2022 (9) TMI 1530 - NAPA - GST

Profiteering - purchase of Flat - non-adherence of period of six months provided in rule 133 of the CGST Rules 2017 - contravention of section 171 of CGST Act - HELD THAT - Without going into the merits and the other submissions made by the Respondent and the Applicants at this stage this Authority finds this case must be reinvestigated by the DGAP based on the above directions of this Authority. Thus the DGAP is directed to reinvestigate the matter as per the provisions of rule 133(4) of the CGST Rules 2017 and submit his report before this Authority. The Hon ble High Court of Delhi vide its Order in the case of Nestle India Ltd. v. Union of India 2020 (2) TMI 671 - DELHI HIGH COURT has held that the limitation of period of six months provided in rule 133 of the CGST Rules 2017 within which the authority should make its order from the date of receipt of the report of the Directorate General of Anti Profiteering appears to be directory inasmuch as no consequence of non-adherence of the said period of six months is prescribed either in the CGST Act or the rules framed thereunder. Matter on remand.

Summary

Issues Involved:
1. Whether there was a benefit of reduction in the rate of tax or ITC on the supply of Construction Service by the Respondent on implementation of GST w.e.f. 1-7-2017.
2. Whether such benefit was passed on by the Respondent to the recipients, in terms of section 171 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Benefit of Reduction in the Rate of Tax or ITC on the Supply of Construction Service:
The DGAP's investigation found that post-GST, the Respondent could avail ITC of GST paid on all inputs and input services, whereas pre-GST, only Service Tax credit was available. The report detailed that the ITC as a percentage of turnover increased from 1.54% pre-GST to 7.49% post-GST, indicating a benefit of 5.95% in ITC. This was calculated based on the data provided by the Respondent, including CENVAT/ITC registers, GSTR-1 and GSTR-3B returns, and other financial documents.

2. Passing on the Benefit to the Recipients:
The DGAP concluded that the Respondent had not passed on the benefit of additional ITC to the buyers, including Applicant No. 1. The recalibrated base price and excess realization (profiteering) were calculated, showing that Rs. 1,82,42,527/- (including GST) was not passed on, which included Rs. 8,75,301/- for Applicant No. 1. The investigation period covered 1-7-2017 to 31-5-2020, and the DGAP found that the Respondent contravened section 171 of the CGST Act, 2017.

Respondent's Contentions:
The Respondent argued that the DGAP's report was based on incorrect facts and legal basis, and the entire investigation was without jurisdiction. They contended that the computation of pre-GST credit was incorrect and that the DGAP excluded Rs. 63,39,788/- of Cenvat credit incorrectly. They also argued that the report was vague and did not consider various factors like increased cost of inputs and the stage of construction when contracts were entered.

DGAP's Clarifications:
The DGAP clarified that the findings were based on data furnished by the Respondent, and the exclusion of Rs. 63,39,788/- was based on the Respondent's own submission. The DGAP maintained that comparing pre and post-GST ITC was justified and necessary to determine the benefit of ITC that should be passed on to consumers.

Authority's Directions:
The Authority directed the DGAP to:
- Verify the actual amount of CENVAT credit available to the Respondent from 1-4-2016 to 30-6-2017.
- Recalculate the percentage of ITC to turnover considering the verified CENVAT credit.
- Verify if the area of three units (302, 303, and 906) was included in the total sold area for the pre-GST period.
- Recalculate the percentage of ITC to turnover and the profiteered amount, if any, based on these verifications.

The case was sent back for reinvestigation by the DGAP as per the directions of the Authority, and the DGAP was instructed to submit a revised report.

Conclusion:
The judgment highlighted the need for accurate calculation of ITC benefits and their proper passing on to consumers. The Authority's order emphasized the importance of verifying all relevant data before concluding on profiteering allegations. The reinvestigation was mandated to ensure compliance with section 171 of the CGST Act, 2017.