TMI Blog2019 (12) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of ₹ 97,40,448/along with interest @18% per annum to these flat buyers from the dates from which the above amount was collected by him from these buyers till the payment is made, within a period of 3 months from the date of passing of this order. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him - Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Bounty Acres project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of the Demand letters. d) Copy of identity proof (Aadhar Card). 3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued Notice dated 11.09.2018 under Rule 129 (3) of the above Rules, asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on to the above Applicant by way of commensurate reduction in the price of the flat and in case it was so, to suo moto compute the quantum of the same and mention it in his reply to the Notice along with the supporting documents. The Respondent was given an opportunity to inspect the non-confidential evidence/information furnished by the above Applicant during the period between 17.09.2018 to 19.09.2018 in accordance with Rule 129 (5) of the above Rules and he availed of the said opportunity and inspected the documents on 17.09.2018. Vide e-mail dated 08.01.2019, the above Applicant was also given an opportunity to inspect the non-confidential documents/reply submitted by the Respondent on 14.01.2019 to 16.01.2019. However, the Applicant did not avail of the said opportunity and vide email dated 11.01.2019, expressed his inability to do s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) Copies of Tran-1. (d) Copies of VAT ST-3 returns for the period April, 2016 to June, 2017. Electronic Credit ledger for the period July, 2017 to August, 2018. (f) Copies of all demand letters, receipts and agreement/contract in the name of the Applicant Ms. Santha Sivaram. (g) Tax rates- pre-GST and post-GST. (h) Details of taxable turnover and input tax credit for the project Bounty Acres . (i) List of home buyers in the project Bounty Acres . 7. The DGAP has also stated that all the documents placed on record were carefully examined by him and he had found that the main issues for determination were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not. 8. The DGAP has further stated that the Respondent vide email dated 10.10.2018, had submitted copies of demand letters and the payment schedule related to the purchase of an apartment by the Applicant, measuring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. 10% BSP on Completion of Plastering work 13-11-2017 10% 4,88,040 87,847 5,75,887 8. 7% of BSP on Completion of Floor Finishing Work 12-03-2018 7% 3,41,628 61,493 4,03,121 9. 3% of BSP on Completion of Handing over+CorpusFund+MaintenanceCost 01-10-2018 3% 1,46,412 54,880 36,233 2,37,525 Total 100% 48,80,400 5,03,880 1,97,100 11,90,000 1,81,050 1,85,573 71,38,003 9. The DGAP has further stated that 18% GST cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule Il, sale of building. Since the Respondent s aforesaid project was completed and the Completion Certificate had been obtained on 08.05.2018, the proportionate input tax credit pertaining to the unsold units was required to be reversed on 08.05.2018 and the computation of the same was furnished as in Table-B below.- Table- B (Amount in Rs.) Particulars Factor Amount Total Saleable Area of Flats (in sq. ft.) A 2,55,800 Area Sold before completion certificate is obtained (in sq. ft.) B 1,31,387 Area sold before completion certificate is obtained (in Percentage) C=B/A 51.36% Area remaining unsold when completion certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al (Pre-GST) July, 2017 to August, 2018 (1) (2) (3) (4) (5)=(3)+(4) (6) 1. CENVAT of Service Tax Paid on Input Services as per ST-3 (A) 6,90,582 27,62,798 34,53,380 - 2. Input Tax Credit of GST Availed as per GSTR-3B Returns (B) - - - 2,58,17,372 3. Total Turnover as per Returns (C) 16,66,41,140 10,66,73,803 27,33,14,943 25,09,09,317 4. Total Saleable Area of flats in the project (Sq. ft.) (D) 2,55,800 2,55,800 5. Area Sold relevant to turnover (Sq. ft.) (E) 85,283 96,789 6. Relevant CENVAT/lnput Tax Credit (F)=[(A)*(E)/(D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis of Increase in input tax credit: 6. Basic Price realised during July, 2017 to August, 2018 (Pre-GST Booked GST @ 18%) E 2,99,60,085 7. Basic Price realised during July, 2017 to August, 2018 (Post-GST Booked GST 12%) F 16,81,62,156 8. Basic Price realised during July, 2017 to August, 2018 Post-GST Booked GST 8% Affordable Housing) G 5,27,87,070 9. Total Taxable Value raised during July, 2017 to August, 2018 H=E+F+G 25,09,09,317 10. GST Collected @ 18% on Pre-GST Booked Unit I=E*18% 53,92,815 11. GST Collected @ 12% on Post-GST Booked Unit J=F*12% 2,01,79,459 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... home buyers during the period 01.07.2017 to 31.08.2018, the amount of benefit of input tax credit not passed on or in other words, the profiteered amount has been quantified by the DGAP as ₹ 97,40,448/- which included GST @ 18%, 12% 8%, on the base profited amount of ₹ 87,06,553/-. The home buyer and unit no. wise break-up of this amount has been given in Annexure-23 of the DGAP report. This amount was inclusive of ₹ 33,972/- (including GST @18% on the base amount of ₹ 28,790/-) which was the profiteered amount in respect of the Applicant, mentioned at serial no. 17 of Annxesure-23 of the DGAP report. It was also observed that the Respondent had supplied the construction services in the State of Tamil Nadu only. 16. The DGAP has further stated that the Respondent had sold 119 flats out of which 90 home buyers had made payments in the post-GST period till 31.08.2018. The above profiteering had been computed in respect of those 90 flats where payments had been received in the post-GST period. The profiteering in respect of the remaining 29 home buyers would be calculated when payments would be received from them, by taking into account the benefit of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority on 07.03.2019. The Respondent was issued notice on 21.02.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed along with imposition of penalty as per Section 122-127 of the above Act read with Rule 21 133 of the CGST Rules, 2017 and his registration under the above Act should also not be cancelled. During the course of the hearings no one appeared for the Applicant No. 1, the DGAP was represented by Smt. Gayatri, Deputy Commissioner and Sh. R. A. Rajneesh, Asst. Commissioner and the Respondent was represented by Sh. Prasanna Krishnan, CA Sh. I.V. Krishna, CA. The Respondent has filed his written submissions on 06.03.2019, 13.04.2019, 20.05.2019 and 28.05.2019. The contentions raised by the Respondent vide above mentioned submissions are discussed in subsequent paras. 20. The Respondent in his written submissions referring to Para 15 and Table C of the DGAP report with reference to Sl. No. 5 - Particularly column E relates to Area sold relevant to turnover as 96,789 Sq.ft. has claimed that the area was 84,332 Sq.ft. only. As a result the modified f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence such benefit. c) that he was permitted by TNVAT Act, 2016 to follow VAT inclusive price method and pay VAT by offering Purchase Plus estimated Gross Profit (to ensure that VAT was fairly levied on material component only and not on service portion of consideration). However, an observation sans legal sanction as well as logic, was made in the report that if the turnover disclosed in VAT return did not match, VAT ITC taken (though explicitly available in the VAT returns) should not be considered for profiteering analysis. In works contract industry, expecting material turnover to match with the gross turnover (material plus service) was quite vexatious and unfair. Under the above mentioned situation, it shall be unlawful and unfair to ignore the VAT ITC value while doing a comparison between ITC benefit during pre GST period and ITC benefit during the GST period. 23. The Respondent has further submitted that an amount of ₹ 78 lakh had totally been ignored in the report while computing the pre GST ITC. If the same had been considered, Table C would have been read as follows: S.No. Particulars July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset could also be added. Thus, there was no justification in adding the land value in the turnover and unduly arriving at lower ratio of ITC of pre GST period to turnover of pre GST period. 25. The Respondent has submitted that there had been cases of direct reduction in his prices to pass on the benefit of GST ITC much more than the actual ITC benefit that he had gained. Such bona fide action from his side could not simply be brushed away by stating that there was some other commercial reason for reducing the price. He further added that the Authority shall certainly and positively consider his genuine request in the interest of natural justice and drop further proceedings against him. 26. The Respondent has referred the Para 14 of the DGAP report which showed some calculations in respect of GST ITC reversal. The report was referring to Section 17 (3) of the Act fairly which reads as follows: The value of exempt supply under sub section 2 shall be such as may be prescribed The Respondent has submitted that what was the prescription of statute in this regard while at the time of taking GST ITC it was perfectly eligible credit only. The report did not throw any lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per GSTR 3B Returns - (B) - - 2,58,17,372 3. Total Turnover as per Returns - (C) 16,66,41,140 10,66,73,803 27,33,14,943 21,29,96,643 25,09,09,317 Less: Land Value during Pre GST period -4,57,07,500 -1,46,10,800 -6,03,18,300 4. Total Saleable Area of flats in the project (Sq Ft)- (D) 2,55,800 2,55,800 5. Area Sold relevant to turnover (Sq.Ft) - (E) 85,283 96,789 6. Relevant CENVAT/Input Tax Credit (F) = [(A)*(E)/(D)] or [(B)*(E)/(D)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over (inclusive of land value) of the Respondent for the pre as well post-GST periods and the value of land was also included in post-GST turnover as the Respondent was paying GST at the effective rate of 12% on the total turnover (after taking the 1/3rd as abatement and paying 18% on 2/3rd value of the demand raised). d) On the issue of the reversal of input tax credit in respect of the area unsold which was not adjusted against eligible input tax credit in the post-GST period the DGAP has replied that out of total saleable area of 2,55,800 sq. ft. the Respondent was required to reverse the proportionate input tax credit in respect of the area which remained unsold as on 08.05.2018 (i.e. 1,24,413 sq. ft.), when the Completion Certificate was obtained and the Respondent had to pass on the benefit of additional input tax credit availed by him, to the home buyers of an area of 96,789 sq. ft. from whom payment had been received in the post-GST period covered in the investigation report (July, 2017 to August, 2018), by way of commensurate reduction in prices. 31 We have carefully considered all the submissions filed by the Applicant No. 1, the Respondent and the other material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts, but he had not discharged any output VAT liability. Further, Respondent also did not charged/paid VAT in the pre-GST period from the home-buyers. Thus, for determining the profiteering amount, neither the credit of VAT paid on the inputs, nor the output VAT liability had been taken into consideration by the DGAP and thus, DGAP has rightly computed the profiteering in this aspect. 34. Further, we observe that the objection raised by the Respondent to exclude Land value from the turnover of post-GST period is not correct as the DGAP had compared the total turnover (inclusive of land value) of the Respondent for the pre as well as post-GST periods and the value of land was also included in post-GST turnover as the Respondent had been paying GST at the effective rate of 12% on the total turnover. Therefore, the objections raised by the Respondent are not sustainable and cannot be accepted. 35. Further, the Respondent has claimed that he had duly passed on ITC benefit of an amount of ₹ 92,38,515/- (₹ 65,41,634 upto 01.08.2018 and ₹ 26,96,881/- after 01.08.2018 till the date of submissions) to the eligible customers. However, the computation of calculating th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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