9911796707
TMI Blog2019 (12) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... cant No. 11, i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. Vide the above report, the DGAP has reported that the Andhra Pradesh State Screening Committee on Anti-profiteering had referred 09 applications to the Standing Committee on Anti-profiteering under Rule 128 of the CGST Rules, 2017, filed by the Applicants No. 1 to 9, alleging profiteering by the Respondent in respect of purchase of flats in the Respondent's project "The Celest" located in Vishakhapatnam. The Applicants No. 1 to 9 had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in price after implementation of GST w.e.f. 01.07.2017 and had charged GST on the pre-GST full amount of instalments. The Applicant No. 2 had also submitted copies of demand letters issued by the Respondent during the post-GST period Along with the application. 2. The Andhra Pradesh State Screening Committee on Anti-profiteering had examined the said applications and based on the submissions made during the personal hearing granted to the Respondent, the above S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment of the same would be made in his final demand note. On the basis of his preliminary calculation, the Respondent submitted that the preliminary benefit already passed on to the customers was likely to exceed the actual benefit that would be required to be passed on in accordance with Section 171 of the CGST Act, 2017. (ii) The Respondent submitted that discount on account of GST benefit @3% had been offered to all the home buyers. The Respondent submitted that on all demands raised post-GST, discount @3% of the gross demand value had been given to his home buyers. To support his claim, the Respondent submitted all demand notes issued to the above Applicants wherein the discount had been passed on. The gross value reported in the home buyers list post-GST was inclusive of the 3% discount. (iii) The Respondent, vide e-mail dated 19.12.2018, had provided the trail of e-mail communications with his various home buyers to substantiate his claim that 3% benefit on account of ITC had been passed on by him. (iv) The Respondent submitted that as per Real Estate Regulatory Authority (RERA) specifications, the two phases of his project was identifiable as two distinct projects, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,730 4. On completion of Foundation -15% 12.09.2016 7,49,849 33,181 7,83,030 5. On casting of 3rd floor slab -12.5% 15.04.2017 6,24,874 28,119 6,52,993 6. On casting of 7th floor slab -12.5% + 50000 towards amenities charges 14.08.2017 6,74,874 83,984 7,58,858 7. On casting of 11th floor slab -10% 05.12.2017 4,99,454 59,934 5,59,388 8. On casting of top floor slab -12.5% 23.08.2018 6,24,874 53,989 68,506 6,39,391 9. On Completion of plastering - 12.5% 6,24,874 10. On Possession 5%+ Remaining Amenities Charges 3,39,950 Total 51,38,549 1,04,230 53,989 2,12,424 44,36,390 6. The DGAP in his Report has observed that the contention of the Respondent that on account of GST, he was already offering a discount @ 3% of the gross demand, which had been communicated to all his customers and hence, he had passed on the benefit that might accrue to him on account of GST and that such preliminary benefit already passed to his customers was likely to exceed the actual benefit that would be require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II, sale of building". Therefore. ITC pertaining to the unsold units might not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST. 8. The D AP has further reported that Section 171 of CGST Act, 2017 which governs the anti-profiteering provisions under GST, reads as "Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices." Thus, the legal requirement was that in the event of benefit of ITC or reduction in rate of tax, there must be a commensurate reduction in prices of the goods or services. Moreover, the said Section 171 does not provide a supplier of goods or services any means of passing on the benefit of ITC or reduction in rate of tax to the consumers other than by way of reduced prices. The Respondent had submitted that the benefit of ITC was passed on by offering a discount @3% of the demand price, to all his existing customers, post introduction of GST. 9. The DGAP has also stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive GST rate was 12% on the gross value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, the profiteering had been examined by comparing the applicable tax and ITC available to the Respondent during for the pre-GST period (April, 2016 to June, 2017) when only Service Tax (c) 4.5% was payable with the post-GST period (July, 2017 to October, 2018) when the GST rate was 12% on the gross value. On the basis of the figures contained in table-'ft above, the comparative figures of rate of tax, ITC availed/available as a percentage of the turnover in the pre and post-GST periods, as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, has been tabulated in Table- 'C' below: Table- 'C' S.No. Particulars (Pre-GST) (Post-GST) 1. Period A April, 2016 to June, 2017 July, 2017 to Oct 2018 2. Output tax rate (%) B 4.50% 12.00% 3. Ratio of CENVAT credit / Input Tax Credit to Total Turnover as per Table - E above (%) C 4.39% 10.42% 4. Increase in input tax credit availed post-GST (%) D - 6.03% 5. Analysis of Increase in Input tax credit: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Annexure-15; Rs. 1,31,729/- (including GST on the base amount of Rs. 1,17,6150 which was the profiteered amount in respect of the Applicant No. 5, mentioned at serial no. 216 of Annexure-15; Rs. 97,148/- (including GST on the base amount of Rs. 86,7401-) which was the profiteered amount in respect of the Applicant No. 6, mentioned at serial no. 142 of Annexure-15; Rs. 1,42,691/- (including GST on the base amount of Rs. 1,27,402/-) which was the profiteered amount in respect of the Applicant No. 7, mentioned at serial no, 224 of Annexure-15; Rs. 1,11,160/- (including GST on the base amount of Rs. 99,2501-) which was the profiteered amount in respect of the Applicant No. 8, mentioned at serial no. 162 of Annexure-15 and Rs. 1,50,166/- (including GST on the base amount of Rs. 1,34,077/-) which was the profiteered amount in respect of the Applicant No. 9, mentioned at serial no. 42 of Annexure-15. The DGAP has also stated that the said service has been supplied by the Respondent only in the State of Andhra Pradesh only. 14. The DGAP has also reported that the above computation of profiteering was with respect to 243 home buyers till 31.10.2018, whereas the Respondent was construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87,609 - 15. The DGAP has further claimed from the Table 'D' above that the benefit claimed to have been passed on by the Respondent (Rs. 1,53,35,365/-) was less than what he should have passed on to the home buyers (Rs. 3A5,22,974/-) including the Applicants (Sr. No. 1 to 9 of table D), by an amount of Rs. 1,91,87,609/-. The details of these amounts was given in Annexure-15 to the DGAP's Report dated 24.04.2019. 16. In view of the foregoing paras, the DGAP has concluded that the additional ITC benefit of 6.03% of the turnover had accrued to the Respondent and the same was required to be passed on to the above Applicants and other recipients as per the provision of Section 171 of the CGST Act, 2017. On this account, the Respondent had realized an additional amount of Rs. 11,36,4471- (Sr. No. 1-9 of Table- "D') from the Applicants No. 1 to 9, which included both the profiteered amount @6,03% of the basic price and GST on the said profiteered amount. However, the Respondent had suo moto passed on an amount of Rs. 5,04,818/- to the above Applicants, duly verified from the demand letters issued to the Applicants No, 1 to 9. Therefore, the Respondent had profiteered by an amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a Tower retail mall was being built and on the higher floors residential apartments were being built as details given below: Particulars Details %age Saleable Carpet Area Residential portion 2,65,592 Sq. feet 76% Commercial portion 85,216 Sq. feet 24% Total 3,50,808 Sq. feet 100% Area Sold (up to 31st October 2018) Residential portion 2,40,233 Sq. feet 100% Commercial portion 0 Sq. feet 0% Total 2,40,233 Sq. feet 100% Turnover details (excluding taxes) Turnover of sold portion (Upton 31 October 2018) 117.21 Crores 53% Balance turnover of sold portion* 26.15 Crores 12% Estimated sale value of unsold portion^ 77.90 Crores 35% Total 221.26 Crores 100% *Without considering 3% interim benefit ^ Conservative estimate on the basis of last sale transaction # It was submitted that for the purpose of computation of profiteering, the DGAP has only considered the Residential portion of the project and not the total area. 19. The Respondent has also submitted that even though there were no specific guidelines/ methodology prescribed under the CGST Act, 2017 for passing on such benefit, the Respondent suo moto computed and decided to pass on preliminar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut tax savings to be passed/Sale value of portion sold under GST % benefit to be passed = Rs. 2 08 Crores./Rs. 77.2 Crores = 2.69% Scenario 2 - Where area was taken as basis for allocating estimated input tax savings to be passed: - Proportion of estimated input tax savings to be passed on to the existing customers: Total Savings of the Project * Residential Area sold / Total area of the project Input tax savings to be passed - Rs. 3.2 Crores X 2, 40,235 Sq. feet = Rs. 2.19 Crores 3,50,808 Sq. feet Estimated input tax savings to be passed on were allocated to the total sale price of the existing customers to compute the percentage benefit to be passed: Input tax savings to be passed/ Sale value of portion sold under GST % benefit to be passed = Rs. 2.19 Crores./Rs. 77.2 Crores = 2.85% The Respondent has also submitted that even though the amount allocable on the basis of above methodology was ranging between 2.69% to 2.85%, however, the final benefit arising on account of GST cannot be ascertained till completion of the project due to the following factors: a. Any sale of property after receipt of completion certificate did not attract GST and thus, to this extent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analyzing the reasons. The actual reasons for the availability of such incremental credits were not looked into for arriving at the benefits to be passed on. He has further highlight that there were primarily 2 reasons for such incremental credits. Firstly, there was increase in tax rates i.e. tax on services increased from 15% to 18% and on goods from 22% to 28%. Secondly, the availability of blocked credits in post-GST period. 22. The Respondent has further stated that the rate of tax on services was 15% in pre-GST regime, which was subsequently increased to 18% in post-GST regime. The credit availability/eligibility was not changing as Service tax paid on execution of works contract was earlier available as CENVAT for utilization against the output tax liability; and the same continued to be available as credit under GST. The change on this account was the increase in tax rate from 15% to 18% for which additional working capital was applied. The Respondent has argued that the DGAP should take into consideration the said aspect as there was no change in the credit availability/eligibility and only an increase in tax rate was the reason for such incremental credit. The Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent has further averred that methodology adopted by the DGAP was not correct as per legislative requirements and there were multiple apparent errors in the computation done by the DGAP. The DGAP has considered incorrect details of total saleable area in his computation of profiteering. The Respondent has contended that in the computation of alleged profiteering, the DGAP has not considered the correct details of saleable area. The DGAP had considered total saleable area of 2, 65,592 Sq. ft. in Table 'B' of his Report instead of correct total saleable area of 3,50,808 Sq. ft. As a result, the alleged GST benefit pertaining to unsold portion has been inadvertently construed as benefit to be passed on to the existing customers. The computations failed to protect the right of future customers who would either buy the property in future or have bought the apartments subsequent to period for which computation was being done by the DGAP which was tantamount to unjust enrichment of alleged GST benefits to existing customers. The Respondent has also submitted that where any portion remained unsold until completion, proportionate ITC pertaining to such portion of property would require to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te credit pertaining to sold and unsold portions and "value" was more logical and correct base. Allocation of credit based on area did not concur with the provisions of GST law. Under GST law, value was the basis for determining output tax liability payable by any tax payer. Unless value of goods or services being supplied was not determined. the output tax liability cannot be computed. Area was not relevant for GST laws in any manner and their details were required to be submitted under different laws as applicable from time to time. Even calculation of benefit to be passed on to the customer has been made based on sale value (i.e. demand price) by the DGAP. Thus, usage of two different basis (i.e. allocation of ITC basis area and distribution of alleged GST benefits basis value) in the same computation would give illogical and absurd results. The Respondent has also argued that Section 171 of the CGST Act, 2017 also specifies that benefit should be passed by way of commensurate reduction in "prices". Hence, it was evident that GST laws also considered the price as a relevant basis for anti-profiteering provisions. Therefore, the allocation should be made on the basis of value and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP was correct then the computation for alleged profiteering needed to be revised. Therefore, he has given his remarks highlighting the errors alongside the computation made by the DGAP in Tables below: Scenario 1 - Where value was taken as basis for allocation of ITC Particulars Reference As per DGAP's Report Post errors rectification Remarks Pre-GST Post-GST Pre-GST Post-GST Cenvat of Service Tax paid on input services A 21,784,314 37,284,314 Cenvat credit considered only for April 16-June 17, Cenvat credit upto March 16 amounting to Rs. 1.55 Cr not considered ITC of GST Availed B 58,910,304 58,910,304 Total Cenvat/ITC C=A+B 21,784,314 58,910,304 37,284,314 58,910,304 Total Turnover D 448,480,346 511,178,843 643,380,346 511,178,843 Pre-GST Turnover Cenvat credit considered only for April 16-June 17. Turnover up to March 16 amounting to Rs. 19.49 Cr. not considered Saleable area / Saleable value E 265,592 265,592 2,212,563,814 2,212,563,814 ITC allocated basis area and not value was incorrect Sale Value (sold area) -Rs. 143.35 Cr. Sale V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saleable area E 265,592 265,592 350,808 350,808 Saleable area as per RERA and information provided to DGAP was 350,808 Sq.Ft. Sold area F 240,233 240,233 240,235 240,235 ITC relevant G=C*E/F 19,704,325 53,285,487 25,532,477 40,342,059 Ratio of ITC (Total Credit/Total Turnover) H=G/D 4.39% 10.42% 3.97% 7.89% Increase in ITC availed post GST I=Post GST H-Pre-GST H - 6.03% - 3.92% Ratio was liable to be revised considering errors highlighted above Total basic demand under GST J 511,178,843 511,178,843 GST Charged @ 12% K=J*1.12 61,341,461 Total demand under GST L=J+K 572,520,304 Recalibrated base price M=J*(1-H) 480,354,759 491,122,860 Add: GST @ 12% N=M*1.12 57,642,571 Commensurate demand price O=M+N 537,997,330 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case. Therefore, given that the facts of the present case were not similar to M/s Pyramid Infratech Pvt. Ltd., he has submitted that the methodology adopted in the above case could not be squarely applied in the present case. 32. The Respondent has further made his legal submissions that the Section 171 of the CGST Act, 2017 was ultra vires the constitution and thus, investigation should be either dropped or kept in abeyance till the constitutional validity is being scrutinized by the Hon'ble High Court. He has also stated that Section 171 of the CGST Act, 2017 violates Article 19 (1) (g) of the Constitution. Right to trade is a fundamental right guaranteed under Article 19 (1) (g) of the Constitution of India and includes the right to determine prices, and such right cannot be taken away without any explicit authority under the law passed by the Parliament or State legislature under Entry 34 of the Concurrent List (List III) of the Seventh Schedule to the Constitution of India. Only in exceptional cases, and in respect of a few specified goods, the Government has enacted laws to control prices. He has also submitted that the provisions of Section 171 of the CGST Act wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supply of goods or services or the benefit of ITC had been passed on by the registered person to the recipient by way of commensurate reduction in prices." In view of the above, he has submitted that the CGST Act, 2017 and the CGST Rules, 2017 empowered this Authority to lay down the methodology for determining the manner in which the benefit of reduced GST rate or enhanced credit be passed on to the recipient. However, no precise computation methodology or principles has been laid down by the Authority. The methodology to be prescribed by this Authority must capture the basic principles that would be relevant to all industries keeping in view the common trade practices which would ensure that Section 171 of the CGST Act, 2017 was interpreted in a uniform manner across all tax payers. Such methodology was the crux of Section 171 of the CGST Act, 2017 because the same would ensure equity, consistency and uniformity in defining the scope of Section 171 of the above Act. 34. The Respondent has also argued that no machinery provisions were available under the GST law and hence, charging provisions of anti-profiteering would fail in this case. Besides, this Authority had been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment, the law being vague, it would not be open to the authorities to arbitrarily assess to tax. In this regard, the Respondent has relied on the following decisions: * K.T. Moopil Nair vs. State of Kerala [AIR 1961 SC 552] = 1960 (12) TMI 76 - SUPREME COURT; * Rai Ramkrishna vs. State of Bihar [1963 AIR 1667, 1964 SCR (1) 897] = 1963 (2) TMI 2 - SUPREME COURT; * State of A.P. vs. Nalla Raja Reddy [1967 AIR 1458, 1967 SCR (3) 28] = 1967 (2) TMI 98 - SUPREME COURT; * Vishnu Dayal Mahendra Pal vs. State of U.P. [1974 AIR 1489, 1975 SCR (1) 376] = 1974 (5) TMI 116 - SUPREME COURT; and * D.G. Gose and Co. (Agents) (P) Ltd. vs. State of Kerala [(1980) 2 SCC 410] = 1979 (9) TMI 189 - SUPREME COURT. The Respondent has further stated that the DGAP had initiated the anti-profiteering investigation with a pre-conceived notion that the Respondent had not passed on the benefit of the reduced GST rate to his customers. The DGAP's arbitrariness would render the entire investigation an otiose exercise resulting in grave injustice to the Respondent. In this regard, he has referred to the Apex Court decision in the case of Natural Resources Allocation (2012) 10 SCC 1 = 2012 (10) TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les. However, the Notice did not specify the exact allegation made against the Respondent. He has also stated that he cannot be expected to make appropriate submission in his defence without knowing exact allegations under such Sections. Hon'ble Supreme Court in case of Kaur & Singh vs CCE, New Delhi = 1996 (11) TMI 84 - SUPREME COURT has held that the party to whom a show cause notice was issued must be made aware of the allegations against it and it was a requirement of natural justice. Thus, in absence of invocation of specific provision with respect to imposition of penalty, the penal provisions cannot be invoked. He has also asserted that there was no provision under the aforementioned sections which specifically contemplates levy of penalty in cases where the supplier had not passed on the benefit as required by Section 171 of the CGST Act, 2017. Thus, the aforementioned penal provisions were not applicable in the present case except to the extent of Section 125 of the CGST Act, 2017 which was general in nature. He has submitted that while Rule 133 of the CGST Rules, 2017 provides power to this Authority for imposing penalty, there was no corresponding provision in the said A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded in the post-GST credits for computing benefit to be passed on to customers. In this regard, the Respondent has submitted that out of the total transitional credit of Rs. 1,31,25,206/-, Rs. 72,59,350/-related to Service tax balance which could not be utilized till 30 June 2017. With respect to balance transitional credit of Rs. 58.65,856/-, the same related to Excise duty/VAT/Entry tax benefit on procurements made by the Respondent under pre-GST regime. The Respondent has submitted that it was not a benefit under GST regime and thus, should not be considered for the calculation of credit benefits to be passed on to the customers. He has also submitted that there was mandatory requirement to pass on benefit of transitional credit claimed under TRAN-2 (i.e. situations where no invoice was available to substantiate amount of duty paid) to the customers. However, there was no such requirement to pass on aforementioned transitional credit claimed under TRAN-1 filed under Section 140 of the CGST Act, 2017. 37. The Respondent in his submissions dated 24,06.2019 in response to the revised submissions of the Applicants dated 15.06.2019 & the DGAP's supplementary Report dated 07.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC "2(63) ITC means the credit of input tax;' Section 2(62) of the CGST Act - Definition of input tax "input tax in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes- (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but did not include the tax paid under the composition levy:" In view of the above, he has made the following submissions: * Section 171 of the above Act mandates passing on the benefit of "ITC" only and the definition of ITC given under the CGST Act covered CGST, SGST, UTGST or IGST. It did not specifically include any of the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns dated 02,07,2019 in response to the DCAP's supplementary Report dated 07.06.2019 and the revised submissions dated 25.06.2019 of the Applicants has further stated that unutilized CENVAT credit balance transitioned into GST credit has been appropriately considered as pre-GST credit (Amount involved - Rs. 72,59,3500. The Applicants have alleged that transitional credit of Rs. 72,59,350 should not be considered as pre-GST credit and accordingly, pre-GST credit should have been Rs. 3,00,24,964/- only (i.e, difference between Rs, 3,72,84,314/- less Rs. 72,59,3504 The Respondent has contended that the aforementioned transitional credit of Rs. 72,59,350/- related to Service tax balance which could not be utilized till 30 June 2017, However, the said amount was allowed to be carried forward as ITC on introduction of GST regime, He has also submitted that this was a mere procedural requirement and it did not result in any change in the underlying fact that such amount of Rs. 72,59,350/- was benefit available under pre-GST regime and accordingly, should be treated as pre-GST credit. 41. The Respondent has also argued that the Applicants have been continuously revising the figures of post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 171 mandates passing on the benefit of "ITC" only and the definition of ITC given under the CGST Act covers CGST, SGST, UTGST or IGST. It did not specifically include any of the previous taxes applicable under the Erstwhile tax laws such as Chapter V of the Finance Act, 1994, Central Excise Act, 1944, etc. * Further, ITC has been defined to mean specified taxes charged on supply of goods or services or both. Thus, transitional credit would not get covered under the ambit of "ITC" since it relates to sale, entry or manufacture of goods and not supply per se. * Rule 117 of the Central Goods & Services Tax Rules, 2017 provides that credit of "eligible duties and taxes': (as defined in Explanation 2 to Section 140 (3) of the CGST Act) transitioned under GST law should be construed as "ITC". However, the provisions were silent with respect to the credit of "eligible duties" transitioned under GST law, which has been separately defined in Explanation 1 to Section 140 of the CGST Act. On the basis of the above discussion, he has further elaborated that transitional credit of "eligible duties" availed by the Respondent cannot be said to be the benefit of ITC under the CGST Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the jurisdictional authorities during the verification of TRAN-1 have issued a Notice dated 05 November 2018 to him (the Respondent) seeking to reverse the ITC of Rs. 58,65,856/- availed in TRAN-1 on the ground that no input was lying in the stock or work-in-progress of the Respondent as on 30 June 2017 and the Respondent has decided, on a conservative basis, to reverse such credit. A copy of the Notice and GSTR-3B for the month of June 2019 was enclosed by him as evidence. In light of above facts, he assumed that the methodology adopted by the DGAP was correct, he has mentioned his remarks highlighting the above-mentioned errors alongside the computation made by the DGAP in Table given below:- Particulars Reference As per DGAP's Report Post errors rectification Remarks Pre-GST Post-GST Pre-GST Post-GST Cenvat of Service Tax paid on input services A 2,17,84,314 3,72,84,314 Cenvat credit considered only for April 16-June 17, Cenvat credit upto March 16 amounting to Rs. 1.55 Cr not considered ITC of GST Availed B 5,89,10,304 5,89,10,304 Total Cenvat/ITC C=A+B 2,17,84,314 5,89,10,304 3,72,84,314 5,89,10,304 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary practice followed by the DGAP and not in consonance with Section 171 of CGST Act, 2017. This approach led in completely ignoring pre-GST ITC earned prior to April 2016 and would lead to absurd results. The Respondent has also submitted that the subject project was initiated prior to April 2016 and the Respondent had also incurred expenditures during such period and earned ITC. Accordingly, pre-GST period should have been taken from beginning of project to June 2017. The same was also accepted by the Applicants present at the time of hearing. 47. The Respondent has also contended that incorrect details of total saleable area considered in the computation by the DGAP (total saleable area currently considered was 2,65,592 Sq. ft, instead of 3,50,808 Sq. ft.). The DGAP has acknowledged that it was aware that the project comprised of residential and commercial development. The DGAP has clarified that the only reason because of which he has not considered the commercial area was because no commercial area has been sold till date. In this regard, the Respondent has submitted that the reasoning provided by DGAP was completely irrational and inconsistent since the D AP itself has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,185 Profiteering amount as per DGAP P=L-O 34,525,630 24,706,119 Benefit amount (Recalibrated base price less revised base price) Q=M*(1-H) Less: Interim benefit already passed to customer R 1,53,35,365 1,53,35,365 Benefit to be passed on S=Q-R 19,190,265 9,370,754 49. The Respondent in his submissions dated 11.10.2019 has provided the revised computation with revised figures assuming that the methodology adopted by the DGAP was correct under various scenarios in Tables below: Scenario A - Where correct total saleable area. pre-GST ITC and pre-GST turnover from Apr 14 to Jun 17 (instead of Apr 16 to Jun 17) was considered Particulars Reference As per DGAP's Report Post errors rectification Pre-GST (Apr 16 to Jun 17) Post-GST (Jul 17 to Oct 18) Pre-GST (Apr 16 to Jun 17) Post-GST (Jul 17 to Oct 18) Cenvat of Service Tax paid on input services A 21,784,314 21,784,314 ITC of GST Availed B 58,910,304 58,910,304 Total Cenvat/ITC C=A+B 21,784,314 58,910,304 21,784,314 58,910,304 Total Turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above submissions the revised Table - 'B' was given as follows: S.No. Particulars Total Total (Pre-GST) (Post-GST) 1 2 3 4 1. CENVAT of Service Tax Paid on Input Services (A) 1,45,24,964 - 2. Credit of VAT Paid on Purchase of Inputs (B) - - 4. Input Tax Credit of GST Availed (C) - 7,95,69,826 5. Total CENVAT/VAT/Input Tax Credit Available (D)=(A)+(B) or (C) 1,45,24,964 7,95,69,826 6. Total Turnover as per Rome Buyers List (E) 44,84,80,346 51,11,78,843 7. Total Saleable Area (in sq. ft.) (F) 2,65,592 2,65,592 8. Area Sold relevant to Turnover as per Home buyers List (G) 2,40,233 2,40,233 9. Relevant CENVAT/INPUT TAX CREDIT (H)=[(G)*(D)/(F)] 1,31,38,105 7,19,72,4116 10. % of CENVAT/ITC to Turnover [(J)=H/E*100 2.39 14.08 d. From the above re-worked figures the Respondent has not passed on ITC to the tune of 11.15% (14.08-2.93) as per observations in pars 18 of the said Report dated 24.04.2019. Based on the above reworked figures, the Table - 'C' of the said Report was reworked as follows: S.No. Particulars Total Total (Pre-GST) (Post-GST) 1 2 3 4 1. Output Tax Rate (A) 4.50% 12.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 15.06.2019 which were here under: a. The Respondent had never come forward to give any ITC benefit of GST as claimed by him in his letter dated 24.05.2019. After a complaint was filed before GST Commissioner of Andhra Pradesh, the Respondent had come forward with the offer of 3% ITC benefit to be passed. b. that even the Respondent in his letter dated 24.05.2019, while questioning the methodology adopted by the DAP in his Report, accepted the fact that the credit under Andhra Pradesh VAT Act and CENVAT Credit of Inputs was not available and that was one of the major reasons for difference in credits pre-GST and post-CST. c. The Respondent had claimed input credit by way of "Transitional arrangements for inputs" in terms of Sub Section 6 of Section 140 of CGST Act, 2017 read with similar provision under APSGST Act, 2017 and the same was credited to his electronic credit ledger. d. The Respondent had availed the AP VAT and CENVAT credit of goods which were procured prior to GST and used by the Respondent for making taxable supplies post GST. Further, the Respondent had claimed the said credit as per Section 140 of CGST Act, 2017 because the inputs were used for supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on some benefit after writing to State Tax Commissioner. On 18.082017 letter to Mr. Mansh Karserija was sent by registered post, Again on 12.12.2017 letter to Mr. Mansh Karserija was given by hand and the complaint was filed before State GST Commissioner and Jt. Commissioner on 22.12.2017 and before State Screening Committee on 25,12,2017. Only after filing complaint to CGST State Commissioner and Jt. Commissioner of State Tax, Visakhapatnam, the Respondent has sent us email on 22.12.2017 with proposal to pass on ITC Benefit. They also stated that as evident from Table A of Report of the DGAP, the said benefit was passed on after December 2017, which clearly showed that the Respondent has neither came with clean hands before the Anti Profiteering Authority nor before the Committee and was trying to camouflage the facts to suit their requirements as being done with applicants. c. The ITC shown in post-GBT period in Table 'B' of the Report of the DGAP was not in agreement with Returns filed by the Respondent and require certain adjustments. Considering the entire information made available to Applicants and as per submissions made by the Respondent by his letter dated 24th May 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,964 - 2. Credit of VAT paid on Purchases of Inputs (B) - - 4. Input Tax Credit of GST Availed (C) - 7,87,87,676 5. Total CENVAT/VAT/Input Tax Credit Available (D) = A+B or C 3,00,24,964 7,87,87,676 6. Total Turnover as per Home Buyers List (E) 64,33,80,346 51,11,78,843 7. Total Saleable Area (in Sq. Fts) (F) 3,50,808 3,50,808 8. Area Sold relevant to Turnover as per home buyers List (G) 2,40,233 2,40,233 9. Relevant CENVAT / Input Tax Credit (H)=(G)*D/F 2,05,61,068 5,39,53,729 10. % of CENVAT / ITC to Turnover H/E*100 3.2 10.55 Table 'C' (Amount in Rs.) Sl.No. Particulars Total Total (Pre-GST) (Post-GST) 1. 2 3 4 1. Output Tax Rate (A) 4.50% 12.00% 2. Ration of CENVAT / ITC as per Table - B (B) 3.20% 10.55% 3. Increase in Input Tax Credit Post GST (C) - 7.35% 4. Total Basic Demand during July to October 2017 (D) - 51,11,78,843 5. GST Charged (E) - 6,13,41,461 6. Total Demand (F) = D+E - 57,25,20,304 7. Recalibrated Base Price (G) = D*(1-C) - 47,36,07,198 8. GST @ 12% (H) = G*12% - 5,68,32,864 9. Commensurate Demand Price (I) = G+H 0 53,04,40,062 10. Excess Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GAP has also stated that he has taken the residential area as the total saleable area and not considered the commercial area. The factual information submitted by the Respondent was as follows:- Total residential area: 2, 65,592 sq. ft. Total commercial area (as claimed by the Respondent): 85,216 sq. ft. Total area (as claimed by the Respondent): 3,50,808 sq. ft. 57. The DGAP has also submitted that as per the details of the buyers submitted by the Respondent, he has sold only the residential portion of the project and no commercial unit has been sold by the Respondent during or before the period of investigation considered by the DGAP. Apparently, there was no turnover from the commercial area of the project, the area sold relevant to turnover as per Column 'G' of Table 'B' of the DGAP's Report dated 24.04.2019 consisted of only the residential portion and hence, the total saleable area pertaining to the residential portion only, has been considered by the DGAP in Column 'F' of Table 'B' of the Report dated 24 04 2019. The DGAP has further argued that the Applicant No. 1 has submitted that the unutilized CENVAT credit balance of Rs. 1,31,25,206/- which has transitioned into t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /methodology for determination of the quantum of benefit to be passed on which could cover different sectors of the economy and that each case has to be decided based on its specific facts. In this case, for calculation of profiteering, the increase in the ITC as a percentage of total taxable turnover has been taken by the DGAP and we do not find anything incorrect therein, C. The Respondent has also argued that pre-GST period should have been taken from May, 2015 to June, 2017, whereas the DGAP has taken the period from April, 2016 to June, 2017, The DGAP has contended that he has considered a uniform pre- BT period from April, 2016 to June, 2017 across all the investigations relating to the Real Estate sector and we find this argument of the DGAP appropriate as principle of parity and uniformity in respect of period before the implementation of the GST, followed by him in real estate cases to arrive at profiteering amount. D. The Respondent has also contended that the DGAP has taken the residential area as the total saleable area and riot considered the commercial area In this regard, the DGAP has stated that the Respondent has sold only the residential portion of the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easing the benefit of additional ITC and by collecting tax @12% on this additional realisation he has denied the benefit of additional ITC to them by not reducing the prices of the flats commensurately. Had he not collected additional GST the buyers would have paid less price and by doing so he has denied them the benefit of additional ITC which amounts to violation of Section 171 of the above Act. Both the Central as well as the State Government had no intention of collecting the additional GST as they had forfeited their revenue in favour of the flat buyers to provide them accommodation at affordable prices and by compelling the buyers to pay the same the Respondent has not only defeated the intention of the above Governments but has also acted against the interests of the house buyers hence the contention of the Respondent is not justified and therefore, the GST collected by him on the additional realisation has rightly been included in the profiteered amount by the DGAP and there is no question of reducing an amount of GST paid to the Government from the profiteered amount which has been forcibly collected by him from the flat buyers. H. The Respondent has also averred that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of tax. In this regard, he has relied upon the Apex Court's decision in the case of CIT vs. B. C. Srinivasa Shetty and he has also cited other cases viz. K.T. Moopil Nair vs. State of Kerala; Rai Ramkrishna vs. State of Bihar; State of A.P. vs. Nalla Raja Reddy; Vishnu Dayal Mahendra Pal vs. State of UP.; and D.G. Lose and Co. (Agents) (P) Ltd. vs. State of Kerala in his defence. We find the contention of the Respondent wrong and incorrect as the Authority has notified the Methodology and Procedure vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017 which was also made available on its website for ready reference for the trade. As the facts of each case are different so no fixed mathematical methodology can be prescribed for each case separately. Therefore, the cases cited above have no relevance there. The overarching principle of the existent law is to ensure that the supplier has not pocketed the ITC benefit accrued to him on account of implementation of GST and has passed it on. 60. The Applicants have also contended that the unutilized CENVAT credit balance of Rs. 1,31,25,206/- which has transitioned into the GST credit should be considered as pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions as mentioned in Annexure 15 of his Report. Thus, based on the above facts this Authority determines the profiteered amount as Rs. 3,45,22,974/- which includes GST @12% on the base profiteered amount of Rs. 3,08,24,084/- realized from 243 out of total 267 residential units for the period w.e.f. 01.072017 to 31.10.2018 as per the Annexure- 15 of the Report., including the above Applicants. 62. It was established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 had been contravened by the Respondent as he had profiteered an amount of Rs. 3.45,22.974/- which includes GST @12% as applicable on the base profiteered amount of Rs. 3,08,24,084/- from the 243 residential units for the period w.e.f. 01.07.2017 to 31,10.2018 as per Annexure- 15 of the Report Accordingly, the above amounts shall be paid to the above Applicants and the other eligible house buyers by the Respondent along with interest @18% from the date from which these amounts were realized from him till he was paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which shall be recovered by the concerned Commissioner CGST/SGST and pai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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