TaxTMI 
TaxTMI 
2020 (4) TMI 905
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.... situated at C-04A, Sector-16B, Greater Noida, Uttar Pradesh and had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price of the shop. The above application was examined by the Standing Committee on Anti-profiteering, in its meeting held on 11.03.2019, the minutes of which were received by the DGAP on 27.03.2019, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, it was decided by the DGAP to initiate an investigation and collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. I in respect Of the construction service supplied by the Respondent. 2. Thereafter, the DGAP had issued Notice to the Respondent on 08.04.2019 under Rule 129 (3) of the above Rules, calling upon him 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 suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all supporting documents. The R....
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....8-19. (h) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit for the period from April, 2016 to June, 2017 for the project "U Faria' (i) List of home buyers in the project "U Faria" (j) Copy of Project Report submitted to the RERA (k) TRAN-I Statements for the period from July, 2017 to December, 2017. (l) Details of applicable tax rates, pre-GST and post-GST. 5. The DGAP after examining the above application, various replies of the Respondent and the documents/evidence on record has stated that the main issues for determination were whether there were benefits of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and if so, whether the Respondent has passed on such benefits to the recipients by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017. 6. The DGAP has also informed that the Respondent has submitted a copy of the Project Report of the "U Faria" project and the payment schedule for the purchase of shops. The Respondent, vide his letter dated 29.05.2019 and subsequent letter, submitted copies....
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....ommercial shops which were under construction but not sold was provisional ITC which would be required to be reversed by the Respondent, if such shops remained unsold at the time of issue of the Completion Certificate (CC), 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 were 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 was 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 was liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule Il, sale of building. ' Therefore, the DGAP has claimed that the ITC pertaining to the unsold units would not fall within the ambi....
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....Relevant ITC [(F)=(A)*(E)/(D)] or [(F)= (B)*(E)/(D)] 1,229,049 3.283.048 Ratio of ITC Post-GST[(G)=(F)/(C)] 0.84% 2.58% 10. The DGAP has claimed from the Table-'B' that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 0.84% and during the post-GST period from July, 2017 to March, 2019, it was 2.58% which clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 1.74% [2.58% (-) 0.84%] of the turnover. 11. The DGAP has also observed that 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 commercial shops. 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 as the turnover, the recalibrated base prices and the excess realization ....
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.... of the taxable turnover which has accrued to the Respondent was required to be passed on to the Applicant No. I and the other recipients. He has further submitted that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent inasmuch as the additional benefit of ITC @1.74% of the base prices received by him during the period from 01.07.2017 to 31.03.2019, has not been passed on to the Applicant No.1 and the other recipients. On this account, the Respondent has realized an additional amount to the tune of Rs. 37,107/- (including GST) from the Applicant No. 1 which included both the profiteered amount @1.74% of the basic price and GST on the said profiteered amount. The DGAP has also contended that the Respondent has realized an additional amount of Rs. 24,41,276/-, as has been mentioned in Annexure-14, which included both the profiteered amount @1.74% of the basic prices and the GST on the said profiteered amount, from 177 other recipients who were not Applicants in the present proceedings. These recipients were identifiable as the Respondent has provided their names and addresses along with unit nos. allotted to them. Therefore, this additional a....
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.... (iv) That even otherwise he had already offered approx. 5% to 7% discount on the basic prices to his customers who had booked shops post-GST. He has also enclosed copies of discount/Credit notes as evidence. (v) That in view of the change in the economic scenario particularly increase in the availability of ITC on account of higher rate of GST, the basic prices of the commercial units had already reduced. As the discount had been given mainly on account of availability of ITC, the allegation that he had failed to give the necessary discount and had resorted to profiteering was absolutely incorrect, illegal and beyond the provisions of law. (vi) That while computing the ratio of ITC post-GST, the amount of Rs. 3,31,56,773/- of ITC of GST availed had been considered. The Respondent has submitted that instead of "ITC availed" value of "ITC Utilized" i.e. Rs. 1,60,62,170/- should be considered for the purpose Of computation of profiteering. The Respondent vide his e-mail/letter dated 20.09.2019 has also requested that for the purposes of calculation of profiteering value of the 'ITC availed post-GST' should be taken as Rs. 1.6 Crore (ITC utilized) instea....
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....that the issue involved in the present case was that the Respondent had not passed on the benefit of ITC to his recipients by not reducing the prices of the construction service commensurately. The DGAP has also mentioned that if the investigation was restricted to the Applicant No. 1 then the other recipients/customers of the Respondent who have not made complaint against him, would never get their due commensurate benefit from the Respondent. Further, there was no stipulation in the law to restrict the investigation only to the complainant/AppIicant. 19. The DGAP has also averred that the legal requirement under Section 171 (1) was that in the event of benefit of ITC or reduction in the rate of tax, there must be commensurate reduction in prices of the goods or services. In other words, every recipient of goods or service has to get the due benefit from the supplier and hence, this benefit has to be calculated for each and every recipient/customer irrespective of date of booking. Such reduction could obviously only be in absolute terms so that the final price payable by a consumer must get reduced. In the instant case, the Respondent was required to pass on the benefit of ITC ....
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....s no requirement of re-computation of the profiteered amount in the instant case. 23. The DGAP has also stated that there was no provision in the statute to withdraw the complaint or discontinue the investigation if the complainant had given his no objection. The DGAP has further mentioned that the Applicant No. I's e-mail enclosed by the Respondent with his submission dated 05.12.2019 as evidence, was an e-mail dated 15.11.2019 which was obtained by the Respondent from the Applicant No. I after receiving his Report dated 24.09.2019 from this Authority. The DGAP has thus stated that it appeared to be an afterthought which has nothing to do with his findings submitted to this Authority vide Report dated 24.09.2019. 24. The DGAP has also contended that the sample credit notes submitted by the Respondent were issued by the Respondent on 26.11.2019 only after receipt of his Report dated 24.09.2019. Hence, it appeared to be an afterthought. The DGAP has also mentioned that the period of the present investigation was from 01.07.2017 to 31.03.2019 and therefore, the credit notes issued in November 2019 or any action initiated by the Respondent after the investigation period had ....
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....1,77,50,478/- was blocked by the State GST Authorities on 28.03.2019 and mentioned that the investigation period covered in the Report dated 24.09.2019 was from 01.07.2017 to 31.03.2019 and hence, it was apparent that the said ITC was available to the Respondent during the entire investigation period which was blocked only on 28.03.2019. The DGAP has therefore submitted that the Respondent had not initiated any steps to pass on the benefit of ITC to his buyers during the investigation period. He has also contended that the actual reason for blocking of the ITC was not known to him as the Respondent was silent on this issue in his submission dated 15.01.2020. 29. The Respondent in his submissions dated 14.02.2020 has reiterated his earlier contentions and further added that the assertion made by DGAP that the credit 'was' available or 'is' available to the Respondent was absolutely erroneous when it has been blocked during the very period. The whole formula of profiteering was based on the availability of ITC. Once the ITC itself was not available how it could be used for computation. He has also argued that when it was known during the investigation that the ITC ....
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....claimed that the Respondent has availed benefit of additional ITC of 1.74% (2.56%-0.84%) Of the turnover which he was required to pass on to the buyers of the shops as per the provisions of Section 171 (1) of the above Act. The DGAP on the basis of Table-B has also calculated the commensurate prices which the Respondent should have charged from the shop buyers vide Table-C and has claimed that the Respondent has profiteered an amount of Rs. 24,78,383/- including the GST by denying the benefit of ITC to his buyers which he was required to pass on to them. The above amount also includes an amount of Rs. 37,107/- which is required to be passed on to the Applicant No. I. The details of the benefit to be passed on to the 178 shop buyers have been given by the DGAP vide Annexure-14 attached with his Report dated 24.09.2019. During the course of the present proceedings before this Authority the 31.Respondent has vehemently argued that the Deputy Commissioner SGST, Gautam Budh Nagar, Uttar Pradesh has temporarily blocked ITC of Rs. 1,77,50,478/- on 28.03.2019 which the Respondent was not allowed to utilise. He has also attached copy of his Electronic Credit Register as Annexue-2 with hi....
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.... issued to the above shop buyers vide which he has claimed to have passed on the benefit of ITC. Perusal of the credit note issued in favour of Applicant No. 1 shows that the Respondent has claimed that an amount of Rs. 95,205/- has been passed on to him on 07.07.2018 as benefit of ITC by recording "Being GST input credit of 5% on demand raised against demand being passed on to customer". In reply to the claim made by the Respondent the DGAP has stated vide his Report dated 31.01.2020 that the Respondent had not produced the above credit notes during the course of the investigation and hence, the above credit notes have not been verified by him. In view of the above Report of the DGAP the claim made by the Respondent that he has passed on the benefit of ITC by issuing credit notes also needs to be verified. 35. Based on the above findings, the Report dated 24.09.2019 furnished by the DGAP cannot be accepted and the DGAP is directed to further investigate the present case under Rule 133 (4) of the CGST Rules, 2017 on the following issues:- (i) Whether the ITC amounting to Rs. 1,77,50,478/- has been blocked by the State GST authorities on 28.03.2019? (ii) Whether....