TMI Blog2019 (11) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him - Since the present investigation is only up to 30.09.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. Penalty - HELD THAT:- It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his One Park Avenue project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions - a SCN be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. - Case No. 53/2019 - - - Dated:- 5-11-2019 - SH. B.N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, MS. R. BHAGYADEVI, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the complaint it was found that the Applicant had booked a flat in the project One Park Avenue , promoted by the Respondent on 25.02.2017 during the pre GST period. The above Applicant had also submitted before the DGAP that the sale agreement was supposed to be registered on the payment of 20% of the agreement value. The details of the demands raised on the above Applicant by the Respondent on account of the purchase of the above flat, were furnished by the DGAP as has been shown in the Table-A below:- Table A (Amount in Rs.) Particulars Area (in Sqft) Basic Cost S.T. @ 4.5% VAT @1% Registration charges@6% GST Other Charges Total Agreement Value (pre-GST) (A) 656 ₹ 89,39,548 ₹ 4,02,280 ₹ 89,395 ₹ 5,36,373 ₹ 3,50,745 ₹ 1,03,18,340 Paid in Pre-GST era (B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Mansukhani, Chairman of the Respondent to appear on 26.11.2018 and produce the relevant documents, in response to which Sh. Rohit Mansukhani and Sh. Sayyad Mehboob, Authorised Representative of the Respondent had appeared before the Superintendent of the DGAP on 26.11.2018 and submitted the documents. 7. The DGAP has further stated that the Respondent had submitted replies vide his letters/emails dated 06.11.2018, 13.11.2018, 16.11.2018, 22.11.2018, 24.11.2018, 26.11.2018, 27.11.2018, 29.11.2018, 24.01.2019, 12.03.2019 and 29.03.2019. The submissions of the Respondent were summed up by the DGAP as under:- a) That the above Applicant had not made any payment in the post GST regime and had also defaulted on payment of demands raised in the pre GST regime. Out of the demand of 20% of the agreement value, raised on 04.03.2017 for payment of ₹ 18,36,215/- plus applicable taxes, the above Applicant had paid only ₹ 4,62,622/-, and an amount of ₹ 14,74,585/- had remained unpaid and the Respondent had himself paid the Service Tax and the Value Added Tax (VAT) on the demanded amount. b) That as per the statutory provisions made under the Real Estate (Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,87,186 ₹ 1,80,000 ₹ 1,07,13,988 Consideration Amount less Installment demanded ₹ 71,69,266 ₹ 8,60,312 Post GST cost with Tax ₹ 90,05,481 ₹ 82,630 ₹ 18,362 ₹ 5,40,329 ₹ 8,87,186 ₹ 1,80,000 ₹ 1,07,13,988 d) That the Respondent had mutually revised the agreements executed by him with his home buyers by offering them discount @ 2-3%, on account of GST benefit, post-GST implementation and the same was offered to the above Applicant also. The Respondent had also submitted documents to support his above claim. The Respondent had provided the trail of emails to show that the revised price was offered to the above Applicant after discussion, but he had not accepted the same. e) That with the RERA coming into force, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail dated 29.03.2019. 8. The Respondent had also submitted the following documents/information to the DGAP vide his above mentioned letters/e-mails during the course of the investigation:- a) Copies of GSTR-1 Returns for the period from July, 2017 to September, 2018. b) Copies of GSTR-3B Returns for the period from July, 2017 to September, 2018. c) Copies of Tran-1 Tran-2 statements for the period from July, 2017 to December, 2017. d) Copies of VAT ST-3 Returns for the period from April, 2016 to June, 2017. e) Copies of all demand letters, Sale Agreement/Contract issued to the Applicant. f) Tax rates - pre-GST and post-GST. g) Copy of Balance Sheets for the FY 2016-17 FY 2017-18. h) Copy of Electronic Credit Ledger for the period from 01.07.2017 to 30.09.2018. i) CENVAT/Input Tax Credit register for the period from April, 2016 to June, 2017 and July, 2017 to September, 2018. j) Details of turnover, output tax liability/GST payable and input tax credit availed. k) Copy of Project report submitted to the RERA. I) List of home buyers in the project One Park Avenue , 9. The DGAP has also stated that all the docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppertain and on other requirements as may be prescribed in this agreement 5% At the time of handing over of possession of Apartment On or after receipt of Occupation Certificate of Completion Certificate 5% Total 100% 11. The DGAP has also intimated that the Respondent, vide his letter dated 16.11.2018 had submitted copies of the demand letters issued by him to the above Applicant, the details of which are shown as in the Table- D given below:- Table D (Amount in Rs.) S.No. Payment Stage Due Date Basic % BSP Service Tax Total Amount payable Amount paid MVAT Balance Receivable 1. Booking Amount 14.03.2017 5.00% 4,61,361 20,761, 4,82,122 1,00,000 3,82,122 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter its first occupation, whichever is earlier . Thus, he has argued that the ITC pertaining to the residential units which were under construction but not sold was provisional which might be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the Completion Certificate, in terms of Section 17 (2) Section 17 (3) of the above Act which read as under: Section 17 (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies . Section 17 (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building . Therefore, he has argued that the ITC pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availed by him, his turnover from the project One Park Avenue and the ratio of ITC to turnover, during the pre-GST period from April, 2016 to June, 2017 and post GST period from July, 2017 to September, 2018 periods was as per the Table-E below:- Table E (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total July, 2017 to March, 2018 April, 2018 to Sep, 2018 Total (Pre-GST) (Post-GST) 1 2 3 4 (5)=(3)+(4) 6 7 (8)=(6)+(7) 1. CENVAT of Service Tax Paid on Input Services (A) 63,88,078 56,40,799 1,20,28,877 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of land, effective GST rate was 12% on the gross value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, he had contended that the profiteering had been computed by comparing the applicable tax and the ITC available to the Respondent during the pre GST period from April, 2016 to June, 2017 when the Service Tax @ 4.5% and VAT@ 1% was payable (total tax rate was 5.5% on the basic price) with the post GST period from July, 2017 to September, 2018 when the GST rate was 12% on the gross value. On the basis of the figures contained in Table- E above, the comparative figures of the ITC availed/available as a percentage of the turnover in the pre and post GST periods, the recalibrated base price and the excess collection i.e. the profiteering during the post GST period, has been tabulated by the DGAP as per the Table- F below:- Table- F (Amount in Rs.) S.No. Particulars Pre-GST Post-GST 1. Period A April, 2016 to June, 2017 July,2017 to Sep 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DGAP has also contended that on the basis of the aforesaid CENVAT/ITC availability in the pre and post GST periods and the demands raised by the Respondent on the above Applicant and other home buyers on account of value of construction on which GST liability @ 12% was discharged by the Respondent during the period from 01.07.2017 to 30.09.2018, the amount of benefit of ITC not passed on to the recipients or in other words, the profiteered amount came to ₹ 1,27,84,694/- which included GST on the base profiteered amount of ₹ 1,14,14,905/-. The names of the home buyers of flats sold up to 30.09.2018 and unit no. wise break-up of the profiteered amount has been given in Annexure-18 of the DGAP s Report. The DGAP has further contended that since no demand was raised on the above Applicant and no payment was made by him during the post GST period, no benefit of additional ITC was required to be passed on to him, as had been mentioned at Serial No. 90 of Annexure-18 of the Report. It was also intimated that the Respondent had supplied construction services in the State of Maharashtra only. 19. The DGAP has also stated that the Respondent had claimed to offer discount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Respondent vide their submissions are mentioned in the subsequent paras. 22. The Applicant No. 1 vide his submissions dated 25.04.2019 has raised objections against the Report of the DGAP and stated that the Respondent had deposited an amount of ₹ 16,072/- only in cash against the total output GST liability of ₹ 2,25,17,438/- during the investigation period from 01.07.2017 to 30.09.2018, as per GSTR-3B returns filed by him from July 2017 to August 2018, as per the Annexure-1 attached by the Applicant. He has also stated that based on the above amount of ITC claimed by the Respondent and his total taxable value, the profiteering was 11.99% of the turnover. He has further stated that after commensurate reduction in the prices of the flats, the actual amount of profiteering worked out to be ₹ 2,07,64,080/- as against ₹ 1,27,84,694/- calculated by the DGAP which was refundable to all the buyers along with 18% interest including those buyers who had surrendered their units, till the date of cancellation, as they were identifiable. 23. Raising objection against the contents of para 12 (a) of the DGAP s Report the above Applicant has submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpet area by including area of the internal walls and also increased the base price by 3.22% (₹ 92,27,211/- - ₹ 89,39,548/- =₹ 2,87,663/-) although there was no change in the approved plan of the flat and hence the price should not have been increased. He has also alleged that even if it was assumed that there was increase in the size of the flat by 1.37% the overall increase in the base price was 3.22%. 25. The above Applicant has also submitted that he had received the cost sheets pre GST and post GST periods in which GST discount @ 3% had been allowed (Annexure-5) which showed that the Respondent had increased the basic price by 3.2% and allowed GST discount @ 3%. He has further submitted that the revised agreement value I base price demanded by the Respondent with the revised quote dated 27.11.2017 was ₹ 92,27,2111- which was also mentioned in the Booking Form and which was supposed to include the agreement value of ₹ 89,39,548/- and all other charges like 2 year maintenance charges, Gas, Electricity Water connection charges and Registration charges amounting to ₹ 2,78,909/- (Annexure-6). He has also stated that in the final cost sheet s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above Applicant has averred that he had done so due to arbitrary increase in the total cost of the flat. He has further averred that the above Authority vide its order dated 17.04.2018 (Annexure-9) had directed the Respondent to provide revised cost sheet enabling him to make an informed decision. It was also mentioned by the above Authority that the Applicant could also approach the concerned authorities of GST in case the benefit of ITC had not been passed on to him. Accordingly, the Respondent had provided a fresh quote on 25.05 2018 (Annexure-10) which did not pass any ITC benefit and on the contrary increased the overall base price illegally. 28. The above Applicant has also claimed that he had sought an appointment with the Respondent to discuss the matter but his request was ignored and hence he had approached this Authority. He has also alleged that without waiting for the order of the Authority under Section 171 of the Act the Respondent instead of refunding the booking amount had unilaterally cancelled his booking and forfeited the booking amount which amounted to vendetta as was clear from Bullet No. 4 of second page of the cancellation letter dated 24.11.2018 (Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t tax rates / were Zero rated or Exempted from tax could not be applied to the construction service, in which the nature of tax applicability got changed at the relevant point of time and thus, for the purpose of calculating profiteering, overall ITC utilized needed to be taken into consideration. 32. The Applicant has also claimed that the entire saleable area must have been sold at different rates as per the normal practice where there was no ceiling fixed by the regulatory authorities and hence, any consideration of ITC based on the sq. ft. area would not be justified and the best way would be to allow ITC benefit based on the amount, as the GST was also charged on the amount and not on the sq. ft. area. The above Applicant has also stated that the Respondent had shown lesser amount of GST payable in the GSTR-3B return for the month of November, 2017 by an amount of ₹ 1,02,508/-. The above Applicant has further stated that the Respondent had issued demand letter dated 21.09.2017 to him and to the other buyers (Annexure 13) in which the GSTIN and the dates were mentioned but the same were not in the appropriate format as per the CGST Act, 2017 and it had not been mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Govt. had repeatedly clarified that with effect from 01.07.2017, under the GST, full ITC was available for offsetting the headline rate of 12% and hence, the input taxes embedded in the flat should not form part of the cost of the flat. He has also claimed that with effect from 25.01.2018, the Govt. has again clarified that the builders shall not be required to pay GST on the construction service of flats etc. in cash but would have enough ITC to pay the output GST and they should not recover any GST payable on the flats from the buyers. They could recover GST from the buyers only if they recalibrated the prices of the flats after factoring in the full ITC available in the GST regime and reduced the ex-GST prices of flats. He has further claimed that the Respondent has been persistently demanding GST @ 12% despite the provisions of the Anti-profiteering measures in the CGST Act, 2017 and the Rules and despite repeated media reports, objections by the buyers and also numerous number of mails etc. he had not re-calibrated the price of the flats knowingly. He has also enclosed the sequence of events vide Annexure-14 attached to his above submissions. 35. The above Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified by the promoter to be sold after issue of completion certificate or first occupation, whichever is earlier; F= aggregate carpet area of the apartments in the project; Explanation 1: In the tax period in which the issuance of completion certificate or first occupation of the project to takes place, value of E shall also include aggregate carpet area of the apartments, which have not been booked till the date of issuance of completion certificate or first occupation of the project, whichever is earlier; Explanation 2: Carpet area of apartments, tax on construction of which is paid or payable at the rates specified for items (i), (ia), (ib), (ic) or (id), against serial number 3 of the Table in the notification No. 11/2017-Central Tax (Rate), published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated 28th June, 2017 vide GSR number 690(E) dated 28th June, 2017, as amended, shall be taken into account for calculation of value of E in view of Explanation (iv) in paragraph 4 of the notification No. 11/2017-Central Tax (Rate), published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated 28th June ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing calculation of Profiteering Table B Sl.No. Particulars Amount in Rs. 1. Turnover A 18,76,45,356 2. Available ITC as per Sec 17(2) calculated in accordance with Rule 42 and Rule 43- Post GST Period B 2,25,17,438 3. GST Paid In Cash C 16,072 4. CENVAT Available as per Table E DGAP report for Pre GST Period @ 2.11 % of Turnover C 39,59,317 5. Profiteering (D=B-C) 1,85,42,049 6. Profiteering Percentage (E=D/A) 9.88% 7. Re-Calibrated Rate in Percentage (F=100%-E) 90.12% 8. Re-Calibrated Price (G=AXF) 16,91,05,995 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent had revised the price of the flat to ₹ 1,09,75,629/- and increased it by ₹ 6,57,289/- and hence he had filed the present complaint against the Respondent on 18.07.2018. He has further stated that the Respondent had furnished the following cost sheets during the hearing:- Shared by Man Realty OPA Cost Sheet on Booking Avenue 6 RERA Carpet 656 Flat No 1605 FLOOR 16 TYPE 2 BHK Flat Cost 8,939,548 Discount - New Flat Cost 8,939,548 Installment Demanded 1,836,215 Service tax @ 4.5% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Final Consideration Amount with taxes 9,943,423 Stamp Duty 540,700 Registration Charges 30,000 Vat 18,362 Other Charges 150,000 GST @18% 27,000 Total Cost 10,714,485 3.8% He has further alleged that it was clear from the above Table that the Respondent has made contradictory claims and has not been able to explain the reason for increase in the base price on which he has claimed to have passed discount. As per the above Table the Respondent has given discount of ₹ 2,21,7301- only as against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation provided by Justice G. P. Singh and the cases of Keshav Lal Jetha Lal Shah v. Mohan Lal Bhagwan Das = 1968 (4) TMI 72 - SUPREME COURT , Commissioner of Income Tax v. Gold Coin Health Food Private Limited = 2008 (8) TMI 5 - SUPREME COURT , Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. 1987 SCR (2) 1 = 1987 (1) TMI 452 - SUPREME COURT , Commercial Tax Officer, Rajasthan v. M/s. Binani Cement Ltd. another (Civil Appeal No. 336 of 2003 decided on 19.02.2014) = 2014 (3) TMI 905 - SUPREME COURT , LIC v. D. J. Bahadur (1981) 1 SCC 315 : 1981 (1) SCR 1083 = 1980 (11) TMI 157 - SUPREME COURT and Gobind Sugar Mills Ltd. v. State of Bihar (1999) 7 SCC 76 = 1999 (8) TMI 761 - SUPREME COURT to claim that the intent of the amendments made in Rule 42 (1) (f) and Rule 43 (1) (b) was to bring clarity in respect of exempt ITC for construction supply which was earlier missing in the above provisions and since the intent was declaratory, these rules should be applied retrospectively as no liability was imposable on the Respondent by such application. 43. The Applicant has also claimed that the construction supply was different from the supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had already passed on the benefit. 45. The Respondent has also submitted that in the case of the Applicant No. 1 he had decided to increase the consideration by ₹ 1,26,593/- on account of increase in the carpet area by 9 sq. ft., however, he had agreed to pass a discount of ₹ 1,47,820/- at the rate of 2% of the balance consideration which was increased to ₹ 2,21,730/- vide communication dated 27.11. 2017, post discussion with him which was evident from Annexure-5. He has further submitted that the above fact has also been recorded by the DGAP in Para 12 (h), 27 and Table B of para 12 of the Report, which showed that an amount of ₹ 2,21,730/- has been passed on as ITC benefit to the above Applicant. The Respondent has also contended that he has passed on benefit of ₹ 1,11,61,090/- to his customers and has complied with the provisions of Section 171 of CGST Act, 2017. It is further contended by him that since no mechanism has been provided in the GST provisions to quantify the amount of profiteering and hence, the mechanism of distribution of the benefit opted by him and the DGAP was different. He has also stated that the amount payable/receivable by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In para 20 of the Report, it has been observed that the Respondent has agreed to pass on 2-3% of the amount as benefit to all the existing customers. The said discount was also offered to the Applicant but he had cancelled the flat and hence no benefit should be given to him. Despite having all the information, the DGAP has concluded in Para 27 that benefit claimed to have been passed on was subject to satisfaction of this Authority. 48. It is also submitted by the Respondent that the DGAP being a fact-finding authority should have verified the details submitted by him and should have reduced the demand to the extent of benefit already passed on. However, the DGAP has chosen to ignore the details furnished by him due to which the demand has been inflated in the Report, he has alleged. 49. The Respondent has also contended that the method of calculation adopted by the DGAP in computing the profiteered amount shown in Table E was incorrect as the DGAP in para 21 has claimed that the Respondent was entitled to 2.11% CENVAT credit as compared to the turnover during the pre GST period and the ratio on the same basis was 8.10% during post GST period which has result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On initiation of 23rd Slab 3 17 On initiation of 25th Slab 3 18 On initiation of 27th Slab 3 19 On initiation of Top Slab 3 20 On initiation of Brickworks 3 21 On initiation of Flooring 3 22 On Possession 5 Total 100 He has therefore, averred that in the pre GST regime, the customer had to pay up to 20% of the total amount at the time of booking which was not construction linked and thus, the tax liability on the said value arose to the Respondent but he had very less CENVAT credit since the work done would be minimal as compared to the demand raised, whereas in the post GST regime the customer has to pay up to 30% of the total amount at the time of agreement and which was not construction linked. Similarly, in vice- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Respondent has contended that the ratio of availment of the ITC to the taxable turnover for the period from July-2017 to March-2018 was 24.37% and for the period from April-2018 to September-2018 was 3.23% and the average percentage of availment which has been shown in Table- E was 8.10%. Thus, he has further contended that the variation in the utilization of credit between the two periods both falling under the GST regime itself substantiated that there was no synchronization between the accrual of credit and raising of demand. He has also stated that in the present case, only excavation and basement work was started in the pre GST regime and the CENVAT credit of ₹ 1.20 Crore mainly pertained to the services like marketing and legal etc., however, demands of ₹ 27.83 Crore have been raised on the customers which were not construction linked. He has further stated that the demand was only of 20-30% of the amount at the time of booking of the flats but the corresponding expenditure incurred was only 6.2% of the project cost which showed that the method adopted by the DGAP was incorrect. He has also claimed that in this case the expenditure was incurred during mid Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional benefit arising to him as he had paid additional 3% tax to the service providers and taken ITC of the same. Thus, he has further stated that in order to arrive at the correct profiteered amount the credit figures must be revised for the services availed by him during the period from July 2017 till September 2018 as per the following Table:- Sr. No. Particular Amount 1. Taxable Value of Input Services (pure service contracts) A 15,10,53,932 2. ITC availed on these services (18%) B 2,68,83,251 3. Service Tax if leviable - 15% C = A * 15% 2,24,02,709 4. Additional input tax credit D = (B - C) 44,80,542 He has also submitted that this amount of ₹ 44,80,542/- was not an additional benefit thus the same must be reduced from the post GST period for calculation as given in Table E of the DGAP report. 51. The Respondent ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST regime it was 44,901 sq. ft. He has therefore, contended that accordingly the proportionate ITC must be re-calculated as per the relevant area sold. He has submitted the following Table to substantiate his claim:- Particular Pre-GST Post-GST CENVAT/ITC 31,39,142 58,87,921 Turnover 27,83,31,886 18,19,61,336 Ratio 1.13% 3.21% The break-up of the above calculation has been given by the Respondent in Annexure-8. 52. The Respondent has also claimed that the DGAP has also included 12% GST charged by him from the customers in the profiteered amount which was evident from para 25 of the DGAP s Report as the basic profiteered amount has been shown as 1,08,99,4841-. He has further claimed that the DGAP has wrongly mentioned that the base profiteered amount was ₹ 1,14,14,905/- as the balance amount of 18,85,2101- was towards the GST and hence, the excess collection made by him was only 1.08 Crore as the excess GST collected has duly been deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the rate of tax on services was 15% payable on 30% (70% was abatement) of the total value as per Notification No. 26/2012-ST dated 20-6-2012 and although the rate of VAT was different from State to State it was in the range of 1% on the total value including the value of the land. He has also stated that in the post GST period, the rate of tax on construction service was 18%, but for determining the value, abatement of 1/3rd of the value of agreement towards land was allowed and thus, if the agreement value was ₹ 100/- the tax was payable on ₹ 67/- only. He has further stated that as per the judgment passed in the case of Larsen Toubro Ltd., reported as 2014 (34) STR 481 (SC) = 2013 (9) TMI 853 - SUPREME COURT service provided by the builder/developer was classified as works contract and therefore, value of land included in the price was required to be excluded to arrive at the taxable value under section 15 of the CGST Act, 2017. He has also claimed that the rate of tax was always applied on the taxable value which was also required to be declared in the ST-3 returns under the Service Tax regime and GSTR-3B returns under the GST regime and hence, the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king fund, advance property tax, club usage charges and select other reimbursements shall be payable as actual. The agreement for sale shall be executed and registered in favour of the intending allottee(s) within a reasonable time. Cost of all stamp duty and registration/mutation, documentation charges, etc. as applicable will be extra and shall be borne by the intending allottee(s). The intending allottee(s) shall pay as and when demanded by the Company, VAT, Stamp Duty and Registration Charges/Mutation Charges and all other incidental and legal expenses for execution and registration of Agreement for Sale/mutation of the Flat in favour of the intending allottee(s). The intending allottee(s) agrees to pay the total sale price and other charges of flat as per the payment plan to be mentioned in the Allotment letter/Agreement sale. He has also claimed that it was evident from the above that the other charges were payable in addition as had been mentioned in the application form. He has further claimed that the above Applicant has paid ₹ 4,62,622/- within a month of booking which roughly amounted to 5% of the basic flat cost of ₹ 92,27,211/-. Thus, the Applicant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax amount was also reflected in the Service Tax returns filed by him for the period from October 2016 to March 2017. He has also submitted a copy of ledger to substantiate the transaction which took place on 04.03.2017 which has been attached as Annexure-1 along with the Certificate of CA which has been attached as Annexure-2. It is further contended by him that a demand letter was never signed by the customer and the demand letter submitted by him to the DGAP for verification did not contain the signature of the Applicant. It is also submitted by him that the increase in the price on account of RERA has no relevance with the provisions of Section 171 of the CGST Act, 2017. He has also claimed that the booking value of the flat in the booking form/ application form was ₹ 92,27,211/- and increase in the price pointed out by the above Applicant actually had not taken place at all which could be ascertained from the email dated 10.10.2017 sent by him to the Applicant intimating that on account of RERA the price would increase only by ₹ 1,26,593/- and in the same mail itself it has been mentioned that the Respondent was not charging for the increased area which could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above submissions, the benefit at 2.09% may be passed on by the Respondent to the above customers. 59. In his submissions dated 30.05.2019 the Respondent has given the customer wise GST discount passed on to all the 65 flat owners as per Annexure-1 during the post GST period and details of the demands which have been raised on 61 flat buyers amounting to ₹ 18,19,61,336/- as per Annexure-6 attached to his submissions dated 09.05.2019. He has also claimed that the total discount passed on to all the 65 flat buyers was ₹ 1,11,61,090/- on the total value as per the agreements less the value of the demands raised in pre GST regime. Thus, the discount has been provided on all the demands which would be raised/would be raised in the post GST regime. He has also claimed that the GST discount passed on to the 61 flat buyers on which the demands have been raised was ₹ 92,54,051/- which was attached as Annexure-2. 60. The Respondent has also alleged that the DGAP has calculated the profiteered amount in respect of the five buyers on whom no demand has been raised in the post GST period, the details of which have been attached as Annexure-3 and therefore, the profiteere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent has also contended that the Applicant No. 1 has pointed out arithmetical errors on the part of the DGAP in the Table F of his Report which were required to be corrected. He has further contended that the GST amount @12% amounted to ₹ 2,18,35,360/- only and thus, the profiteered amount mentioned at Sr. No. 12 of the Table F would be ₹ 1,22,07,4221- instead of ₹ 1,27,84,694/-. Similarly the taxable value as per the GSTR-3B returns was ₹ 18,76,45,356/- as against the DGAP s figure of ₹ 18,19,61,336/- and the GST amount as per the GSTR-3B returns was ₹ 2,25,17,438/- as against ₹ 2,24,14,930/-. He has claimed that this difference was on account of the mechanism applied by the DGAP as he has considered the demand figures pertaining to the construction service only and has not considered the other taxable transactions not related to the profiteered amount and hence the figures considered by the DGAP were correct. He has also claimed that Section 17 (2) and 17 (3) of the CGST Act, 2017 applied on the reversal of ITC only in the case of, completion of the projects and could not be applied during the construction phase of the project. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laint was examined by the Standing Committee in its meeting held on 06.09.2018 and was forwarded to the DGAP for investigation who vide his Report dated 03.04.2019 has found that the ITC as a percentage of the total turnover which was available to the Respondent during the pre GST period was 2.11% and during the post GST period this ratio was 8.10% as per the Table E mentioned above and therefore, the Respondent had benefited from the additional ITC to the tune of 5.99% (8.10% - 2.11%) of the total turnover which he was required to pass on to the flat buyers of this project. The DGAP has also found that the Respondent has not reduced the basic prices of his flats by 5.99% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre GST basic price, he has contravened the provisions of Section 171 of the CGST Act, 2017. The DGAP has further submitted that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to ₹ 1,27,84,694/- which included 12% GST on the basic profiteered amount of ₹ 1,14,14,905/-. The DGAP has also intimated that there was no demand raised on the Applicant No. 1 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the terms of his allotment and he cannot claim that he was not bound to pay the same till the Respondent had obtained registration under the RERA. The Respondent has produced evidence including the entries made in his account books to prove that he had infact written the above letter and hence the above allegation of the Applicant is not correct. 72. The above Applicant has also claimed that the Respondent had arbitrarily increased the area and the price of the flat after coming in to force of the RERA. Although, this Authority has no mandate to look in to the increase in the area as per the above Act but it has certainly mandate to look in to the price rise affected by the Respondent post implementation of GST w.e.f. 01.07.2017 and it is revealed that he has increased the basic price of the flat by ₹ 2,87,683/- i.e. by 3.22% in respect of the above Applicant from ₹ 89,39,548!- to ₹ 92,27,211/-as is clear from Table B of the Report as well as the cost sheet submitted by the Respondent which has been mentioned in para 41 supra, on the ground that there was increase in the carpet area as well as due to implementation of the GST. Perusal of Annexure-4 submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o suggest that the other home buyers had not accepted the discount of ₹ 1,11,61,0901- offered by the Respondent and hence the allegation made by the above Applicant could not be established. 77. The above Applicant has also submitted that the figures mentioned in column Nos. 7 8 of Table E of the DGAP Report of saleable area and sold area were not relevant. However, this argument of the Applicant is wrong as the above figures are very much relevant for calculation of the profiteered amount and hence the argument made by the Applicant in this regard cannot be accepted. 78. The Applicant has also claimed that the provisions of Section 17 (2) of the above Act were not applicable while computing profiteering which is wholly untenable as ITC was required to be calculated after taking in to account the provisions of the above Section. 79. The above Applicant has also submitted that it was wrong to consider ITC based on the area for calculation of profiteering and it should be computed on the basis of the amount charged for the flat. However, this contention of the Applicant is seriously flawed as the ITC benefit has to be calculated on the basis of the area purchased by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation and reversal of the ITC, the provisions of Rule 42 and 43 provide the detailed mechanism for calculating the same. Therefore, the calculation of available ITC of ₹ 2,25,17,438/-post reversal given by the Applicant in Table A cannot be accepted as the Respondent has not obtained the OC and hence there is no question of reversal of ITC, hence, the provisions of Rule 42 and 43 as have been applied by the above Applicant do not apply in the present case. The calculation of profiteered amount of ₹ 2,07,64,080/- as per Table B is also not correct as it has not been calculated on the basis of the relevant ITC in proportion to the area sold and is based on the ITC computed vide Table A. Therefore, the contentions of the above Applicant made in this behalf are frivolous and hence they do not merit consideration. 83. The above Applicant has also contended that the Respondent has increased the basic price of the flat from ₹ 89,39,548/- to ₹ 90,05,481/- by 3.2% and had offered him discount of ₹ 2,21,730/- @ 3% which clearly showed that the above discount had been given to cover the enhanced price and no benefit of ITC was given to him. The above contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur (1981) 1 SCC 315 : 1981 (1) SCR 1083 = 1980 (11) TMI 157 - SUPREME COURT and Gobind Sugar Mills Ltd. v. State of Bihar (1999) 7 SCC 76 = 1999 (8) TMI 761 - SUPREME COURT to claim that the intent of the amendments made in Rule 42 (1) (f) and Rule 43 (1) (b) of the CGST Rules, 2017 was to bring clarity in respect of the exempt ITC for construction supply which was earlier missing in the above provisions and since the intent was declaratory, these rules should be applied retrospectively as no liability was imposable on the Respondent by such application. In this regard it is submitted that as has been discussed in para supra above the provisions of Rule 42 (1) (f) and 43 (1) (b) are not applicable in the present case as has been proposed by the Applicant as the Respondent has not obtained OC as yet. There is also no provision of applying them retrospectively in the CGST Act, 2017 or the notification issued under it as the law requires that in case a notification is to be implemented retrospectively the intention has to be mentioned in the notification itself. Therefore, the above judgements cited by the Applicant do not further his cause. The Order No. 7/2018 passed on 18.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,11,61,090/- claimed to have been given to the other home buyers by the Respondent also does not pertain to the benefit of GST. The DGAP has nowhere stated in para 12 (h) and 20 of his Report that the Respondent had passed on the benefit of ITC to the home buyers. He also could not verify the amount of the discount passed on by the Respondent in his Report. Therefore, the contention made by the Respondent is this regard is not tenable and hence the above amount cannot be reduced from the profiteered amount. 88. The Respondent has also stated that the above Applicant was not an interested party and hence he had no locus standi to file complaint against him. However, as has been discussed above the Applicant had filed the complaint on 18.07.2018 whereas the Respondent had cancelled his booking on 24.11.2018 and hence the above Applicant fell within the definition of interested party as per the explanation given under Rule 137 (c) b of the CGST Rules, 2017 as he was recipient of the service supplied by the Respondent at the time of filing of the complaint. Otherwise also any other person can file complaint for violation of the provisions of Section 171 of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio. 91. The Respondent has also alleged that the DGAP has considered sold area as 1,37,948/- sq. ft. during the pre GST period and 84,643 sq. ft. during the post GST period which was not correct as the above areas were 73,837 sq. ft. and 44,901 sq. ft. only. He has further alleged that the DGAP has taken in account an area of 7,885 sq. ft. of those flats also the bookings of which were cancelled. Perusal of the record shows that the above area has been taken by the DGAP on the basis of the information supplied by the Respondent and hence he cannot resile from his earlier statements given before the DGAP and therefore, the relevant ITC calculated as per the area sold relevant to turnover in Table E of the Report is correct. Hence the above contention of the Respondent is not tenable. 92. The Respondent has also contended that he was not in agreement with the computation of the profiteered amount made by the DGAP as it included the GST which had been deposited by him in the Govt. account. The plea taken by the Respondent on this ground is fallacious as by forcing the flat buyers to pay more price by not releasing the benefit of additional ITC and by collecting tax @12% on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not the benefit of reduction in the rate of tax as per the provisions of Section 171 of the above Act and perusal of his returns which he has himself filed during the pre and post GST period shows that he has availed additional benefit of ITC of 5.59% of the turnover as the relevant ITC for the pre GST period was ₹ 58,64,788/- and for the post GST period it was ₹ 1,47,44,544/-. There is also no relevance of comparing the pre-and post GST tax rates after taking in to account the abatement which was available during the above two periods as the benefit is not to be passed on the basis of reduction in the rate of tax. The case of M/s KRBL does not help the Respondent as in that case there was no benefit of additional ITC to the above party and hence the above case is of no help to him. The claim made by the Respondent on this ground is farfetched and hence the same is untenable. 95. The Respondent has also stated that it was specifically mentioned in the application form that the maintenance charges, stamp duty, reimbursements and taxes etc. shall be charged extra from the allotees and the above Applicant has also deposited ₹ 4,62,622/- being 5% of the price o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est that the letter dated 04.03.2017 was written by the Respondent to the above Applicant as there are entries to that effect in his record as per Annexure-1 and the CA certificate submitted by the Respondent as Annexure-2 with his submissions dated 17.05.2019 also supports his plea. 97. The Respondent has also claimed that the profiteered amount could not be computed on the value of the flats sold as the cost of consideration could rightly be apportioned based on the area. He has further argued that introduction of new mechanism of reversal of ITC under Rule 42 of the CGST Rules, 2017 for reversal of ITC for the construction industry provided for reversal of the ITC credit on the saleable area, whereas for other industries the reversal has been provided based on the amount, accordingly, the objection of the Applicant could not be accepted. The above argument of the Respondent has merit and hence the same is logical. The Respondent has also argued that the above Applicant has wrongly tried to point out that the entire ITC availed by the Respondent was available on the date of investigation and nothing needed to be reversed. However, the above claim of the Applicant is not correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the methodology followed by the DGAP while calculating the profiteered amount however, the same is not maintainable as profiteering in each case has to be determined on the basis of the facts of each case and no straight jacket formula can be fixed for calculating the same as the facts of each case differ. Even the methodology applied in two cases of construction service may vary on account of the period taken for execution of the project, the area sold and the turnover realised. The Respondent has himself admitted that the methodology applied in this case was correct in principle and hence he should have no objection on the computation of the profiteered amount. Therefore, the objection raised by the Respondent and the Applicant on this ground is frivolous and without legal force. 102. It is established from the perusal of the above facts that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has profiteered an amount of ₹ 1,27,84,694/- inclusive of GST @ 12% on the base profiteered amount of ₹ 1,14,14,905/-. Further, the Respondent has realized an additional amount of ₹ 1,27,84,694/- which includes both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only up to 30.09.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. 105. It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his One Park Avenue project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Accordingly, the notice dated 09.04.2019 vide which the Respondent was directed to show cause why action under Section 29 and 122-127 of the CGST Act. 2017 should not be taken against him is hereby withdrawn. 106. The Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Maharashtra to monitor this order under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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