TMI Blog2019 (12) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... im to all the eligible buyers. In case this additional benefit is not passed on to the Applicants No. 1 to 71 or to other eligible buyers, they shall be at liberty to approach the Haryana State Level Screening Committee for initiating fresh proceedings under the provisions of Section 171 of the above Act against the Respondent. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) Of the above Act and therefore, he is 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 as to 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. Application disposed off. - Case No. 67/2019 - - - Dated:- 9-12-2019 - SH. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Sh. Pawan Kumar, Applicant No. 1, Sh. Anil Kumar, Applicant No. 2, Sh. Sailesh Dikshit, Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. 4. Consequently, the DGAP issued a notice under Rule 129 of the Rules on 15.01.2019 calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicants by way of commensurate reduction in prices and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as to furnish all supporting documents to substantiate his claim. 5. The period covered by the DGAP in the current investigation is from 01.07.2017 to 31.12.2018 and the construction service was supplied by the Respondent in the State of Haryana only. 6. In response to the notice dated 15.01.2019, the Respondent submitted his replies in parts vide letters and e-mails dated 30.01.2019, 14.02.2019, 21.02.2019, 18.03.2019, 19.03.2019, 28.03.2019, 09.04.2019, 10.04.2019 and 09.05.2019. The reply of the Respondent to the DGAP contained the following: - (a) The Respondent submitted that he was in the business of construction of flats under Haryana Affordable Housing Policy, 2013, in a single residential project Floridaa situated at Bhatola, Sec-82, Faridabad, Haryana. The project was registered with the Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Copies of VAT ST-3 returns for the period April, 2016 to June, 2017. (d) Copies of all demand letters, sale agreement along with allotment letter, settlement deed and payment details in respect of the Applicants No. 01, 05, 07, 22, 30, 39, 40 and 41 above (e) Details of applicable tax rates, pre-GST and post-GST. (f) Copy of audited Balance Sheet (including all annexures and profit loss account) for FY 2016-17 FY 2017-18. (g) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018. (h) CENVAT/ITC register for the period April, 2016 to December, 2018. (i) Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to December, 2018 for the project Floridaa . (j) List of home buyers in the project Floridaa along with details of commercial shop buyers. (k) Details of benefit of ITC passed on to the buyers along with sample customer s ledger. 8. In addition the Respondent, also submitted a copy of flat buyer s agreement dated 31.07.2015, entered by the Applicant No. 1 and demand letters for the sale of flat No. D-0403, mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,71,958 8 Within 36 months of Allotment 09.04.2018 12.50% 2,42,820 - - 19,426 - 2,62,246 9 Change in Size 01.03.2018 - 27,360 - - 2,189 - 29,549 10 Miscellaneous (IF-MS, VAT,) 11.01.2019 - 25,000 - 72,846 - (29,138) 68,708 Total 100.00% 19,94,920 25,496 72,846 50,753 (29,138) 21,14,877 9. The DGAP on examining the various documents observed that the Respondent had claimed that he had already passed on the benefit of ITC even before initiation of the present proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n but not sold, was provisional ITC which might be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the Occupancy Certificate, in terms of Section 17(2) Section 17(3) of the CGST 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 subsection (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 Il, sale of building . Therefore, ITC pertaining to the unsold units might not fall within the ambit of his investigation and the Respondent was required to recalibrate the selling price of such units to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,18,287 136,60,040 - - - 3 Total CENVAT/lnput Tax credit Available (C)=(A+B) 104,16,727 49,27,090 153,43,817 - - - 4 Input Tax Credit of GST Availed (D) - - - 218,24,834 181,02,537 399,27,371 5 Turnover from Commercial as per ST-3 return (E) 208,43,044 109,98,811 318,41,855 - 18,38,711 - 6 Turnover from residential flats as per VAT Returns as per Annex-22 (F) 3361,13,395 1482,12,584 4843,25,979 - 3048,02,496 - 7 Total Turnover (G) 3569,56,439 1592,11,395 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8%. Accordingly, based on the analysis at Table- B above, the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST 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 (Amount in Rs.) S.No. Particulars Post-GST Period 1. Period A 01.07.2017 to 24.01.2018 (Flats Shops) 25.01.2018 to 31.12.2018 (Shops) 25.01.2018 to 31.12.2018 (Flats) Total 2. Output GST rate (%) B 12 12 8 3. Ratio of CENVAT credit/ Input Tax Credit to Total Turnover as per table D above (%) C 7.37 7.37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DGAP has further intimated that on the basis of the aforesaid CENVAT/ITC availability in the pre and post-GST periods and the details of the amount collected by the Respondent from the Applicants and other recipients during the period 01.07.2017 to 24.01.2018, the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients, was ₹ 1,03,06,413/- for residential flats and commercial shops, which included 12% GST on the base profiteered amount of ₹ 92,02,154/-. Further, the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients during the period 25.01.2018 to 31.12.2018, was ₹ 1,66,71,248/- which included 12% GST on commercial shops and 8% GST on residential flats, on the base profiteered amount of Rs. Therefore, the total benefit of ITC to be passed on during the period 01.07.2017 to 31.12.2018, was ₹ 2,69,77,661/-which included GST (@ 12% or 8%) on the base amount of ₹ 2,46,06,450/-. The home buyer and unit no. wise break-up of this amount was given in Annex-25 Of the DGAP Report. This amount was inclusive of ₹ 11,24,124/- (including GST on the base amount of ₹ 10,24,023/-) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit Passed on as per Annex-26 2. Co-applicant (Residential) 1 474.14 19,46,560 1,00,279 - 1,00,279 Flats Booked post-GST. Further Benefit to be passed on as per Annex-27 3. Other Buyers (Residential) 85 40,811 1455,46,052 75,27,297 - 75,27,297 4. Other Buyers (Residential) 669 3,21,432 3221,08,418 168,97,895 196,14,602 (27,16,707) Excess Benefit passed on. List Attached as Annex-28 5. Other Buyers (Residential) 28 13,431 - - 732280 (7,32,280) No consideration paid post-GST, However, Respondent have passed on benefit. List Attached as Annex-28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of 737 residential flats including 40 Applicants (Sr. No. 1, 4 5 of above Table), by an amount of ₹ 35,68,372/- and in case of 18 commercial shops (Sr. No. 8 9 of above Table), by an amount of ₹ 3,34,995/-. The Report also stated that this excess benefit claimed to have been passed on to some recipients by the Respondent could not be set off against the additional benefit required to be passed on to the other recipients but it could be adjusted against any future benefit that might accrue to such recipients. 21. Further, the DGAP in his Report stated that the Respondent had also submitted that he had sold 7 commercial shops and 86 residential flats post introduction of the GST to the prospective buyers at a mutually agreed price after considering the change (increase/reduction) in cost due to change in GST or discounts offered. Accordingly, the post-GST buyers had no right to claim any benefit and therefore, the Respondent was not obliged to refund the excess amount of ₹ 80,74,810/- collected from such buyers to whom fiats and commercial shops were sold post-GST (Sr. No. 2, 3 7 of Table- D ) on account of benefit of additional ITC. 22. Conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 25.06.2019 have stated that the Respondent s claim that he had passed on the ITC benefit to them was incorrect instead he was demanding 1 lakh more from them at the time of possession and substantial amount of this in cash. They also submitted that the Affordable Housing Policy 2013 stated that the Respondent will not take any charges for maintenance till 5 years after the possession of the property, but on the contrary, he was demanding cash for electricity and maintenance charges and till date had not given them any official offer for possession. The Applicant No. 1 also submitted copy of the Builder Buyer Agreement, copy of the last demand letter from the Respondent, copy of HUDA Affordable Policy 2013 copy of Part Occupation Certificate (OC) which the Respondent had received. Further, the Applicants in their submission dated 22.08.2019 submitted that they agreed with the DGAP s Report. 25. Supplementary Report was sought from the DGAP on the issues raised by the above Applicants through their above submissions. The DGAP vide his Report dated 01.07.2019 has claimed that the DGAP had already furnished the investigation Report of the case on 04.06.2019 as required unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following cases in this B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) = 128 ITR 294 Palai Central Bank Ltd. (1984) 150 ITR 539 (SC) = 1984 (10) TMI 41 - SUPREME COURT National Mineral Development Corporation (2004) (6) SCC 281 = 2004 (5) TMI 575 - SUPREME COURT Further, the Respondent has relied on the following judgements: 1. Larsen Toubro v State of Bihar (2004) 134 STC 354 (Pat.) = 2003 (11) TMI 565 - PATNA HIGH COURT affirmed by Supreme Court in Voltas Ltd., (2007) 7 VST 317 (SC) = 2007 (5) TMI 18 - SUPREME COURT , where in the Hon ble High Court had held that in absence of all exclusions which are to be prescribed for computation of tax, no tax is payable. It is also submitted that the said judgment was also quoted by the Hon ble Supreme Court in State of Jharkhand v. Voltas Ltd., East Singhbhum, (2007) 9 SCC 266 = 2007 (5) TMI 18 - SUPREME COURT . 29. The Respondent has contended that the Anti-Profiteering provisions under the CGST Act, 2017 and the Procedure Methodology drafted under Rule 126 of the CGST Rules, 2017 was silent on the timing of benefit accrued on the agreement entered in pre-GST regime transfer of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere exempt from VAT in pre-GST period. In post GST period, such inputs attracted GST @ 5%. Therefore, while computing ITC, the amount Of GST collected on such exempted goods had also been considered by the DGAP which was detrimental to the Respondent. 33. He further referred Table F of the DGAP s Report and claimed that as per Column F of Table F of the Report, the total benefit which was required to be passed on to the flat owners had been computed as ₹ 2,69,77,661/-. However, as per Column G of Table F , the DGAP had noted that the total benefit claimed to have been passed on by the Respondent came to ₹ 2,22,85,626/-, which was part of the Report as Annexure-26, 28 29. Thus as per the DGAP s Report, the Respondent has passed on the ITC benefit of Rs. under the provisions of Section 171 of the CGST Act, 2017 at the time of offering possession on ad hoc basis which reflected his responsibility to comply with the provisions of the statute. The Respondent has determined the estimated benefit of ITC to be passed on to the flat owners on ad hoc basis as follows:- a. Residential flat owners-the ITC benefit in comparison with the pre-GST era was determined o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this present case, the DGAP had considered Total Saleable Carpet Area (Excluding Balcony Area) in Table-CD of the DGAP s Report dated 04.06.2019. The DGAP in his supplementary Report dated 30.09.2019 stated that as per the Notification No. PF-27/48921 dated 19.08 2013 of the Town And Country Planning Department of Haryana Government, a comprehensive Affordable Housing Policy 2013 under the provisions of Section 9A of the Haryana Development and Regulation of Urban Areas Act, 1975 was notified wherein the Allotment Rates; Allotment Eligibility Criteria was explained. In para 4 (ii) (c) of the notification the definition of carpet area and balcony has been excluded. As per the provisions therein maximum allotment rate on per sq. ft. carpet area basis for the Apartment units under such approved projects has been fixed as ₹ 4,000/- per sq, ft. in Gurgaon, Faridabad, Panchkula, Pinjore-Kalka, ₹ 3,600/- per sq. ft. for other High and Medium Potential Towns and ₹ 3,000/- per sq. ft. for Low Potential Towns. The DGAP further stated as per the above notification in case there was any balcony area which was approved free-of-FAR, additional recovery could be made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this shows his nonseriousness towards the present proceedings. Therefore, he has wasted the precious time of the Authority. 41. The second objection of the Respondent is that confidential documents were allowed to be accessed by the Applicants. The Applicants who appeared in most of the hearings had requested for providing certain documents to verify as to whether the calculations of the DGAP were as per the buyer s agreement and payment schedule provided to them. Therefore, to meet the ends of justice, it was essential to provide access to the documents to the Applicants. 42. The issue of arbitrary estimation of 4.77% benefit by the DGAP was baseless as has been claimed by the Respondent. The DGAP has clearly taken the payment schedule into account, ITC available from April 2016 to June, 2017 (pre-GST period) alongwith the turnover for the same period and has calculated the ITC ratio as 2.6%. Similarly, for the post-CST period i.e. 01.07.2017 to 31.12.2018, the ITC ratio has been calculated as 7.37%. Based on this ratio, the additional benefit has been arrived at 4.77% (7.37%-2.6%). These facts are based on the data provided by the Respondent, the returns and the homebuyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority in its various orders has held that the mathematical methodology cannot be a set formulae but depended on various parameters and facts of each case. The mathematical methodology followed in the case of goods may be different from the services, Similarly, it could vary from restaurant service to construction service and within the construction service, it will vary based on the status Of the construction of the project at the time of the introduction of GST, payment plan adopted by the buyers, timings of the purchase of inputs etc. and therefore, no fixed mathematical methodology can be employed. 46. He has further contended that it was settled that in the taxing statutes mechanism for computation of value should be provided. However, this contention of the Respondent is fallacious as no tax has been imposed under Section 171 of the above Act. It would also be apt to mention here that under Section 171 (2) this Authority has been constituted to ensure that the provisions of Section 171 (1) are implanted. Rule 123 of the CGST Rules, 2017 provides constitution of Standing Committee at the Central level and Screening Committees at the State level to prima facie examine the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has also mentioned the case of Commissioner Central Excise Customs Kerala others v. Larsen Toubro 2015 SCC Online SC 738 = 2015 (8) TMI 749 - SUPREME COURT , supra, in which the issue involved, is the levy of Service Tax on the undivisible works contracts which is not the matter in the present case and therefore the above case has no relevance in the facts of the present case. 48. The Respondent has also stated that the Anti-Profiteering provision under the CGST Act and the Procedure Methodology drafted under Rule 126 was silent on the timing of passing on of the benefit. However, there can be no doubt that the above benefit has to be passed on as soon as the Respondent avails the benefit for discharging his output tax liability by utilising the ITC. Since, the Respondent is utilising the benefit of ITC every month through his Returns he should also pass on the benefit by commensurate reduction in the price every month. The Respondent cannot use two yardsticks While passing the above benefit by using the ITC every month and by claiming that his buyers would be entitled to get the same when the project would be completed. The Respondent cannot enrich himself at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation to pass on the benefit of ITC to his buyers and he cannot be allowed to appropriate the same. 51. We also observe that the DGAP after estimating the profiteered amount as ₹ 2,69,77,661/- has noted that the Respondent had claimed to have passed on the benefit of ₹ 2,22,85,626/-. If the benefit claimed to have been passed on by the Respondent is accepted and taken into account, the DGAP has computed the profiteering to be ₹ 75,27,297/- only for 85 homebuyers and ₹ 9,67,826/- for 27 commercial shops. However, the Applicant No. I vide his letter dated 25.06.2019 has refuted the claim by the Respondent that the ITC benefit has been passed on as he has not passed on any benefit to him. Instead the above Applicant has claimed that extra amount was charged for maintenance and other purposes. This was endorsed by the other home-buyers who had appeared during the hearing. Moreover, the claim of the Respondent has not been verified by the DGAP nor he has produced any documentary proof of ITC benefit passed on by the Respondent. The DGAP in his Report has clearly stated Benefit claimed to have been passed on under column-G of Table-F of his Report dated 04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the DGAP, as the construction of the project was yet to be completed. However during the course of proceedings, the Respondent has submitted that he has received occupation certificate on 09.01.2019 and there was no inventory of unsold units left on the date of issue of occupation certificate. As the present investigation has been conducted only up to 31.12.2018, therefore, we order that any additional benefit of ITC, which may accrue to the Respondent subsequently, shall also be passed on by him to all the eligible buyers. In case this additional benefit is not passed on to the Applicants No. 1 to 71 or to other eligible buyers, they shall be at liberty to approach the Haryana State Level Screening Committee for initiating fresh proceedings under the provisions of Section 171 of the above Act against the Respondent. The concerned jurisdictional CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC was passed on to the eligible house buyers in future. 54. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in contravention of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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