TaxTMI 
TaxTMI 
2022 (8) TMI 1413
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....ommittee forwarded the copies Of the Complaint of the Applicants along With demand letters to the DGAP for further investigation. 2. DGAP vide the above said Report dated 30.12.2020 had inter-alia stated the following: - I. On receipt of the reference from the Standing Committee on Anti profiteering, a Notice under Rule 129 of the Rules was issued by the DGAP on 21.10.2019, calling upon the Respondent to reply as to whether he admit that the benefit of ITC had not been passed on to the recipients 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 documents in support of his reply. Further, the Respondent was afforded an opportunity to inspect the non-confidential evidences/information which formed the basis of the said Notice, during the period 30.10.2019 to 31.10.2019. The authorized representative of the Respondent availed of the said Opportunity On 14.11.2019. II. The period covered by the current investigation was from 01.07.2017 to 30.09.2019. III. As complete and relevant documents were not submitted by the Respondent even after repeated requests, Summons....
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....any concession to the Allottee/purchaser in the above consideration". Basic price of the flats sold to the customer post implementation of GST had been reduced by Rs- 296/Sq. Ft- on average basis, illustrated as below: Particulars Taxable Value Area Per Sq. Ft. Area (Rs) Agreements executed during the last quarter (pre-GST) 23,21,90,850 46,650 4977 Agreements executed during the first quarter(poS1-GST) 21,06,34,083 44,999 4681 Reduction in per Sq. Ft. rate 296 In view Of the above. the turnover Of Rs. 103 Crores (approx) pertaining to flats sold post-GST was not required to be considered for the purpose of computation Of anti-profiteering benefit- VII. Vide the aforementioned letters./e-mails, Respondent submitted the following documents/ information: a. Copies of GSTR-I returns for the period July, 2017 to September, 2019. b. copies of GSTR-3B returns for period July, 2017 to September, 2019. c. Copies of Tran-I return for transitional credit availed by the Respondent. d. Copies of VAT & ST-3 returns for the period April, 2016 to June, 2017. e. Electronic Credit Ledger for the period July, 2017 to Sept, 2019. f. CENVAT/ITC register for the F.Ys. 2016-....
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....ct. 2017 reads "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly. except where the entire consideration had been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever was earlier", Thus, the ITC pertaining to the residential units and commercial shops which were 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 Central Goods and Services Tax 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 input tax as was attributable to the said taxable supplies including zero-rated supplies " Section 17 (3) "Th....
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....ng had been calculated with respect to flats booked in pre-GST era only. As per home buyers list submitted ted by the Respondent, 199 flats were booked post- implementation of GST. XIII. The Respondent had submitted that he had opted for payments of GST @5% without ITC, as notified vide Notification No. 03/2019- Central Tax (Rate) dated 29.03.2019 w.e.f. 01.04.2019. Accordingly, the investigation period was limited upto 31.03.2019. XIV. As regards the allegation of profiteering, it was observed that Phase-I Of the project had 04 towers (A, B, C & D) Work on all the 04 towers started in pre-GST era and continued in post-GST. O.C. for 03 towers (A, B & D) was received on 15.02-2019 and for Tower-C,O,C. was not issued upto 31.03.2019. Prior to 01.07.2017. i.e.. before the GST Was introduced, the Respondent availed Credit of Service Tax paid on input services only. No credit was available in respect of Central Excise duty paid on the inputs. Further, VAT paid on inputs by the Respondent Was also not available in the instant ease, as the Respondent was under composition scheme in Maharashtra Post-GST, the Respondent was entitled to avail ITC Of GST paid on all the inputs and the inp....
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....d in Table' 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) from the home buyers who booked flats during the pre-GST period. 'were tabulated in Table-"C" below:- Table-'C' (Amount in Rs.) S. No. Particulars 1 Period A July, 2017 to March 2019 2 Output tax rate (%) B 12.00% 3 Ratio of CENVAT/ ITC to Taxable Turnover as Table -C above (%) C 7.67% 4 Increase in ITC availed post-GST (%) D=7.67% less 1.15% 6.52% 5 Analysis of increase in input tax credit: 6 Base Price collected during July, 2017 to March, 2019 (excluding turnover for the units sold post OC) E 27,80,41,750 7 GST Collected @ 12% over Basic price F=E*12% 3,33,65,010 8 Total Demand collected G=F+E 31,14,06,760 9 Recalibrated Basic price H=G*(I-D) or 93.48% of E 25,99,13,428 10 GST@12% I=H*12% 3,11,89,644 11 Commensurate demand price J=I+H 29,11,03,039 12 Excess Collection or Demand or Profiteering Amount K=G-J 2,03,03,720 From Table-"B" and "C" above, it was deduced that the....
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.... on by the Respondent to the recipients, who booked flat in pre-GST period comes to Rs. 1,45,28,245/- which included GST @12% on the base profiteered amount of Rs. 1,29,71,647/- profiteered amount of Rs. 94,726/- for Applicant no. 1 and Rs. 96,373 each for Applicant no. 2 & 3. XX. The Respondent had total of 495 units in the whole Phase-1 project as on 31.03.2019, out of which 255 Mats were booked in pre-GST period, 199 flats were booked in post-GST period and 41 flats remained unsold at the time of O.C. Accordingly, the home-buyers data provided by him was for the live customers as existing on 31.03.2019, after which he had opted for new scheme ie. GST payment @5%, without ITC. 'The above computation of profiteering was with respect to 255 units in the towers, which were booked prior to launch of GST. XXI. 'The DGAP thus concluded that post-GST the benefit of additional input tax credit to the tune of 6.52% of the turnover, accrued to the Respondent post-GST and the same was required to be passed on by the Respondent to the Applicant and other recipients for the project "Tinsel Town", who had booked flats in pre-GST period. 'The provisions of Section 171 of the Central Goods a....
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....truction services to his customers. Therefore, such non-creditable duties and taxes paid on inward supplies were embedded in the budgeted cost of the project. However, pursuant to introduction of GST law, Respondent was allowed to avail the credit of taxes paid on procurement of goods. 'Therefore, the benefit accruing on account of such non-creditable taxes was being computed and the Respondent passed on these benefits to the customers in terms of Section 171 of the CGST Act, 2017. II. No methodology prescribed to derive profiteering; thus, leading to arbitrary exercise of powers by DGAP. It was settled law that in the absence of a machinery provision for assessment of tax the levy itself fails and was liable to be struck down as unconstitutional. Reliance was placed on the decision of Hon'ble Supreme Court in the case of Commissioner, Central Excise and Customs, Kerala vs. Larsen and Toubro Limited (2016) 1 SCC 170 wherein it was held that in the absence of machinery provisions for computation of taxable value in case of composite works contract levy of Service tax would become non-existent. Resultantly, the present Impugned Report was required to be quashed on this ground i....
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....sed on the benefit to the customers. VIII. It could also be observed that there was no reduction in the rate of tax of supply on the contrary the tax liability of the Respondent had increased also for additional ITC, the Respondent was cligible for the additional ITC to the extent of VAT and Excise duty considered as cost at the time of budgeting. The Respondent submitted that it had appropriately computed such non creditable cost and had passed on these benefits to the customer including the Complainant. IX. The Respondent's calculation with respect to profiteering benefit was as under: A Saving Of VAT/SBC pertaining to procurements during July 3,63,72,380 B Credit of VAT availed in GST TRAN-I 63,69,072 C Less: ITC reversed for unsold area 67,60,000 D Benefit [A+B+C] 3,59,81,452 E Area sold before obtaining OC 4,84,921 F Area sold pre-GST 2,74,510 G Agreement value of flats sold pre-GST 1,39,16,18,698 H Amount invoiced in GST regime pertaining to flats sold in pre-GST regime 31,99,60,554 IJ Benefit to be passed on to the customers [D*E/F*H/G] 46,83,193 X. The DGAP had compared the percentage of credit availed to taxable turnover for the period ....
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....y prescribed to derive profiteering. Thus leading to arbitrary exercise of powers by DGAP, it was submitted that the contentions of the Respondent made in these paras were incorrect as the main contours of the Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the benefit of ITC was enshrined in Section 171 (1) of the CGST Act, 2017 itself. Section 171 of the CGST Act, 2017 (CGST Act 2017) mandates that any benefit of reduction in the rate of tax or the benefit of ITC which accrues to a supplier must be passed on to the consumers as both was concessions given by the Government and the suppliers was not entitled to appropriate such benefits by increasing his profit margin at the cost of the consumers. "Methodology and Procedure" had also been notified by the NAA vide Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017 (CGST Rules 2017). However, one formula which fits all cannot be set while determining such a "Methodology and Procedure" as the facts of each case were different. ii. Regarding unconstitutionality of Section-171 the DGAP submitted that the contention of the Respondent made in this para were incorrect. The mand....
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....ions would require that such amount be refunded to the eligible recipients or alternatively deposited in the Consumer Welfare Fund, regardless of whether such extra tax collected from the recipient had been deposited in the Government account or not. Therefore, the option was always open to the Respondent to return the tax amount to the recipients by issuing credit notes and adjusting his tax liability for the subsequent period to that extent. Moreover, the legislative intent behind Section 171 of the CGST Act, 2017, is to pass on the benefit of the tax rate reduction by way of reduction in price. As the price included both basic price and the tax charged on it, any excess amount collected from recipients, even in the form of tax, must be returned to the recipients. In case, the recipients was not identifiable, the said amount is required to be deposited in the Consumer Welfare Fund. vii. The contention of the Respondent that DGAP in its finding had completely ignored the genesis of Section 171 of the CGST Act, was denied. The DGAP had correctly computed the profiteered amount by taking ITC to turnover ratios in the pre-GST & post-GST periods into account which was correct, reaso....
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....on services and he has executed project by the name of Tinsel Town in Pune, Additional Input tax Credit was available to the Respondent for the project due implementation of the GST wef 01.07.2017 which was required to passed on in terms of Section 171 of the CGST Act, 2017. The Project was executed in two phases. Both the phases have separate RERA registration. 'The Authority finds that the following issues are required to be settled in the present proceedings:- I. Whether there is benefit of additional IC available to the Respondent which isnot passed on by him to the Applicants? II. Whether there is any violation of the provisions of Section 171(1) of the CGST Act, 2017 by the Respondent and whether the various objections raised by the Respondent like absence of Methodology of determination of profiteering, excessive delegation of power to frame Methodology, unconstitutionality of Section-171 etc. are tenable? 1. Section- 171 of the CGST Act, 2017 reads as under: "(1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices, It is clear from the plai....
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....ode of payment of price, stage of completion of the project, timing of purchase of inputs, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realized before and after the GST implementation would always be different than the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to another project. Issuance of Occupancy Certificate! Completion Certificate would also affect the amount of benefit of ITC as no such benefit would be available once the above certificates are issued. Therefore, no set parameters can be fixed for determining methodology to compute the benefit of additional ITC which would be required to be passed on to the buyers of such units. The case of Commissioner, Central Excise and Customs, Kerala versus Larsen and Toubro Limited (2016) 1 SCC 170 relied upon by the Respondent is not applicable in this case as the "Methodology and Procedure had been notified by the Authority vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. Moreover, profiteering is not a tax as had been interpreted by the Respondent but it is a benefit wh....
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....Authority has nowhere interfered with the business decisions of the Respondent and therefore, there is no violation of right of trade and commerce. M/s. Indraprastha Gas Lid. Vs. Petroleum and Natural Gas Regulatory Board and Ors (2015 (9) SCC 209/ relied upon by the Respondent is not applicable in the present case as there is no fixation of tariff & prices by the Authority. V. The Respondent argued that concept of GST being an indirect tax is an economic concept. A supplier cannot be mandated / dictated through a taxing statute to reduce price to the same extent as benefit accrues due to availability of Input Tax Credit. The contentions of the Respondent made in these paras were incorrect as profiteering is not a tax as had been interpreted by the Respondent but it is a benefit which had accrued to him on account of additional ITC which he needed to pass on to the customers. Unlike taxes, the profiteering cases deal with amounts that the Government had foregone in favour of the consume Which the suppliers attempt to appropriate to themselves and use in his business. The Authority in exercise of power delegated to it under the Rule 126 had notified the Methodology and Procedure v....
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....ch the customers were not required to pay. The Respondent was legally not required to collect the excess GST and therefore, he had Violated the provisions of the CGST Act supra, as he had denied the benefit of tax reduction to his customers by charging excess GST. Hence although the GST amount deposited with the Government exchequer had been illegally collected by the Respondent and if any refund is prescribed the same can be claimed by the Respondent as per the existing laws. VIII. 'The Authority concurs with DGAP findings where the agreement with home buyer with a clause evidencing passing on of benefit of additional ITC to the various home buyers, who had booked flats in post-GST period i.e. a contract agreed upon by the promoters and home buyers, the same were not considered for profiteering. 'The Authority also concurs with the findings that Phase-II of the project was launched after implementation of GST and no bookings were made in the period prior to GST, provisions of Section 171 were not attracted for Phase-II. 7. Based on the discussion above and the figures of turnover and ITC for the Pre GST & Post GST Period, we have no reason to differ with the DGAP findings that ....
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....e for imposition of penalty is not required to be issued to the Respondent. 11. The concerned jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order within three months of receipt of this order by the Respondent. It may be ensured that the benefit of ITC has been passed on to each homebuyer as per this Order along with interest @18% if not already passed on. In this regard an advertisement may also be published in minimum of two. Local 'Newspapers/vernacular press in Hindi/English/local language with the details i.e. New World Reality LLP, Project: Tinsel Town, located at Pune and the Profiteering Amount 2,03,03,720/- so that the Applicants along with Non-Applicant homebuyers can claim the benefit of ITC which is not passed on to them. Homebuyers may also be informed that the detailed NAA Order is available on Authority's website www.naa.gov.in. Contact details of concerned Jurisdictional CGST/SGST who are nodal officer for compliance of the NAA's order may also be advertised through the said advertisement. 12. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of this order to the Authority a....