TaxTMI 
TaxTMI 
2023 (12) TMI 1411
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.... DGAP for further investigation under Rule 128 of the CGST Rules, 2017. 2. On receipt of the above reference from the Standing Committee, the DGAP issued notice dated 06.06.2022 calling upon the Respondent to reply as to whether he admitted that the benefit of input tax credit (ITC) had not been passed on to his customers by way of commensurate reduction in prices 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. In response to the notice, the Respondent submitted the documents/information vide various letters and e-mails and on the basis of the submissions of the Respondent, the DGAP has submitted the following findings:- a. The period of investigation is from 01.07.2017 to 31.05.2022. b. As per the information submitted by the Respondent prior to 01.07.2017, i.e., before introduction of the GST, the Respondent was eligible to avail credit of Service Tax paid on the input services (CENVAT credit of Central Excise Duty was not available) in respect of the units of the project "Vasavi GP Trends" sold by him. The Respondent was not eligible to avail ITC of VAT paid on....
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....le is arrived after considering benefit of ITC of GST". In order to examine this aspect, all the said 137 out of 159 Agreements of Sale/Sale Deeds were required to be scrutinized. On scrutiny of these Agreements of sale for flats in respect of 137 numbers of home buyers (which were submitted by the Respondent), it was found that in the said documents it was mentioned that "Mutually agreed amount as per the Agreement of Sale is arrived after considering benefit of ITC of GST". On further scrutiny of the 137 post-GST buyer Agreements of Sale/Sale Deeds it was found that the signature of the Purchasers were not appearing in any of 137 post- GST buyers. Further, the Respondent had not provided e-mail ids or phone numbers, therefore the claim of the Respondent in respect of 137 post-GST homebuyers could not be verified and hence, the claim of the Respondent was not considered. However out of the above said 137 buyers, the Respondent vide his Emails dated 15.12.2022 and 18.02.2022 submitted undertaking of homebuyers addressed to 'whomsoever it may concern' in respect of 4 post-GST home buyers stating that the price has been fixed after considering the Input Tax Credit on Inputs/I....
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....VAT/input tax credit availability pre-GST and post-GST and the details of the amount collected by the Respondent from the buyers in respect of the flats sold by the Respondent during the period 01.07.2017 to 31.05.2022, the benefit of ITC that needed to be passed on by the Respondent to the buyers of flats came to Rs. 14,81,25,853/- which included 12% GST on the base amount of Rs. 13,22,55,226/-. g. The DGAP has concluded that the Respondent has profiteered by an amount of Rs. 14,81,25,853/- inclusive of GST, after implementation of GST. The profiteered amount is 7.25% of the turnover. The Respondent has also claimed that he has passed on the benefit of ITC amounting to Rs. 1,38,19,503/- to the home buyers. On verification with pre-GST buyers (55 e-mails provided by the Respondent), 9 have confirmed that benefit of GST/ITC has been received, 19 denied that they had received any benefit of ITC, 27 remaining homebuyers have not replied so far. Out of 159 post-GST homebuyers wherein the Respondent has claimed to have passed on benefit of ITC. On scrutiny of the 137 post-GST buyers who's Agreements were provided by the Respondent, the said agreement of Sale/Sale Deed consi....
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....nefit, they have not responded. Therefore, benefit of Rs. 71,87,554/- (updated amount Rs. 95,56,818/- part of total benefit Rs. 1,68,45,817/- to Pre-GST Customers) passed on to these flat buyers has to be deducted from the alleged profiteered amount arrived at by the DGAP. c. During the post GST period, M/s Natco Pharma Ltd. has purchased 41 apartments. The price of the apartments was fixed after several rounds of discussions with them with the understanding that the GST ITC benefit would be passed on to them, which, in fact has been passed on. The total value of the apartments purchased by M/s Natco Phama Ltd. was Rs. 6722.72 lakhs and the alleged ITC benefit to be passed on to them, amounting to Rs. 521.93 lakhs, as worked out by the DGAP was unsustainable and the same has to be excluded from the computation. d. The average selling price of the apartment in pre-GST period was Rs. 3,930/- per sq. ft.. and Rs. 4,348/- per sq. ft., during the post GST period, excluding the apartments sold to M/s. Natco Pharma Ltd., the difference was only Rs. 418/- per sq. ft. which was due to price increase of construction materials like steel, Cement, Sand, Bricks, etc., and labo....
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....has to be considered and the ITC to be passed on has to be recomputed. 5. Clarifications on the above submissions dated 21.09.2023 of the Respondent were sought from the DGAP under Rule 133(2A) of the CGST Rules, 2017. The DGAP vide letter dated 07.11.2023 has filed clarifications vide which it has been stated that:- a. GST on profiteered amount collected from the buyers has been added to profiteered amount because the buyers ought not to have paid the GST amount, had they been passed on the commensurate benefit of additional ITC by the Respondent. Since the Respondent has collected the benefit of additional ITC, which he was not required to, along with GST on it, he is liable to pass on the additional ITC along with GST to the buyers. b. The ITC benefit claimed to have been passed on to 55 home buyers has already been verified and the replies of the home buyers have accordingly been considered and the same has been explained in the DGAP's Report dated 24.02.2023. Out of the 55 homebuyers only 9 have supported the Respondent's claim of having received the ITC benefit and 19 have denied the receipt of the benefit. Since the investigation had to be comple....
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....t he has sold the flats to the customers at the above mentioned rates and passed on the benefit to these customers itself, could not be established from these three Annexures. The same could also not be considered as the investigation report has already been submitted to the Commission under Rule 129 of CGST Rules, 2017. f. The claim of passing of ITC to NATCO Pharma Limited by the Respondent is incorrect as per Annexure-VII furnished by the Respondent. Rs. 521.93 Lakh has never been passed on to NATCO as the same has not been shown in the documents submitted earlier by the Respondent i.e. Home Buyers List as well as the documents (Annexure VII) submitted now. Further, the Respondent has asked to exclude credit of Rs. 1,06,89,957/- taken on GST Input services & escalation in construction cost which could not be accepted as seen from the records. g. The Respondent's claim that the cost has escalated over a period of seven years during which the project was being executed and an exclusion of Rs. 1,06,89,957/- needed to be made in the profiteered amount due to the same could not be considered. The Agreements being executed by the Respondent with his customers wer....
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....dditional benefit of ITC" duly certified by the Authorized person of the Respondent to the DGAP to prove his above claim. The claim of the Respondent regarding passing on the benefit of ITC to the customers/home-buyers shall be verified by the DGAP by contacting the customers/home buyers and seeking their replies regarding receipt of benefit of ITC. c. The Respondent has further contended that the average selling price of the flat/apartment in pre-GST period was Rs. 3,930/- per sq. ft. and Rs. 4,348/- per sq. ft. during the post GST period, excluding the apartments sold to M/s Natco Pharma Ltd. The difference is only Rs. 418/- per sq. ft. Even assuming that the provisions of Section 171 would apply to post GST customers, then, the apartments sold to the customers at a price lesser than the pre GST period average selling price, have to be excluded from the computation of the profiteered amount, as the question of extension of the ITC benefit to such customers does not arise, when the selling price itself is less than the pre GST period average selling price. Hence, the alleged benefit pertaining to such customers is unsustainable and the same has to be excluded from the com....