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2019 (11) TMI 467

..... passed on - contravention of provisions of section 171 of CGST Act - penalty - HELD THAT:- Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondents. In case this benefit is not passed on the Applicants or any other buyer shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 of the above Act against the Respondents. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future. Penalty - HELD THAT:- It is evident from the above that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled his consumers/buyers to pay more GST than that they were required to pay and therefore, he is liable for imposition of penalty - Accordingly, a Show Cause Notice be issued to him directing him to expla .....

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..... Government of Haryana on the matter. 3. The applications filed by the Applicant No. 1, 2 & 3 were examined by the Standing Committee on Anti-profiteering, in its meetings held on 07.08.2018 & 08.08.2018 whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. The minutes of the above meetings of the Standing Committee were received by the DGAP on 30.08.2018. 4. Further, the application of Applicant No. 4, which had been received later, was also examined by the Standing Committee on Anti-profiteering, in its meeting held on 13.12.2018 whereby it was decided to forward the same for detailed investigation to the DGAP with the request to club the fourth application with the previous three applications. Minutes of this meeting of the Standing Committee on Anti-Profiteering were received by the DGAP on 07.01.2019. 5. The DGAP, on receipt of the first of the above four references from the Standing Committee on Anti-profiteering, issued a notice to the Respondent under Rule 129 of the CGST Rules, 2017 on 10.09.2018 (Annexure-4), calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed .....

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..... lients and he had got registered under GST in August, 2017. (c) That the Applicant No. 1 had paid only application money (5% of the cost) and the subsequent instalment (20% of the cost) before GST and that the Applicant No. 1 had not paid the instalments demanded by the Respondent in November, 2017 and May, 2018. Since he had not paid any instalment post-GST, no GST was paid by him. The Applicant No. 2 & 3 had paid instalments post-GST with GST @12%, as per Government of India Notification, which was later reduced to 8%, w.e.f. 25.01.2018. The same had been adjusted in the demand letters issued in May, 2018. (d) That the Respondent had submitted that due to non-availability of permission to start construction activity prior to 05.02.2018, he had not raised demands on all the home buyers, but the same were issued to only those home buyers who had asked for the demand letters. (e) That the Respondent had assured that he would definitely pass on ITC benefit to all his customers when the last demand would be raised. By then, he would be aware of the details of the benefit of ITC to be passed on to his clients as his project would be close to completion/ possession. 8. In his Report .....

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..... total price Within 15 days of the date of issuance of offer of Allotment letter 20% of the total price Within 06 months of the date of issuance of offer of Allotment letter 12.5% of the total price Within 12 months of the date of issuance of offer of Allotment letter 12.5% of the total price Within 18 months of the date of issuance of offer of Allotment letter 12.5% of the total price Within 24 months of the date of issuance of offer of Allotment letter 12.5% of the total price Within 30 months of the date of issuance of offer of Allotment letter 12.5% of the total price Within 36 months of the date of issuance of offer of Allotment letter 12.5% of the total price 11. The DGAP has also submitted that the Respondent, vide letter dated 19.09.2018, had submitted copies of the payment schedule and the demand letters issued to the Applicants No. 1, 2 & 3. The details of amounts and taxes paid by the said four Applicants to the Respondent were furnished by the DGAP as are given in Table-'B' below. Table- B Applicant No. 1 (Amount in Rs.) S. No. Payment Stage Due Date Basic % BSP Service Tax GST Total Amount payable Amount paid 1. At the time of booking 11.09.2016 5.00% 1,31, .....

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..... into consideration for ascertaining the profiteering was that para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) read as Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building . Further, clause (b) of Paragraph 5 of Schedule II of the CGST Act, 2017 read as (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier . Keeping the above in view, the DGAP has further reported that the ITC pertaining to the residential units, which were under construction but had not been sold was provisional ITC, which was liable to be reversed by the Respondent, if the residential units remained unsold at the time of issue of completion certificate, in terms of Section 17 (2) & Section 17 (3) of the Central Goods and Services Tax Act, 2017, which read as under:- Section 17 (2) Whe .....

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..... the Respondent, the Respondent's turnover during the said period and the ratio of ITC to the turnover, as is given in Table-C below:- Table- C' (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) 01.07.2017 to 24.01.2018 25.01.2018 to 31.08.2018 Total (Post-GST) 1. CENVAT credit of Service Tax Paid on Input Services (A) 0 0 0 2. ITC of VAT paid on Inputs (B) - 3. ITC of GST Availed (C) - 23,46,360 1,19,81,147 1,43,27,507 4. Total CENVAT/ITC Available (D)=(A)+(B) or (C) - 23,46,360 1,19,81,147 1,43,27,507 5. Total Turnover (E)= (C)+(D) - 19,465,786 149,554,736 169,020,522 6. Total Saleable Carpet Area (in SqFt) (F) - 5,58,047 5,58,047 7. Saleable Area relevant to turnover (in SqFt)(G) - 2,45,616 2,45,616 8. Relevant ITC [(H)= (A)*(G)/(F)] or [(H)= (B)*(G)/(F)] 0 0 0 6,306,037 6,306,037 9. Ratio of ITC to Turnover Pre-GST and Post-GST [(J)=(I)/(F)] 0 3.73% 3.73% 16. The DGAP has further reported from the above Table-'C', the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 0% and during the post-GST period (July, 2017 to August, 2 .....

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..... e price as well as cum-tax price, therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of the additional ITC that had accrued to the Respondent, was required to be passed on by him to his recipients. 18. The DGAP has, on the basis of the aforesaid CENVAT/ITC availability during the pre and the post-GST periods and the details of the amount collected by the Respondent from the above Applicants and other home buyers has quantified the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients or in other words, the profiteered amount, as ₹ 8,13,4051-, including 12% GST on the base profiteered amount of ₹ 7,26,255/-, for the period from 01.07.2017 to 24.01.2018 and the profiteered amount as ₹ 60,26,165/- including 8% GST on the base profiteered amount of ₹ 55,79,7821- for the period from 25.01.2018 to 31.08.2018. Therefore, the total profiteered amount during the period from 01.07.2017 to 31.08.2018 has been calculated by the DGAP as ₹ 68,39,570/- which included GST (@ 12% or 8%) on the base profiteered amount of 63,06,036/-. The home buyer and un it no. wise break-up of this amount has been annexed by the DG .....

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..... said profiteered amount. The DGAP has further claimed that the investigation has revealed that the Respondent had realized an additional amount of ₹ 68,14,176/-, mentioned in Annexure-25 of the DGAP's Report, which included the profiteered amount @3.73% of the turnover (base price) and GST on the said profiteered amount in respect of 489 other recipients who were not Applicants in the present proceedings as well as Applicant No. 2 and 3. These recipients were identifiable as per the documents placed on record as the Respondent had provided their names and addresses along with unit nos. allotted to them. Therefore, this additional amount of ₹ 68,14,176/- was required to be returned to such eligible recipients. The DGAP has also mentioned that the present investigation covered the period from 01.07.2017 to 31.08.2018 and profiteering for the period post August, 2018 was not examined as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage when the construction of the project was not completed. The DGAP's conclusion was that the provisions of Section 171 (1) of the CGST Act, 2017 required that any reduct .....

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..... of society who could not afford high value apartments. v. The above Applicants have further submitted that the ratio of ITC to Turnover pre-GST and post-GST as calculated by the DGAP vide his Report dt. 21.02.2019, was erroneous. They also contended that the Respondent had only paid an amount of ₹ 3,256/- in cash during the investigation period from 01.07.2017 to 31.08.2018, and the entire amount of the output liability of GST which was paid through ITC should be the amount of profiteering. The detailed calculations were given as below:- Calculation of ITC Benefit for passing over to the buyers Sl.No. Particulars 01.07.2018 to 24.01.2018 - @ 12% 25.01.2018 to 31.08.2018- 8% Total (Post - GST) 1. Total Taxable Value / Turnover 194,65,786 1495,54,736 1690,20,522 2. GST payable (1*rate) 23,35,890 119,64,380 143,00,270 3. Paid through ITC 23,35,890 119,61,124 142,97,014 4. Cash paid (2 minus 3) - 3,256 3,256 5. Ratio of ITC availed/ Turnover (3 divided 1) 12% 7.998% - 6. Re-caliberated rate (100 minus 5) 88% 92.002% - 7. Re-caliberated price (1 * 6) 171,29,892 1375,93,348 1547,23,240 8. GST @ 12% / 8% 20,55,587 110,07,468 130,63,055 9. Commensurate demand price with GST (7 + 8) .....

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..... yers for passing on the benefit of the profiteered amount. He has also averred that this was on the basis of the calculation of the profiteered amount upto 31.03.2019 as per the methodology provided in the DGAP's Report, along with the interest @18% p.a. This fact of issuance of credit notes has also been accepted by the Applicants. The Respondent has also submitted the list of all the buyers including the above Applicants to whom he had passed on the ITC benefit. The Respondent has claimed that, upto 31.08.2018 the total ITC benefit of ₹ 68,39,570/- has been passed on by him along with the applicable interest thereon to the 493 home buyers, as per the Annexure 25 of the DGAP's Investigation Report, which is inclusive of the ITC benefit of Applicant No. 2 of ₹ 12,697/- along with interest of ₹ 1496/- and Applicant No. 3 of ₹ 12,697/- along with interest of ₹ 1521/-. Since the Applicant No. 1 & 4 have not paid any amount post GST (upto 31.08.2018) and hence, there was no benefit of ITC to be passed on in respect to these two Applicants during the period of investigation. The Respondent has also claimed that the total ITC benefit of ₹ 1 .....

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..... issues raised by the Applicants are as follows: i. The above Applicants have pleaded for granting benefit of ITC to all the flat buyers instead of only the Applicants while passing the order. In this regard, it is mentioned that in every such case, the Authority allows benefit to all the buyers of the project and not only the Applicants. Therefore, this pleading of the Applicants is accepted. ii. Second pleading of the Applicants is that instead of actual ITC benefit accrued to him, the Respondent had passed on the ITC benefit at a flat rate of 4% to the buyers. In this regard, during the proceedings, the Respondent has admitted that he has passed on the ITC benefit on actual calculations as per the DGAP's investigation report along with the interest @18% p.a. This fact was also admitted by the Applicants during the proceedings. Therefore, the objection of the above Applicants is not sustainable. iii. The above Applicants have also raised objection that the request of the Respondent that he would pass on the benefit at the time of completion of the project was not sustainable. In this regard, the Respondent has admitted that he has passed on the ITC benefit as per the DGAP' .....

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..... . Increase in input tax credit availed post-GST (%) D - 3.73% 3.73% 3.73% 5. Analysis of Increase in input tax credit 6. Base Price collected during July, 2017 to August, 2018 (Gross Turnover) E 19,465,786 149,554,736 169,020,522 7. GST Collected over Basic Price F= E*12% or 8% 2,335,894 11,964,379 14,300,273 8. Total Demand collected G=E+F 21,801,680 161,519,115 183,320,795 9. Recalibrated Basic Price H=E*(1-D) or 96.27 % of E 18,739,531 143,974,954 162,714,485 10. GST @12/8% I=H*12/8% 2,248,743 11,517,996 13,766,740 11. Commensurate demand price J=H+I 20,988,275 155,492,950 176,481,225 12. Excess Collection of Demand or Profiteering Amount K=G-J 813,405 6,026,165 6,839,570 On the basis of the aforesaid CENVAT/input tax credit availability pre and post-GST and the details of the amount collected by the Respondent from the Applicants and other home buyers during the period 01.07.2017 to 24.01.2018, the amount of benefit of input tax credit that needs to be passed on by the Respondent to the recipients or in other words, the profiteered amount comes to ₹ 8,13,405/- which includes 12% GST on the base profiteered amount of ₹ 7,26,255/-. Further, the amount of benefit of in .....

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..... tio of ITC/Turnover for post-GST period (July, '17 to August, '18) comes out as 3.71%. Therefore, in the context of the findings of the DGAP, which have been carefully considered the fact that the Respondent has accepted the findings of the Investigation Report and passed on the ITC benefit to his recipients, the Authority finds no reason to disagree with the investigation conducted and the consequent Report of the DGAP. 31 Therefore, this Authority, under Rule 133(3)(a) of the CGST Rules, 2017, orders that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The Respondent's Annexures dated 15.04.2019 and 03.05.2019, which comprise of the details of payments made through various modes have been taken on record. As per this Annexure the Respondent has paid to the Applicant No. 1 to 4 and 716 other home buyers the entire profiteered amount through credit notes and letters to this effect have been sent to all these home buyers as has been shown in the Annexures. Needless to mention that all such refunds/adjustments shall be made, incorporating the interest @ 18% f .....

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