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2019 (11) TMI 467

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..... re. 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 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 impose on him. - Case No. 55/2019 - Dated:- 5-11-2019 - SH. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, MS. R. BHAGYADEVI, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Present: - Applicant No. 1 Sh. Hardev Singh, Applicant No. 2 Sh. Vaneet Malhotra, Applicant No. 3 Ms. Martha Paohaonamai, Applicant No. 4 Ms. Megha in person alongwith their Authorised Representative Sh. R. K. Jain and Sh. Rameshwar Singh, Sh. Rahul Chawdhary, Sh. Ishu Khurana, Sh. Sonu Verma and Sh. Ashok Singhal, buyers, .....

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..... or 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 on by him to the above Applicants by way of commensurate reduction in prices and if not passed on, to suo moto determine the quantum thereof and pass on the benefit and indicate the same in his reply to the notice as well as to furnish all supporting documents in the case. The Respondent was given an opportunity to inspect the non-confidential evidence/information furnished by the Applicants during the period 17.09.2018 to 19.09.2018. However the Respondent did not avail of the said opportunity. As regards the application received vide the second of the two references of the Standing Committee on Anti-Profiteering by the DGAP, the p .....

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..... nt 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, the DGAP has further stated that vide his aforementioned letters, the Respondent had submitted the following documents/information: (a) Copies of GSTR-1 returns for the period August, 2017 to August, 2018. (b) Copies of GSTR-3B returns for the period August, 2017 to August, 2018. (c) Copies of all demand letters issued in the name of the above Applicants. (d) Tax rates- pre-GST and post-GST. (e) copy of Balance Sheet for FY 2016-17& FY 2017-18. (f) Copy of Electronic Credit Ledger for the period 01.08.2017 to 31.08.2018. (g) ITC register for the period September, 2017 to August, 2018. (h) Details of turnover and ITC for the pro .....

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..... 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% 1,31,475 - 1,31,475 1,31,475 2. Within 15 days of the date of issuance of offer of Allotment letter 20.05.2017 20.00% 5,25,900 - 5,25,900 5,25,900 3. Within 06 months of the date of issuance of offer of Allotment letter 19.11.2017 12.50% 3,28,688 - 26,295 3,54,983 0 4. Within 12 months of the date of issuance of offer of Allotment letter 19.05.2018 12.50% 3,28,688 - 26,295 3,54,983 0 Total 50.00% 13,14,751 - 52,590 13,67,341 6,57,375 Applicant No. 2 & 3 (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 30.12.2016 5.00% 1,31,300 - 1,31,300 1,31,300 2. Wi .....

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..... ate, 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) 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 .....

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..... 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, 2018), it was 3.73%. This clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 3.73% [3.73% H 0%] of the turnover. It was stated by him 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 included in the service) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (Annex-23). The effective GST rate on construction service in respect of affordable and low-cost housing was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) d .....

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..... ofiteered 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 DGAP with his Report as Annex-25. The DGAP has also reported that as per Annexure-25, the Applicant No. 1 and 4 had not paid any amount in the post GST period and hence, they were not entitled for any benefit of increased ITC availability. However, in the case of Applicant No. 2 & 3, mentioned at serial no.187 and 484 of Annexure-25, the amount profiteered was ₹ 25,3941- (including GST). 19. On the basis of the details of the outward supplies of the construction service submitted by the Respondent, the DGAP has further reported that the said construction service had been supplied by the Respondent in the State of Haryana only .....

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..... itional 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 reduction in rate of tax on any supply of goods or services or the benefit of ITC was required to be passed on to the recipients by way of commensurate reduction in prices which had been contravened in the present case. 22. The above report was considered by the Authority in its meeting held on 26.02.2019 and it was decided to hear the Applicants No. 1 to 4 and the Respondent on 13.03.2019. Sh. Rahul Chaudhary, Sh. Ashok Singal, Sh. Rameshwar Singh, Sh. Ishu Khurana and Sh. Ramesh Singh were also added as applicants on their request as they had also purchased flats from the Respondent. First hearing was held on 13.03.2019 when the Applican .....

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..... 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) 191,85,479 1486,00,816 1677,86,295 10. Total Turnover plus GST collected originally collected from buyers (1 + 2) 2,18,01,676 16,15,19,116 18,33,20,792 11. Excess collection of demand or profiteering amount (10 minus 9) 26,16,197 129,18,300 155,34,497 vi. The Applicants have also submitted that profiteering due to non-passing of the ITC benefit by the Respondent was 12% during the period from 01.07.2017 to 24.01.2018 and 7.998% during the period from 25.01.2018 to 31.08.2018 under Section 171 of CGST Act, 2017. Therefore, the amount of refund allowed by the Respondent @ 4% during May, 2018 should be deducted from the above amount of .....

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..... e 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 ₹ 1,90,09,595/- has been passed on by him along with interest of Rs. 26,00,920/- to the 720 home buyers up to 31.03.2019. 25. We have carefully considered the DGAP's Report and the written submissions filed by both the Applicants and the Respondent which have been placed on record and find that following issues are to be settled in the present proceedings:- I. Whether there was reduction in the rate of tax on the service in question w.e.f. 01.07.2017 and w.e.f. 25.01.2019? II. Whether there was any net additional benefit of ITC? III. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017, by not passi .....

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..... 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's investigation report along with the interest @18% p.a. during the proceedings. This fact has also been admitted by the above Applicants during the proceedings hence, the request of the Respondent to pass on the benefit at the time of completion of the project has become infructuous. iv. The above Applicants have also questioned the methodology adopted by the DGAP for calculation of the ITC benefit and suggested another methodology as has been mentioned in Para 19 (v) of this order. In this regard, the explanation of the DGAP, referred to in Para 17 and Para 18 of this order, has been found to be correct and rational as per Section .....

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..... g 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 input tax credit that needs to be passed on by the Respondent to the recipients or in other words, the profiteered amount during the period 25.01.2018 to 31.08.2018, comes to ₹ 60,26,165/- which includes 8% GST on the base profiteered amount of ₹ 55,79,782/-. Therefore, the total profiteered amount during the period 01.07.2017 to 31.08.2018 comes to 68,39,570/- which includes GST (@ 12% or 8%) on the base profiteered amount of ₹ 63,06,036/-. It is observed that the Applicant No. 1 and 4 have not paid any amount post GST and hence, there is no benefit of ITC to be passed on to them. The above amount is inclusive of  .....

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..... eceived 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% from the date of the receipt of the amount by the Respondent from the buyers till the date the due amount is refunded/adjusted within a period of three months from the date of this order. 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 necessa .....

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