TaxTMI 
TaxTMI 
2022 (9) TMI 1530
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....r alia submitted the following points :- 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 ins....
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....omputing the limitation period as per the Hon'ble Supreme Court's Order dated 27-4-2021 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. &....
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....ct, 2017. m. Another relevant point in this regard was para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither a supply of goods nor a supply of services) which reads as "Sale of land and, subject 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 reg....
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....0 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)] 70,45,816 2,05,06,105 Ratio of ITC Post-GST |H=(G)/(D)*100| 1.54% 7.49% * The Respondent claimed that Rs. 63,39,788/- should be deducted 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 perio....
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....ted by the Respondent it was observed that the service had been supplied in the State of Maharashtra only. s. From the above discussion, it was found that the benefit of additional ITC to the tune of 5.95% of the turnover, accrued to the Respondent in post-GST period, was required to be passed on by the Respondent to his recipients. Section 171 of the CGST Act, 2017 had been contravened by the Respondent inasmuch as the additional benefit of ITC @5.95% of the base price received by the Respondent during 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 ....
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....of Rs. 63,39,788/- claimed by the Respondent while calculating the total Cenvat credit claimed in pre-GST era. ii. At Para 15, the Report alleged that the aforesaid credit was deducted on the Respondent's request. The same was made as the Respondent was asked to reverse it by the Service Tax Audit department as it was not related to construction of SRA project. iii. The Respondent submitted that Rs. 63,39,788/- related to payment made by the Respondent after it was pointed out by Service Tax Audit department that it was in relation 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.&nb....
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.... was incorrect. Illustration for the same was explained below: Pre-GST era Cost of inputs 100 Rate of tax 12% Cenvat credit 12 Post GST Cost of inputs 100 Rate of tax 28% ITC 28 Post GST Cost of inputs 125 Rate of tax 12% ITC 19.375 d. That the report was vague and cryptic. Hence, the report was liable to be dropped:- i. The above report was vague and beyond comprehension and hence, the present report was liable to be withdrawn. The DGAP computed the alleged benefits based on the period covered under investigation and did not cover the entire tenure of the project 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 i....
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....ply. However, the same were not provided. vii. For reasons mentioned above, the Respondent submitted that the report requiring him to pass on the alleged benefit of ITC amounting to Rs. 1,82,42,527/- should be withdrawn. 4. Copy of the above submissions dated 9-4-2022 filed by the Respondent was supplied to the DGAP for supplementary Report under rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarification dated 4-5-2022 vide supplementary Report dated 23-9-2021 and clarified that:- A. For the contention raised by the Respondent that the DGAP's report proceeded on an incorrect factual as well as legal basis, the DGAP clarified that the contention of the Respondent was wrong as the findings of the 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....
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....ucted by Department, an Audit Officer had pointed the reversal of Service Tax credit which was availed during 2013-14 to 2017-18 (Upto June, 2017) as per rule 6(3) of Service Tax. The department had finally while passing the Audit conclusion, demanded and issued a Shaw Cause Notice showing demand of Rs. 63,39,788/- for the reason being not given Cenvat related to construction of SRA project... Finally, we request you that kindly reduce the Service Tax credit amount as disallowed by department from the above table, as we was not reversed the same from above table due to column had not specified in your annexure." In light of the above submission of the Respondent the Cenvat credit amount of Rs. 63,39,788/- was excluded while calculating the total Cenvat credit claimed by the Respondent 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 content....
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....ling taxes, cost of the raw material and ITC available, however, in all such cases, there had been availability of additional benefit of ITC in GST regime. Therefore, the additional benefit of ITC in post-GST regime which was not available earlier was required to be passed on by the suppliers to all the recipients by way of commensurate reduction in prices, in terms of Section 171 of CGST Act, 2017. ii. The DGAP and the Authority were statutorily required to complete their task within a given time frame of 6 months, the ITC availed and the consequential profiteering, if any, had to be determined at a given point of time and such determination could not be deferred till the completion of the project. iii. The main factor under consideration for the sake of profiteering was that there should not be 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 ....
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....r committed in calculation by the DGAP, which would demonstrate that there was no profiteering. The error has been highlighted by the Respondent in table below:- (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/lnput Tax Credit Available (C)= (A+B) 1,24,61,086 2,94,39,571 4 Turnover for Flats as per Homebuyers 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 12,516 7 Relevant ITC [(G)= (A or B)*(F)/(E)] 70,45,816 38,60,219 Rs Ratio of ITC Post-GST[H=(C)/(D)*100| 1.54% 1.4% Thus, as it could be seen from the table above, there was no profiteering 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....
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.... on the entire agreement value. The Respondent/Developer claimed that GST Authority would demand GST from him and he took support from one GST circular also. However, GST circular and provision clearly stated that any invoice issued after July would attract GST. (ix) The Respondent/Developer issued one letter dated 18-7-2018 for GST dues in which he was demanding GST@12% on '10% agreement amount' and he was demanding Service Tax @4.5 % and VAT @ 1% on the '90 % agreement amount'. (x) In present case, other than Demand Letter dated 18-7-2018 pre-GST, the Respondent/Developer had not issued any invoice of GST as required under GST law and further he had already shown his intention to recover VAT & Service Tax and acknowledged also. Now developer could not change his mind and recover GST on the entire agreement value. (xi) The Respondent/Developer was demanding entire 12% GST without giving any credit available to her for using material and services in pre-GST era which he bound to transfer to buyer. The Respondent/Developer claimed that he had not availed any GST credit on completed WIP to avoid anti-profiteering provision under ....
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....ce Tax Paid on Input Services used for units (A) 1,88,05,773/- 0 2 ITC of GST(B) 0 2,94,39,571 3 Total CENVAT/ITC Available (C)= (A+B) 1,88,05,773/- 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)] 1,06,33,265 2,05,06,105 Ratio of Input Tax Credit Post-GST [H=(G)/(D)*100] 2.32% 7.49% Thus, from above it could be seen that once the Cenvat credit of Rs. 63,39,788/- forms part of the calculation, the ratio of Cenvat credit in pre-GST jumped to more than 2.32%. Hence, the calculation made under aforesaid report, to the above extent, must be revised. d. In addition to above credit, the report does not consider the credit claimed prior to 31-3-2016. Prior to 31-3-2016, the Respondent had claimed and availed credit of Rs. 52,42,335/-. Hence, the same must be considered for the calculation of alleged anti profiteering. The error is highlighted in table below:- Scenario 2....
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....it could be seen that once the actual sold area (post-GST) was considered, the ratio of ITC in post-GST fell to 1.4%. Therefore, it could be seen that there was no profiteering. f. To the above submission, the Authority pointed out that the turnover of the Respondent post GST era included part payment of flats sold in pre-GST era. Hence, the total area sold post-GST was inclusive of area sold in pre-GST regime. To this, the Respondent submitted that the turnover of flat sold post-GST era was Rs. 19,94,78,774/-. Accordingly, the recalculation has been tabulated below:- Scenario 4 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 ITC of GST(B) 0 2,94,39,571 3 Total CENVAT/ITC 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 19,94,78,774/- 5 Total Saleable Area (in SQF) (E) 95,452 95,452 6 Total Sold Area (in SQF) relevant to turnover (F) 53,....
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....s as per Home Buyers List (D) 45,83,18,520 19,94,78,774/- 5 Total Saleable Area (in SQF) (E) 95,452 95,452 6 Total Sold Area (in SQF) relevant to turnover (F) 55,461 11,026 7 Relevant ITC [(G)= (A or B)*(F)/(E)] 1,39,72,804 34,00,670 Ratio of ITC Post-GST [H=(G)/(D)*100] 3.05% 1.7% Thus, from above it could be seen that there was no profiteering. In all above scenarios it could be seen that the DGAP had erred in calculating the ratio of ITC Pre/Post-GST. i. 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. Calculation for residential units as per format adopted by the DGAP has been tabulated below:- Scenario 6 (for residential unit only) Table- 'A' (Amount in Rs. ) Sl. No. Particulars ....
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....over. (iii) The Authority directs that, the DGAP shall verify the actual amount of CENVAT credit available to the Respondent, for the Project "Shiv Bliss", from 1-4-2016 to 30-6-2017 as per their CENVAT Registers/records and Service Tax Returns and shall take into consideration such actual amount of credit which has been availed by the Respondent and allowed to be so availed by the relevant statutory authorities, as verified by the DGAP from the said records. Consequently, the DGAP shall recalculate the percentage of ITC to Turnover in the relevant Tables for the purpose of working out the profiteered amount, if any. (iv) The DGAP shall verify from the records as to whether the area of three Units no.s 302, 303 and 906, totalling 1490.48 sq. ft. for which 100% payment is said to have been received before 30-6-2017 is included in the Total Sold Area relevant to Turnover for pre-GST period, at Sr. no. 6, Item (F) of Table (A) of its Report. The DGAP shall include any such area which has not been included/missed out while calculating the percentage of ITC to Turnover and consequently, the DGAP shall recalculate the percentage of ITC to Turnove....