TaxTMI 
TaxTMI 
2026 (3) TMI 1421
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....ay of commensurate reduction price of the flats? II. Whether the Respondent is liable to pay Rs. 2,07,08,131/- only, plus GST at the rate 12%, amount to Rs. 24,84,976/-, totaling an amount Rs. 2,31,93,107/- only? AND III. Whether the Respondent is liable to interest on Rs. 2,31,93,107/- only at the rate of 18% ? 2. In this case the original applicant Shri Niranjan Swain, of Baramunda, Bhubaneshwar allottee of the flat no. 605 of block no. A-3 of project Jeewan Anand of the Respondent i.e. M/s LIC HFL Care Homes Ltd., submitted a complaint to the effect that the Respondent / builder hereinafter referred as Respondent has not passed on the benefit of Input Tax Credit to him by way of commensurate reduction in prices and charged GST at the rate of 12% on the demand raised post GST. The Complaint was considered by the Standing Committee and it was forwarded to the Directorate General of Anti-Profiteering, hereinafter referred as DGAP for brevity, for investigation, on 15.10.2020. The DGAP conducted a detailed investigation to the allegation. The DGAP submitted its report on 28.01.2021, with reference to the time period from 01.07.2017 to 30.09.202....
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....y a negation of the power. In the absence of such rules, it is sufficient that the power is exercised fairly and reasonably, having regard to the context in which the power has been granted....". In Chairman and MD, BPL Ltd. v. S.P. Gururaja [(2003) 8 SCC 567.], the Supreme Court has held, "...Under the Act or the Regulations framed thereunder, no procedure for holding such consultations had been laid down. In that situation it was open to the competent authorities to evolve their own procedure. Such a procedure of taking a decision upon deliberations does not fall foul of article 14 of the Constitution of India." 126. Consequently, rule 126 of the Rules, 2017 to the extent it grants flexibility to NAA to determine the methodology and procedure to decide whether reduction in rate of tax or benefit of input-tax credit has been passed on or not to the recipient is reasonable and legal. Moreover, as per rule 126 NAA "may determine" the methodology and not "prescribe" it. The substantive provision, i.e., section 171 of the Act, 2017 itself provides sufficient guidance to NAA to determine the methodology on a case-by-case basis depending upon peculiar facts of each case and the....
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....od and it was purchased by the consumer by paying the full amount of price upfront in the pre-goods and services tax period, the buyer is entitled to claim benefit of input-tax credit on the taxes paid on the construction material purchased by the builder in the post-Goods and Services Tax period during which he has been given benefit of input-tax credit on the taxes on which input-tax credit was not available in the pre-goods and services tax and cost of such taxes has been built in the price of the flat by the builder. (d) If the flat is constructed in the post-goods and services tax period and it is purchased after construction being complete by making upfront payment of the full price, no benefit of input-tax credit would be available as the price of the flat would have been fixed after taking into account the input-tax credit which has become available to the builder in the post-goods and services tax period and which was not available to him in the pre-goods and services tax. 129. However, this court finds that the methodology adopted by NAA and DGAP to arrive at the profiteering amount of the real estate industry was generally based on the difference betwee....
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.... and services for the project (E) 46,03,72,534 11,54,27,648 6 Percentage/ Ratio of the input tax credit to the purchase value (F = D*l00/E) 0% 17.99% Relying on the above table-'A', it is submitted that the input tax credit as a percentage of the purchase value of the project that was available to the Respondent during the pre-GST period was 0% and during the post-GST period, it was 17.99%. Therefore, there is apparent savings made by the Respondent on account of introduction of GST as contemplated under the observations made by the Hon'ble High Court of Delhi in the impugned order dated 29.01.2024. It is also submitted that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (Annex-14). The effective GST rate was 12% for construction service. Accordingly, based on the figures contained in table-'A' above, the recalibrated base price and the excess realization (profiteering) during the post-GST period, are tabulated in Table-B below. Table-B Amount in Rs. SI.No.....
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....ide above order directed to pass benefit of ITC on taxes paid on Construction material purchased by the builder in post-GST period. c. The entire construction work was outsourced to the contractors and therefore, under Section 10 (4a) (b) of the Odisha VAT Act, 2004 the Respondent was neither eligible to avail ITC on the construction materials nor liable to pay VAT. Service Tax laws also barred CENVAT credit on the materials used in the construction. Thus, taxes paid on construction materials was built in the price of the flat. d. Respondent submitted that ITC of GST availed on inward goods (materials) is Rs. 14,52,570/- and ITC of GST availed on inward services is Rs. 1,93,28,564/-. Therefore, only a sum of Rs. 14,52,570/- can be considered as profiteered amount as directed by High Court. e. As per para 129 of high court order the methodology adopted by NAA and DGAP is flawed in real estate sector, there is no direct correlation between the turnover and the ITC availed for a particular period. 9. DGAP has filed clarifications vide letter dated 21.11.2025 on the Respondent's submissions. The same has been summarized as below:- a. DGAP submitte....
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....r example ITC of Central Sales Tax and ITC of Central Excise Duty paid on inputs were not allowed in pre-GST. W.e.f. 01.07.2017, all these taxes got subsumed in GST an ITC of GST is available in respect of all goods and services; therefore, additional benefit of ITC accrued to the Respondent is required to be passed on as per Section 171. f. For the contention of the Respondent that due to inadvertent error, the Respondent failed to take credit of Service Tax paid on input services, and DGAP ought to have excluded ITC on services from the profiteered amount. The DGAP already clarified on this issue in para 10(d) above, the DGAP further submitted that it is responsibility of the Respondent to pass on the benefit of ITC to the home buyers. g. For the averment made by the Respondent that the DGAP has considered entire ITC amount including tax paid on services as the profiteered amount, which is beyond the direction of the Hon'ble High Court as well as scope of profiteering under Section 171. The DGAP clarified that during pre-GST period, the Respondent was not availing any credit on input taxes, whereas after introduction of GST, the Respondent availed ITC of GST amo....
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....,570/- (on construction materials) and that the comparison of pre-GST and post-GST ITC is flawed. The Complainant stated that the DGAP vide its report dated 04.04.2025 calculated profiteering of Rs. 2,31,93,107/-. The Respondent availed ITC of Rs. 2,07,76,653/- (July 2017-Nov 2019) and ITC was utilized to offset output GST @12%. The Complainant submitted that GST collected from buyers was retained instead of being used for tax payment and that retention constitutes benefit to be passed on. e. For the Respondent's contention that DGAP wrongly compared two tax regimes and Pre-GST taxes were different and therefore comparison is invalid. The Complainant submitted that in Pre-GST there were (Excise Duty, VAT, Entry Tax) with limited credit however in post-GST full ITC is available on goods and services. Further, CBIC vide its office memorandum dated 15.06.2017 clarified that embedded taxes would not form part of cost under GST and that the builders must pass benefit to buyers and therefore comparison is necessary to assess tax benefit. f. For the averment of the Respondent that since tax rate on services increased post-GST, higher ITC cannot be treated as benefit. The....
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....as paid this in the GST regime which otherwise under the erstwhile regime, was not required to be paid. Thus, the quantum of ITC (on an illustrative basis)) for the purpose of Section 171 needs to be re-worked as below:- Period ITC availed on inward goods GST paid on inward services @18% Additional burden @3% on services Benefit of alleged increase in ITC for services Total ITC availed ITC covered u/s 171 for goods & services 2017-18 8,30,700 99,28,261 16,54,710 82,73,551 1,07,58,961 91,04,251 2018-19 34,860 83,52,856 13,92,143 69,60,713 83,87,716 69,95,573 2019-20 4,79,119 14,64,084 2,44,014 12,20,070 19,43,203 16,99,189 2020-21 4,324 9,28,180 1,54,697 7,73,483 9,32,504 7,77,807 Total 13,49,003 2,06,73,381 34,45,564 1,72,27,818 2,20,22,384 1,85,76,821 Accordingly, alleged profiteering is re-worked as below:- Sr No Particulars July 2017 to September 2020 (Post GST) Recomputed 1 CENVAT Credit of Service Tax paid on input services as per ST3 returns (A) - 2 ITC of VAT paid on inputs (B) - 3 Input Tax C....
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....n relevant date of the payment, along with corresponding Gazette Notification evidencing rate of tax. The original complainant was also given liberty to file single page affidavit with annexed documents within the period of 10 days, thence, in evidence of the exact Service tax he had paid on the date of the actual payment. 13. Further, hearing in the matter was held on 29.01.2026, during the hearing, it was pointed out by the Tribunal that the Respondent had not complied the Tribunal order dated 06.01.2026. However, the Complainant had filed his affidavit dated 19.01.2026 wherein, he has stated that he had deposited Rs. 45,60,877/- with the Respondent including Service Tax and GST, details of which are given below:- Date of Payment Instalment Basic Cost Service Tax / GST Total Rate of ST [Comp. scheme] Rate of GST Demand Letters & Money receipt 19.08.2011 26.07.2011 1st-50% 18,25,000 47,000 18,72,000 2.575% [10.3% * 25%] NA Annexure-1 17.04.2012 2nd-20% 7,30,000 18,800 7,48,800 2.575% [10.3% * 25%] NA Annexure-2 24.10.2013 2nd-20% 7,30,000 22,557 7,52,557 3.09% [12.36% * 25%] ....
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....ices which were taxable under Section 66/66B of the Finance Act., 1994, for use in the construction of residential complex and the respective service providers had charged applicable service tax (inclusive of Cess) thereon. Entire construction was outsourced to various work contractors. d. That during the period from 1st June 2011 till 30th June 2017, effective rate of service tax on input services were as below: Period Rate of tax Abatement on works contract service Cess Effective rate of service tax (inclusive of cess) Works Contract Other input service 01.06.2011-31.03.2012 10% 60% 3% 4.12% 10.30% 01.04.2012-30.09.2014 12% 60% 3% 4.94% 12.36% 01.10.2014-31.05.2015 12% 60% 3% 4.94% 12.36% 01.06.2015-14.11.2015 14% 60% 0% 5.60% 14.00% 15.11.2015-31.05.2016 14% 60%* 0.5% 5.80% 14.50% 01.06.2016-30.06.2017 14% 60%* 1% 6.00% 15.00% * Rule 2A of the Service Tax (Determinationof Value) Rules, 2006 e. That during the period 2011-2017 (up to 30 June 2017), the Respondent Company has paid a total consideration of Rs. 49,86,79,598/- towards p....
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....nt is consumer welfare and prevention of unjust enrichment. e. The Hon'ble High Court held that no uniform mathematical formula applies to profiteering cases; hence, the Respondent cannot selectively apply a methodology to reduce its liability. f. The Respondent wrongly compared pre-GST and post-GST ITC structures and claimed limited credit; the Complainant argues that under GST, ITC on goods and services is pooled and utilized against output GST @12%, hence full benefit must be passed on. g. The Respondent claims only Rs.14.42 lakh is passable, whereas DGAP determined Rs.2.31 crores. The Complainant asserts entitlement to the full DGAP-determined amount. h. Respondent opted for Composition Scheme under Works Contract and paid service tax at reduced rate (2.57% / 3.09%). i. Under the said scheme, CENVAT credit on inputs is not permissible as per Rules. j. Since contractor also opted for composition scheme, no CENVAT credit could be availed or passed on to the Respondent. k. Credit cannot be claimed indirectly when it is not allowed directly. The Complainant in this regard relied up CESTAT judgment of Gauri Plasticulture....
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....r, it was 17.99 %. Hence, it is apparent that savings made by the Respondent on account of introduction of GST as per the observations made by the Hon'ble High Court of Delhi in case of Reckitt Benckiser (Supra) dated 29.01.2024. The Respondent has admitted that it has not availed ITC in the pre-GST period as the entire work was outsourced contractors. It is apparent that he has stated that the entire construction work was outsourced to the contractors and, therefore, under Section 10 (4a) (b) of the Odisha VAT Act, 2004 the Respondent was neither eligible to avail ITC on the construction materials nor liable to pay VAT. Service Tax laws also barred CENVAT credit on the materials used in the construction. Thus, taxes paid on construction materials was built in the price of the flat. It is understood that Respondent has admitted in the pre-GST period he was not getting any ITC for any of the materials or services purchase. 18. It is a foundational principle in legal evidence that "what is admitted need not be proved". The rationale is simple: if a party voluntarily acknowledges a fact against their own interest, there is high presumption of truth. In the context, the document we ....
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....rcentage is 0 / 17.99%. The increase in ITC availed is 17.99%. Purchase Value of Goods and Services (Excluding Taxes and Duties) during Post-GST Period is Rs, 11,54,27,648/- only. Total Savings on account of additional ITC benefit is, therefore Rs. 2,07,65,434. Total Area (in Sq. Ft.) of the project is 2,70,048. Thus, the Total Saving Per Sq. ft. is equal to division between Total Savings on account of additional ITC benefit is to Total Area (in Sq. ft.) of the project. It is Rs. 76.895 /-. Total Sold Area (in Sq. ft.) is 2,69,304, the remaining being unsold area. Thus, a profiteering amount is multiplication of Rs 76.895/- and 2,69,304, sq. ft., which comes to Rs. 2,07,08,131/- only. 21. The Respondent has also admitted this aspect though he disputes that part of the amount is not to be treated as profiteered amount. Respondent in its written submission has categorically submitted that ITC of GST availed on inward goods (materials) is Rs. 14,52,570/- and ITC of GST availed on inward services is Rs. 1,93,28,564/-. Therefore, only a sum of Rs. 14,52,570/- can be considered as profiteered amount as directed by High Court. It is submitted by the Respondent that as per para 129 o....
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....s. 24. Thus, we come to the conclusion that the DGAP has submitted correct report in calculating profiteering of Rs. 2,07,08,131/-. The question of adding GST at the appropriate rate on the profiteered amount, to calculate the sum to be paid by the Respondent, is no more Res Integra. This aspect of inclusion of GST collected on the additional realization made by the Respondent / builder has been considered by the Delhi High Court in the case of Reckitt Benckiser (Supra) in the para 157, which is quoted below:- 157. Both the Central as well as the State Government had no intent of collecting additional Goods and Services Tax on the higher price as they had sacrificed their revenue in favour of the buyer. By compelling the buyers to pay the additional Goods and Services Tax on a higher price, the supplier has not only defeated the intent of the Governments but has also acted against the interest of the consumer and therefore, the Goods and Services Tax collected by him on the additional realization has rightly been included in the profiteered amount. (Underlined to lay emphasis) Thus, it is clear that the Respondent has profiteered an amount of Rs. 2,07,08,131....