) Most of the items having GST Tariff rate of 28% tariffs like Tiles, Paints, Sanitary Fitting, Gymnasium equipment, Lifts, etc. were used in the latter part of the construction, which is not covered in the investigation period. d) Occupation Certificate was obtained by the builder from authorities. However, neither building was completed nor the demands were raised. This confirms that OC was obtained without completion of work/project. This was merely done to evade the GST as GST is not applicable on unsold flats. e) Because ....
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.... Whether in the absence of issuance of Show Cause Notice, proceedings initiated violates the principles of natural justice? 8. Before taking any decision on the issues mentioned at point 'a' and 'b' of para 7 above, the Authority, inter alia examines and decides the issues raised by the Respondent at point 'c' of para 7 mentioned above and the findings are as under:- I. The Respondent has claimed that the profiteering figures are less than the benefit already passed on by the Noticee. The Authority finds that, as per Section 171 of CGST Act 2017, any benefit of tax reduction has to be passed on at the level of each supply to each buyer and in case it is not passed on, the profiteered amount has to be calculated on each supply. Each customer is entitled to receive the benefit of tax reduction on each product purchased by him. The word "commensurate" mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product based on the tax reduction as well as the existing base price (price without GST) of the product. The computation of commensurate reduction in prices is ....
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....dent has decreased the price of the units to be sold by him commensurate with such availability of additional ITC as mandated by Section 171 of the CGST Act, 2017. Hence, such submission made by the Respondent is untenable. The Respondent has benefitted with additional ITC only after the introduction of the GST. This additional benefit of ITC pertains to the entire project or in other words, relates to each flat/unit of the project of the Respondent. Hence all unit/flat buyers are eligible to get their due benefit of ITC from the Respondent irrespective of their bookings made in pre-GST or post-GST period. III. The Respondent has contended that the anti-profiteering proceedings are time-barred. The Respondent has contended that the fresh time limit available to a new investigation is not available to a further investigation under rule 133 (4) and that the further investigation under rule 133 (4) needs to be completed and the final order of the NAA needs to be passed within the overall time limit of 6 months from the date of receipt of the original report of DGAP provided in rule 133 (1) CGST Rules 2017. In this regard, the Authority finds that the time limits prescribed under R....
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....The Authority finds that the value of land is deducted from the turnover as and when the suppliers of construction services raise separate bills/invoices for the sale of land. In such cases, the land is an item of sale at a negotiated price between a seller and a buyer and there are separate bills/ invoices for the sale of such land and supply of construction service. In such cases, there is a clear bifurcation in these agreements with respect to such two items- one of sale and the other of supply. In such cases, both in the pre-GST regime, as well as the GST regime, the Service Tax, or GST as applicable, was charged only on the value of the supply of construction service. In such cases, the value of land which is a determinate value as per record was excluded from the turnover of receipts during the respective periods. The facts, in this case, are not the same. In the present case, there is no separate item of sale i.e. land and no separate invoices have been issued/bills raised for sale of such land. Also, both in the pre GST period and in the GST period, Service Tax and GST, as applicable, have been paid by the Respondent only on the value after availing abatement towards value ....
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....ated 12.10.2018. The Respondent has also contended that the investigation cannot go beyond the application filed by the Applicant. In this regard, Authority finds that section 171 (1) of the CGST Act, 2017 provides that in the event of any benefit of ITC or reduction of rate of tax, there must be a commensurate reduction in prices of any supply of goods or services. Therefore, the law prescribes that benefit of reduction in the rate of tax or benefit of increase in the ITC should result in commensurate reduction in prices of any supply and every supply. As observed by the Authority in the earlier paragraphs that anti-profiteering provisions are beneficial provisions, which aims to extend the relief of reduction of taxes or the benefit of ITC to the end consumers at the expense or loss of revenue to the government. As such, concerned authorities i.e. DGAP and Commissioners of CGST/SGST/UTGST are adequately armed under the provisions of CGST Act,2017 and rules made thereunder (as well as cognate statutes) to carry out necessary investigation in respect of such goods and services against such supplier of goods or services which are not passing on the benefit of reduction of tax or t....
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....en by them and the status and date of the activity, upon which reduction of rates or the necessity of passing of ITC have arisen. For example reduction of GST rates in case of FMCG products may be treated differently vis-a-vis real estate project, which would take into account various factors like status of the project, procurement of various raw materials, completion certificate, payment schedules, etc. In the case of real estate industry, as in the instant case, DGAP has evolved a methodology within the guidelines issued by the Authority for determination of profiteered amount, based on various information supplied by the Respondent. As may be seen from the methodology adopted, the DGAP has captured the amount of ITC available before the GST implementation and the said amount available after the GST implementation and taking into consideration various factors like turnover, saleable area, total area, sold area etc. during the pre-GST in the post GST area, the DGAP has come to a conclusion, calculating the amount of the profiteering in the given facts and situation. As such, the Authority concurs with the methodology adopted by the DGAP. IX. The Respondent has contended that in ....
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....f 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 reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report 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 3.02% and during the post-GST period (July-2017 to December-2018), it was 6.66% for the project "Godrej 24". This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.64% [6.66% (-) 3.02%] of his turnover for the said project and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,89,62,698/- for the project "Godrej 24", the details of which are mentioned in Table- B above. Further as per Table-C of DGAP, the profiteering amount to be ....
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....to the customers/flat buyers/recipients in contravention of the provisions of Section 171 {1) of the CGST Act, 2017. We hold that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 31.12.2018, and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 31.12.2018 when the Respondent has committed the above violation and hence the penalty under Section 171 (3A) can not be imposed on the Respondent for such period. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent. 15. Further the concerned jurisdictional CGST/SGST Commissioner is also directed to ensure that the benefit of ITC as determined by the Authority as per the Annexure 'A' of this Order be passed on along with interest @18% to each homebuyer/recipient/customer, if not already passed on. In this regard an adverti....