TaxTMI 
TaxTMI 
2022 (9) TMI 1530
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....a. The Maharashtra State Screening Committee on Anti-profiteering examined the said complaint and forwarded it with his recommendation to the Standing Committee on Anti-profiteering for further action, in terms of rule 128 of the Rules. b. The aforesaid reference was examined by the Standing Committee on Anti-profiteering in its meeting held on 26-5-2020. The minutes of meeting were received by the DGAP on 3-6-2020, whereby it was decided to forward the same to the DGAP, to conduct a detailed investigation in the matter. c. On receipt of the reference from the Standing Committee on Anti-profiteering on 3-6-2020, a Notice under rule 129 of the CGST Rules, 2017 was issued by the DGAP on 1-7-2020, 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 suo motu determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all the supporting documents. Further, in the said Notice dated 1-7-2020, the Respondent was given an opportunity to inspect the non-confidential evidences/information submitted by the....
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....021 passed in Cognizance for Extension of Limitation, In re 2021 (48) G.S.T.L. 225 (S.C.) = 2021 (376) E.L.T. 401 (S.C.) = [2021] 127 taxmann.com 72/167 SCL 99. h. In response to the Notice dated 1-7-2020, the Respondent replied vide letters/e-mails dated 27-7-2020, 28-8-2020, 21-9-2020, 18-10-2020, 27-11-2020, 28-12-2020, 29-12-2020, 1-3-2021, 07-3-2021, 8-3-2021, 19-3-2021, 31-3-2021, 21-4-2021, 10-7-2021, 27-7-2021 and 21-9-2021. The Respondent submitted that the project "Shiv Bliss" had ground plus 20 floors and the construction was completed upto 20th floor, however the Occupancy Certificate was received only for 3rd floor to 17th floor. Further, the Respondent stated that he had total number of 174 units in the project, out of which 133 were sold as on 31-5-2020 and 41 were unsold. i. Vide the aforementioned letters/e-mails, the Respondent submitted the following documents/information: i. Brief profile of the Respondent. ii. Copies of GSTR-1 and GSTR- 3B Returns for the period 1-7-2017 to 31-5-2020. iii. Copies of VAT & ST-3 Returns for the period April, 2016 to June, 2017. iv. Copy Sale Agreement/Contrac....
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....bject to clause (b) of paragraph 5 of Schedule II, sale of building". Further, clause (b) of Paragraph 5 of Schedule II of the CGST Act, 2017 reads as "(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 his first occupation, whichever was earlier". Thus, the ITC pertaining to the residential units and commercial shops 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 was 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 exempted supplies under the said Acts, the amount of credit shall be restricted to so much of....
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....d from total Cenvat Credit available during the period 1-4-2016 to 30-6-2017 from computation of profiteering as the said amount was asked to be reversed by the Service Tax Audit Department as it was not related to construction of Slum Rehabilitation Authority (SRA), Mumbai project. On perusal of the documents provided, it appeared the claim of the Respondent was correct and thus, the DGAP has considered the claim of the Respondent and the NET Cenvat Credit available to the Respondent during the period 1-4-2016 to 30-6-2017 was taken as Rs. 1,24,61,086/- (1,88,00,874 - 63,39,788). o. From the above table- 'A' it was evident that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (01-4-2016 to 30-6-2017) was 1.54% and during the post-GST period (01-7-2017 to 31-5-2020), it was 7.49% for the Project "Shiv Bliss". It confirmed that post-GST, the Respondent had benefitted from additional ITC to the tune of 5.95% [7.49% (-) 1.54%] of the turnover. p. It was observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of l/3rd abatement for lan....
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....uring the period 1-7-2017 to 31-5-2020, had not been passed on to the recipients including the Applicant No. 1. On this account, the Respondent had realized an additional amount to the tune of Rs. 1,82,42,527/- (including GST), which was inclusive of profiteered amount of Rs. 8,75,301/- (including GST) in respect of the Applicant No. 1. The Applicant No. 1 and other recipients were identifiable as per the documents provided by the Respondent indicating the names and address along with unit nos. allotted to such recipients. t. As aforementioned, the present investigation covered the period from 1-7-2017 to 31-5-2020. Profiteering, if any, for the period post May, 2020, had not been examined as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage, when the construction of the project was yet to be completed. u. It was concluded by the DGAP that section 171(1) of the CGST Act, 2017, requiring that "any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices", had been contravened in the present case....
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.... to construction of SRA project where Service Tax Audit department had treated that the Respondent had provided Construction Service to SRA. Payment of Rs. 63,39,788/-did not form part of Rs. 1,88,00,874/- claimed/availed by the Respondent in Pre-GST period. Hence, the Report erred in deducting Rs. 63,39,788/- from Credit availed in Pre-GST era. iv. The Respondent was entitled for whole credit of Rs. 1,88,00,874/- during pre-GST period 1-4-2016 to 30-6-2017. From above points it could be seen that the credit availed by the Respondent was in relation to construction of SRA project. v. The Report did not consider the credit claimed prior to 31-3-2016. The Respondent submitted that prior to 31-3-2016, he had claimed and availed credit of Rs. 52,42,335/-. However, the same did not form part of the Table 'A'. vi. Once the Cenvat credit of Rs. 1,15,82,123/-(Rs. 63,39,788/- + Rs. 52,42,335/-) forms part of the calculation, the ratio of Cenvat credit in pre-GST jumps to more than 4.64%. Hence, the calculation made under aforesaid Report, to the above extent, must be revised. vii. Without Prejudice, the Respondent submitted that the DGAP in terms of s....
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.... or time of receipt of occupancy/completion certificate. The benefit of the tax credit, treated as profiteering, had been broadly computed by applying the ratio of such differential credit to the post-GST turnover. This methodology, however, seeks 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. ii. The Respondent was dealing in residential and commercial units. However, the calculation made under Table 'A' was general for all units. The Respondent submitted that there was no sale of commercial units pre-GST. Once, this was the case, invocation of section 171 for sale of commercial units could not be made. Hence, amount pertaining to same should be excluded for calculation of ratio of input tax. Thus, section 171 of the Act might be invoked only for sale of residential units. iii. The Respondent submitted that in terms of section 17 (2) and section 17 (3) of the CGST Act, 2017, the Respondent was r....
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....DGAP's Report were based on the data furnished by the Respondent including the home buyers list. B. For the contention raised by the Respondent that section 171 of the CGST Act, 2017 did not apply, the DGAP has clarified that under the provisions of section 171, the Authority had been mandated to ensure that both the benefits of tax rate reduction and ITC, which were the sacrifices of precious tax revenue made from the stake of the Central and State Governments were passed on to the end consumers who bear the burden of tax. The intent of the provision was the welfare of the consumers who were voiceless, unorganized and vulnerable. Therefore, the profiteering was to be at the customer level. The DGAP and the Authority have been charged with the responsibility of ensuring that both the above benefits were passed on to the general public and no undue profit was retained by the supplier. It was a case of accrual of additional benefit of ITC on account of introduction of GST. Further, section 171 (1) of the CGST Act, 2017 states that "Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensu....
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....ent in the pre-GST regime. What the Respondent had furnished in C-3 was in addition to what he had submitted during the course of investigation. The DGAP had not at any stage examined the eligibility of Service Tax credit of the Respondent. D. For the contention made by the Respondent that the report proceeded on the assumptions and presumptions, the DGAP submitted that the contention of the Respondent was not correct. ITC was available on the inputs (goods and services) purchased/used in the project, which was cost to the Respondent. Hence, when ITC was being considered in the investigation then it implied that the cost to the Respondent had been considered as far as ITC was concerned. The main factor under consideration for the sake of profiteering was that there should not be any increase in the base price of sold-out flats to obviate passing of benefit of additional ITC. In other words, there should be commensurate reduction in prices of the sold-out flats. The capital expenditure cost incurred by the Respondent, substantial increase in cost of inputs due to increase in rate of tax on such inputs etc. was not factored in while calculating profiteering in terms of sect....
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.... any increase in the base prices of sold-out flats to obviate passing of benefit of additional ITC. In other words, there should be commensurate reduction in prices of the sold-out flats. The capital expenditure cost incurred by the Respondent, substantial increase in cost of inputs due to increase in rate of taxes on such inputs etc. was not factored in while calculating profiteering in terms of section 171 of the CGST Act, 2017. F. For the contention raised by the Respondent that section 171 of the Act may be invoked only for sale of residential units, the DGAP has clarified that as per the methodology and procedure, the investigation in real estate sector cases was done in respect of the whole project including residential and commercial units in pre and post-GST period. The contention of the Respondent was wrong as the commercial units were sold out in post-GST period. G. For the contention made by the Respondent that the actual benefit, if any, could be determined only at the stage of the receipt of Completion Certificate, the DGAP has submitted that the contention of the Respondent made in this para was not acceptable as unutilized ITC had been correctly....
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....fiteering and hence the report requiring the Respondent to pass on the alleged benefit of ITC amounting to Rs. 1,82,42,527/- should be withdrawn. 6. The hearing in the matter was held on 9-6-2022 via video conferencing. The Same was attended by Sh. Satyavijay Gamaprasad Yadav for the Applicant No. 1, Sh. Bharat Raichandani, Advocate, Sh. Mitesh Rajgor, Chartered Accountant and Sh. Deepak Patel, Partner for the Respondent. The Respondent and the Applicant No. 1 were heard. The Respondent has reiterated his written submissions dated 9-4-2022, 24-5-2022 and 8-6-2022. Further, the Respondent and the Applicant No. 1 were directed to file their consolidated written submissions by 13-6-2022. 7. The Applicant No. 1, vide her submissions dated 12-6-2022 inter alia stated that:- (i) The Applicant No. 1 booked Flat No. 701 and 702 for total agreements value of Rs. 1,37,72,500/-(Rs. 68,86,250/- Agreement value of each flat). (ii) Two Agreements entered/registered vide dated 29-6-2017. (iii) Expected date of Completion of the project as per Agreements was 31-12-2017. (iv) As per the clauses of Agreements, amount to be paid after 15 days ....
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....e had not availed any GST credit on completed WIP to avoid anti-profiteering provision under GST during transition phase from VAT to GST. If the Respondent/Developer had not claimed any credit for his convenience, he couldn't claim entire 12% GST without allowing any GST credit. (xii) W.e.f. April 2019 GST Department had announced composition scheme of GST for the Respondent/ Developer, where applicable GST rate was 5%. (xiii) So, for any reason if the Respondent/Developer was not availing GST credit which was available to him or not opting reduced Composition rate of 5% then the Respondent/Developer should compensate buyer by allowing reasonable GST credit to the buyer. 8. The Respondent vide his e-mail dated 13-6-2022 has made his additional written submissions wherein he has inter alia submitted that:- a. The DGAP misunderstood the statement made by the Respondent. The Respondent submitted that there was alleged short payment of Rs. 63,39,788/- on services provided to the Government against SRA Constructions by Service Tax Audit department. Hence, the Respondent was asked to reverse the credit to the extent of such short payment. Thereafter, Sa....
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....ticulars Total (Pre-GST) Total (Post GST) (01-7-2017 to 31-5-2020 1 CENVAT of Service Tax Paid on Input Services used for units (A) 2,40,48,108/- 0 2 ITC of GST(B) 0 2,94,39,571 3 Total CENVAT/ITC Available (C)= (A+B) 2,40,48,108/- 2,94,39,571 4 Turnover for Flats as per Home Buyers List (D) 45,83,18,520 27,37,47,404 5 Total Saleable Area (in SQF) (E) 95,452 95,452 6 Total Sold Area (in SQF) relevant to turnover (F) 53,971 66,487 7 Relevant ITC [(G)= (A or B)*(F)/(E)] 1,35,97,415 2,05,06,105 Ratio of ITC Post-GST [H=(G)/(D)*100] 2.97% 7.49% Thus, from above it could be seen that once the Cenvat credit of Rs. 1,15,82,123/- (Rs. 63,39,788/- + Rs. 52,42,335/-) forms part of the calculation, the ratio of Cenvat credit in pre-GST jumps to more than 2.32%. Hence, the calculation made under aforesaid report, to the above extent, must be revised. e. During the course of the hearing, the Respondent highlighted that the total sold area (post-GST) included area sold in pre-GST era (in column 6 of Table 'A'). Hence, the calculation was incorrect. Admittedly, the total saleable Area was 95,452 sq. ft. (Column 5 of the table). However, in terms ....
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....bove extent, must be revised. g. Further, the total turnover sold before pre-GST period was incorrect. The department has not considered the sale of Flat No. 302, 303 and Flat No. 906. He submitted that 100% payment was received before 30-6-2017. However, the same has been missed for calculating the total area sold pre GST era. The total area of aforesaid units was 1490.48 sq. ft. Accordingly, the recalculation is tabulated below:- Scenario 5 Table- 'A' (Amount in Rs. ) Sl. No. Particulars Total (Pre-GST) 01-4-2016 to 30-6-2017 Total (Post-GST) (01-7-2017 to 31-5-2020 1 CENVAT of Service Tax Paid on Input Services used for units (A) 1,24,61,086 0 2 Input Tax Credit of GST(B) 0 2,94,39,571 3 Total CENVAT/Input Tax Credit Available (C)-(A+B) 1,24,61,086 2,94,39,571 4 Turnover for Flats as per Home Buyers List (D) 45,83,18,520 27,37,47,404 5 Total Saleable Area (in SQF) (E) 95,452 95,452 6 Total Sold Area (in SQF) relevant to turnover (F) 55,461 66,487 7 Relevant ITC [(G)= (A or B)*(F)/(E)] 72,40,333 2,05,06,105 Ratio of Input Tax Credit Post-GST [H=(G)/(D)*100] 1.58% 7.49% Thus, if sale of Flat No. 302, 303 and Flat No. 9....
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....GST [H=(G)/(D)*100] 2.31% 1.34% Thus, from it could be seen that there was no profiteering. Hence, the Respondent submitted that the report requiring him to pass on the alleged benefit of input tax credit amounting to Rs. 1,82,42,527/- should be withdrawn. 9. The Authority has carefully considered the Reports filed by the DGAP, all the submissions and the documents placed on record, and the contentions raised by the Respondent vide his written submissions. 10. On examining the various submissions, the Authority finds and directs as follows: (i) The Respondent has submitted as recorded at paragraph 3 (c) (i) to (iv) and paragraph 8 (a) to (c) above they were eligible to CENVAT credit of Rs. 1,88,00,874/- from 1-4-2016 to 30-6-2017. However, they had wrongly and inadvertently informed the DGAP that they were ineligible for Rs. 63,39,788/- of such credit. However, on reconsideration, according to them, they were never denied such CENVAT credit of Rs. 63,39,788/- and that they were eligible for the same. It is their contention that, there can be no estoppel against law and that the DGAP should give them the benefit of entire amount CENVAT credit of Rs. 1,88,00,874/-....