TaxTMI 
TaxTMI 
2026 (9) TMI 717
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....riginal Complainant. 2. The present proceedings arise out of an application filed by Shri Sudhamoy Saha, R/o Block-7, Flat-3E, Ramchandrapur (N), Kamalgachi, PO Narendrapur, Kolkata - 700103 (hereinafter referred to as "the Applicant"), under Rule 128 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as "the Rules"), alleging profiteering by not passing the commensurate benefit of ITC in respect of construction by M/s Bengal Emami Housing Ltd., 97A, Southern Avenue (Annex Building), Kolkata-700029 (hereinafter referred to as "the Respondent") for the project "Swan Court". The investigation was initiated pursuant to complaints filed by homebuyers and subsequent directions from the Competition Commission of India (CCI) to re-investigate the case in light of the judgment of the Hon'ble Delhi High Court in Reckitt Benckiser India Private Limited v. Union of India [2024 SCC OnLine Del 588]. 3. The DGAP, vide its report dated 15.12.2024, alleged that the Respondent had profiteered an amount of Rs. 13,35,51,188/- including GST, from the homebuyers. The DGAP arrived at this conclusion by calculating the ratio of total ITC availed to the purchase value of good....
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....mined only with reference to HIG and not the entire project. Since the DGAP, in its Report dated 13.12.2024, determined profiteering for the entire project, no project-wide cost-escalation adjustment was considered. Subsequently, vide submissions dated 14.03.2026, the Respondent furnished project-wise cost-escalation workings along with a Chartered Accountant's Certificate issued by M/s S.K. Agrawal and Co. Chartered Accountant LLP, certifying the increase in actual costs of cement, steel, sand and stone chips up to the Occupancy Certificate dated 04.08.2022 and their proportion in the budgeted costs of HIG, MIG and LIG categories. The said workings were examined and accepted for limited re-computation. Accordingly Rs. 5,08,25,698/- towards cost escalation has been allowed in revised Table "B". Reliance is also placed on paragraphs 118 and 163 of the Hon'ble Delhi High Court's Order dated 29.01.2024 in Reckitt Benckiser India Pvt. Ltd. (supra), recognizing genuine commercial cost escalations. Attention is invited to Table "B" of the DGAP's Investigation Report dated 13.12.2024, which is reproduced hereinbelow for ready reference: "Table B" Sl.No. Particulars Post-GST ....
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....ary support to establish passing on of the ITC benefit through issuance of credit notes and reduction in prices. Accordingly, the earlier reliance on email verification alone is revised, and the duly verified documented passing-on amount is accepted and incorporated in revised Table-C. Table-C Amount in Rs SI.No. No. of Units Saleable Area (Sq. ft.) Profiteering Amount Amount of ITC benefit passed on Difference (Benefit to be passed on) Remarks A B C D E F=(D-E) G 1 101 1,74,235 2,64,20,438 5,69,82,460 -3,05,62,022 Excess benefit already passed on 2 275 3,06,602 4,64,92,146 3,08,27,557 1,56,64,589 Less benefit passed on 3 50 39,621 60,08,002 0 60,08,002 Benefit required to be passed on 4 9 13,957 0 42,33,600 -42,33,600 Post OC buyer 5 5 7870 0 0 0 Unsold Total 440 5,42,285 7,89,20,586 9,06,90,657 2,16,72,591 Thus, the DGAP, after taking into consideration the various submissions made by the Respondent, came to the conclusion that the Respondent has profiteered an amount of Rs. 2,16,72,591/-, which nee....
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....tly, the company has been selling the flats at a loss at the sale price per Sq.Ft. fixed by the Government. The company has to bear the overhead and administrative cost themselves and can not recover the same from the buyers. Accordingly, the prices to be charged from LIG and MIG customers were fixed within the framework of the Government Notification, leaving no room for unilateral variation." 9. In response to the aforesaid contention, the DGAP, vide its reply dated 09.06.2026, has referred to the CBEC Press Release dated 15.06.2017. The said Press Release clarified the rationale underlying the introduction of GST in the construction sector, particularly with regard to the incidence of taxes embedded in the cost of construction materials. 10. It was clarified therein that, under the GST regime, construction of flats would generally entail a lower tax incidence, as the taxes embedded in the cost of construction materials under the erstwhile regime were substantially sought to be neutralised through the availability of input tax credit (ITC). Under the pre-GST regime, the construction sector was subjected to multiple indirect taxes, including Central Excise Duty, VAT and Entr....
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....igh Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India, WP (C) 7743/2019. However, the Respondent had objected that extending the investigation to LIG and MIG categories is arbitrary, as LIG, MIG and HIG are distinct real-estate products, physically separated and governed by separate infrastructure, brochures, application forms, launch dates and pricing regimes. The complaint was filed only by an HIG buyer. Prices of LIG and MIG units were regulated under the West Bengal Housing Department's Pricing Notification dated 17.08.2015, leaving no discretion to the Company to unilaterally reduce prices. Further, the requirement of charging "direct cost only" meant that pre-GST taxes were not embedded in or recovered through their sale prices. Hence, no embedded tax component existed in LIG/MIG prices for passing on GST benefits. The Company also submits that these units were sold at prices substantially below market value and that any ITC benefit accrued as cost relief to the Company. Accordingly, the investigation should not cover all 440 units; if restricted to HIG, profiteering would be Rs.70,58,488. 13. In its reply, the DGAP does not dispute the binding nature and applic....
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.... Respondent had no commercial discretion to load overheads, administrative expenses or other indirect costs, including the taxes attributable thereto, into the sale price of LIG and MIG units. In these circumstances, the statutory restriction governing the pricing of LIG and MIG units assumes material significance. The ratio of the decision in AMB Cinemas cannot, therefore, be mechanically applied to the facts of the present case. Consequently, no profiteering can be attributed to the Respondent in respect of the LIG and MIG units, and any computation of profiteering, if warranted, is required to be confined to the HIG units alone. 17. As regards the contention of the Complainant raised during the hearing and vide its submission dated 27.06.2026 regarding 14 units allegedly not being accounted for in the DGAP's Report, we find that the said contention does not disclose any discrepancy or unexplained omission in the Report. The DGAP has clarified that its Report dated 13.12.2024 covers all the 440 units forming part of the project. Out of the 14 units in question, 9 units were sold after the date of issuance of the Occupancy Certificate, i.e. 04.08.2022, while the remaining 5 uni....
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.... balance amount of Rs.12,60,55,300/-. However, upon reconsideration and verification of additional documents furnished by the Respondent, the DGAP revised the profiteered amount to Rs.7,89,20,586/-, with a balance amount of Rs.2,16,72,591/- remaining to be passed on to the eligible recipients. It has also been correctly clarified that excess benefit passed on to certain buyers cannot be adjusted against the shortfall pertaining to other buyers, since each recipient is independently entitled to commensurate benefit under Section 171 of the CGST Act, 2017. In view of the foregoing discussion, we find merit in the Respondent's contention that the prices of LIG and MIG units were statutorily capped and limited to recovery of direct costs, while the associated overheads and tax components were borne by the Respondent. The circumstances governing the pricing of these categories are materially distinct from those applicable to HIG units. Therefore, no profiteering can be attributed to the Respondent in respect of LIG and MIG units, and any computation of profiteering, if warranted, ought to be restricted to HIG units alone. 20. In view of the foregoing discussion, this Tribunal holds t....
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....equivalent to the amount not passed on by way of commensurate reduction in prices along with the interest at the rate of eighteen percent from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be. 24. Interest in such cases is compensatory in nature and is intended to ensure restitution of the time value of money that rightfully belongs to the recipients. Accordingly, the Respondent is liable to pay interest at the rate of 18% per annum from the respective dates of collection of the excess amount until the date of refund. Penalty 25. Further, insofar as penalty under Section 171(3A) of the CGST Act, 2017 is concerned, the said provision came into force w.e.f. 01.01.2020, and since the period of contravention in the present case extends from 01.07.2017 to 04.08.2022, including the period subsequent to its coming into force of the said provision, penalty under Section 171(3A) of the CGST Act, 2017 is attracted. The relevant provision reads as under: "Where the Authority referred to in sub-section (2) after holding examination as required under the said sub....