TaxTMI 
TaxTMI 
2023 (12) TMI 145
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....tion has submitted his Report on 16.09.2021 in which it was stated that: - i. The Applicant No. 1 alleged that the Respondent had not passed on the benefit of reduction in tax rate in post-GST era amounting to Rs. 1,41,224/- and further alleged that the Respondent had also not passed on the benefit of additional ITC amounting to Rs. (1,07,506/-+ 44,771/-) on the materials purchased by the Respondent by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017. The Applicant No. 1 vide letter dated 07.08.2020, submitted that he had placed an Order on 31.12.2015 on the Respondent amounting to Rs. 26,00,000/-. The agreement included the cost of lift, lift materials and transportation from Daman to Mumbai Railway Staff Quarters including all direct and indirect taxes like Central Excise Duty, VAT, Service Tax, Octroi. ii. The Respondent had delivered the material only after GST became applicable and he had charged a new rate for the supply as per the new agreement which was to be executed in due course with all the input credits on Excise, VAT, Octroi, Service Tax on all the components which he had used and received the credit from his vendors. Since G....
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....1, the Respondent submitted his reply vide letters and e-mails dated 01.02.2021, 13.03.2021, 14.07.2021, 19.07.2021, 04.09.2021 and 06.09.2021. The detailed submissions of the Respondent given vide letter dated 13.03.2021 were as follows: - a) That he is in the business of erection and maintenance of elevators (lifts). The Excise Duty was not applicable on him. Only taxes that applicable were VAT/CST (basically State Levy in nature of Sales Tax) and Service Tax (Central Government Levy). On Service Tax front he followed methodology of claiming deduction of VAT paid value from total contract value for the payment of Service Tax in terms of Rule 2A (i) (c) of Service Tax (Determination of Value) Rules 2006. b) He was eligible to take credit for VAT paid for discharge of VAT. The Respondent was eligible to take CENVAT Credit for Service Tax paid on input services. The Respondent was not eligible to take credit of Excise Duty paid on purchase of the components. The Respondent had accordingly tried to focus on maximum possible procurement from vendors located in exempted zones or small scale vendors below threshold limits so that the Excise Duty cost was not incurred o....
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....ts and storage costs on them. The copies of invoices for almost all the material purchased for the said contracts had been submitted by the Respondent (some small value items invoices were not submitted). It was mentioned that most of the vendors duly specified OR numbers 20334 and 20335 (job numbers of Danish) in his invoices evidencing the fact that it was job specific procurement. f) He could not claim input credit on the Excise Duty component on items in inventory as on 30th June, 2017 as part of transitional credit in light of the specific restriction in Section 140 (3) of CGST Act that provided that the works contractor could claim credit only if he was availing benefit of Notification No. 26/2012 in Service Tax era. Since he was not availing abatement under the said Notification No. 26/2012 but was following methodology of claiming deduction of VAT paid value from total contract value for the payment of Service Tax in terms of Rule 2A(i)(c) of Service Tax (Determination of Value) Rules 2006, he was not entitled to claim the credit of Central Excise Duty on inventory lying in stock as on 30th June, 2017. He had enclosed a copy of note prepared at the time of implemen....
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....ed interest costs as well as costs in the form of blocking his limited storage space thereby adversely affecting material flow for other contracts as also higher labour costs would incur due to labour cost hikes. So even keeping aside material cost hike in the price would be higher by about 7.50%. However, the Applicant No. 1 was dealing with Railways on these contracts and he was aware of hardships he might face. He therefore agreed to enter into fresh contract by waiving penalty on earlier contract as well as by not starting on the basis of old price plus 7.50% and in fact he offered reduction of about 5% in contract price quoted 3 years back. As against old contract price of Rs. 11,53,249/- per unit plus taxes, new contract was signed at the price of Rs. 11,01,695/- per unit plus taxes. This would really mean that he offered an estimated 12.50% reduction in justified price apart from not levying penalty on default of old contract whereas normally he would have forfeited as penalty at least Rs. 2,50,000/- if not the entire advance of Rs. 5,20,000/- paid by him. In hindsight, had he levied penalty of Rs. 2,50,000/- and then quoted further lower price to that extent on new contract....
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....Respondent had also not passed on the benefit of additional input credit of Rs. (44,771/- + 1,07,506/-) to him. The Applicant No. 1 claimed that the Respondent had profiteered an amount of Rs. 2,93,5021-. xii. The Applicant No. 1 had also submitted copies of agreement alongwith estimate No. QT41092_R4 dated 04.07.2015 & QT52365 R1 & QT52268 R2 and as per agreement & QT41092 R4 dated 04.07.2015 the base price for the entire job for installation of 2 lifts was Rs. 23,06,499/- and total tax applicable was Rs. 2,93,502/-. The total price comes to Rs. 26,00,000/- (including tax). Thus total tax was calculated to be 12.72% of the base price. Whereas the agreement entered after implementation of GST the QT shows that the base price for the entire job for installation of 2 lifts was Rs. 22,03,390/- and total applicable GST was 18% i.e. Rs. 3,96,610/-. Thus from the perusal of quotation/agreement submitted by the Respondent it was found that there was no reduction of tax after implementation of GST. The pre-GST tax rate as calculated above shows that the tax (Vat + Service Tax) was 12.72% of the base price whereas the applicable GST rate, after implementation of GST was 18% during the re....
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....VAT + ST) was 12.72% whereas post-GST it was 18%. In this context the Respondent submitted that he had purchased most of components for lift during pre-GST era and the same was used for installation of lift after implementation of GST so he could not avail any extra ITC benefit on inputs purchased in pre-GST era. In support the Respondent submitted copies of those bills which duly quoted QR No. for the material purchased from vendors from 01.04.2015 to 30.06.2017. The Respondent also submitted that he had not availed transitional credit of Excise Duty on the stock lying as on 30.06.2017 and in support he submitted the relevant documents. On scrutiny of the documents submitted by the Applicant No. 1 alongwith his complaint one letter of the Respondent dated 08.06.2017 written to the Applicant No. 1 had been found wherein the Respondent had mentioned that GST was going to be implemented from 01.07.2017 and the material was ready with him since long but due to noncompliance of payment and non-readiness of the site and store room from the Applicant's side he was unable to dispatch and if the Applicant No. 1 made payment of material ready for shipment by 30.06.2017 he would save any....
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....act and from 29.06.2018 to 29.07.2020 remaining amount of Rs. 20,80,000/- (approx.) was paid in 4 Instalments. xx. There was no reduction in tax rate and there was no additional benefit of ITC accrued during the relevant period i.e. 18.05.2018 to 29.07.2020. xxi. The Applicant No. 1 in his application had referred to the agreement dated 04.07.2015 which was entered into by him with the Respondent. The fact of the case was that the agreement dated 04.07.2015 had already expired on 04.01.2017 and that no material and installation of lifts was initiated as per the agreement dated 04.07.2015. Further, a new agreement dated 18.05.2018 was signed between the Applicant No. 1 and the Respondent. xxii. Moreover, it was also observed that the Respondent had supplied the material and installation of the lift at base price of Rs. 22,03,390/- as per the 2nd agreement, whereas the base price was fixed for Rs. 23,06,499/- as per the 1st agreement. xxiii. The Investigation conducted by the DGAP revealed that: (I) During the post GST era the Respondent could not avail the additional benefit of ITC, as the Respondent had purchased most of the material during the pre GST era. Dur....
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....rice in the post GST period and had profiteered an amount of Rs. 2,93,502/-. iii. That the Respondent had claimed credit of Excise Duty on the manufactured components of lifts the benefit of which he was required to pass on to the above applicant. iv. That the Respondent had not passed on the benefit of ITC on the Octroi which he had paid while transporting the material from his godown to the site. Even though if he had procured the material from other vendors his own factory was situated outside the limit of Greater Mumbai. v. That the Respondent had failed to execute the Contract within the time limit and as the price was constant, hence overall there was a reduction in taxes from 30.72% to 18% which should reflect in the overall pricing. vi. That the Respondent's claim of price hike of 5% per annum was unjustified and unacceptable as the price might increase or decrease due to various factors. vii. That the Respondent had not availed transitional credit in respect of inputs lying in stock as on 30/06/2017 was the failure on the part of the Respondent due to which the Applicant should not incur losses. 5. Clarifications were sou....
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....he Applicant is not correct. ii. The above Applicant has also claimed that the Respondent had increased the base price in the post GST period and had profiteered an amount of Rs. 2,93,502/-. However, perusal of the initial agreement dated 04.07.2015 executed in the pre GST period and the Quotation Nos. QT41092_R4 dated 04.07.2015, QT52365 R1 dated 3.05.2015 and QT52268 R2 dated 30.05.2015, shows that the base price for the installation of both the lifts was Rs. 23,06,499/- and the total tax applicable was Rs. 2,93,502/- and hence the total price was Rs. 26,00,000/-. Therefore, the total pre-GST tax was 12.72%. However, as per the subsequent agreement dated 18.05.2018 which was executed in the post GST period the base price of both the lifts was Rs. 22,03,390/- which shows that the Respondent had reduced his base price in the post GST period inspite of the fact the rate of tax in the post GST period had been increased to 18%. Therefore, there is no question of the Respondent having profiteered and hence both the above allegations of the Applicant No. 1 are incorrect and untenable. iii. The Applicant No. 1 has also stated that the Respondent had claimed credit of Excise Duty on....
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.... contention raised by the Applicant No. 1 is wrong and is not tenable. v. Another contention raised by the Applicant No. 1 is that the Respondent had failed to execute the contract within the time limit. He has also stated that as the price was constant, and overall there was a reduction in taxes from 30.72% to 18% it should reflect in the overall pricing. In this context, perusal of the record shows that the above Applicant had executed an agreement in the pre-GST period with the Respondent for installation of two lifts on 04.07.2015 which was valid for a period of 18 months till 04.01.2017. However, he had not followed the terms of the above agreement as he had neither made payment of the agreed price nor handed over the site to the Respondent and hence the above agreement could not be executed by the Respondent. It is also apparent from the record that the above Applicant had entered in to a fresh agreement dated 18.05.2018 with the Respondent. In case the above agreements were not executed by the Respondent as per their terms the above Applicant is at liberty to take appropriate legal action against the Respondent, however, the same does not fall under the purview of Section....