TMI Blog2019 (12) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which they shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers From the above discussion it is clear that the Respondent has profiteered by an amount of ₹ 1,40,41,916/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce/refund the price to be realized from the buyers commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 31.12.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 to 4 or any Other buyer they shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 Of the above Act against the Respondents. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future. Pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urgeon vijenderi@hotmail.com A3-1403 02.10.2018 7,10* 53* * Name of the Applicant was wrongly mentioned as Sh. Vijender Jain at S. No. 10 53, as the applications filed by Shri Narendra Prakash Varia were received by the Standing Committee on Anti-profiteering from the e-mail account of Sh. Vijender Jain (vijenderj@hotmail.com). 2. The above Applicants submitted that they had purchased flats (as shown in Table A ) in the Respondent s project Solera Affordable Group Housing situated in Sec-107, Gurugram, Haryana and alleged that the Respondent had not passed on the benefit of input tax credit (ITC) to them by way of commensurate reduction in prices. 3. The Haryana State Screening Committee on Anti-profiteering had originally examined the application mentioned at S. No. 4 in Table-A above, in its meeting held on 30.10.2018 and observed that there was lesser burden of tax in the GST regime due to availability of ITC, which the Respondent should have passed on to his customers, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. The Haryana State Screening Committee had forwarded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of charge basis. However, the project was executed under the supervision of the staff employed by the Respondent. (c) The Respondent informed that in the pre-GST regime, under-construction properties were covered by the definition of works contract and attracted Haryana VAT @ 4.5% approximately with full input tax credit of VAT paid on goods involved in the execution of works contracts. Affordable housing was, however, exempted from Service Tax, vide Notification No. 9/2016-ST dated 01.03.2016. In the GST regime, construction of low cost houses upto a carpet area of 60 square meters per house in a housing project approved by any State Government, was taxable @ 12% (effectively @ 8% after 113m abatement for the value of land), vide Notification No. 01/2018-Central Tax (Rate) dated 25.01.2018 (earlier the GST rate on affordable housing was 18% and the effective rate was 12% after 113rd abatement for the value of land). Therefore, the total indirect tax burden on the project had increased by 3.5% after the introduction of GST. (d) Under the erstwhile VAT/Service Tax regime, the Respondent was allowed ITC of all VAT/WCT paid to the vendors/Sub-contractors. The affordable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 7 - SUPREME COURT . These objections are as follows: (i) Whether on the facts circumstances of the case, there was any reduction in rate of tax on the supply of goods services involved in the execution of works contract in the current GST regime. (ii) Whether on the facts circumstances of the case, the benefit already credited/passed on to the buyers before initiation of the present proceeding, should not be treated as compliance with the provisions of Section 171 of the Central Goods and Services Tax Act, 2017. (iii) Whether on the facts circumstances of the case, the Co-applicants have misled this investigation by not providing complete facts about the receipt of benefit of input tax credit, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. 7. Vide the aforementioned letters and e-mails, the Respondent submitted the following documents/information:- a) Copies of GSTR-1 Returns for the period July, 2017 to December, 2018. b) Copies of GSTR-3B Returns for the period July, 2017 to December, 2018. c) Copy of Tran-1 Returns for transitional credit. d) Copies of VAT ST-3 Returns for the period April, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.50% 2,48,562 11,186 - 2,59,748 4. Within 12 months from the date of Allotment 01.10.2016 12.50% 2,48,562 11,186 - 2,59,748 5. Within 18 months from the date of Allotment 01.10.2016 12.50% 2,48,562 11,186 - 2,59,748 6. Within 24 months from the date of Allotment 01 04.2017 12.50% 2,48,562 11,186 - 2,59,748 7. Within 30 months from the date of Allotment 01.10.2017 12.50% 2,48,562 - 29,827 2,78,389 8. Within 36 months from the date of Allotment 06.04.2018 12.50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vities or Transactions which shall be treated neither as a supply of goods nor a supply of services) which reads as Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building . Further, clause (b) of Paragraph 5 of Schedule II of the Central Goods and Services Tax Act, 2017 reads as (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier . Thus, the DGAP has stated that the ITC pertaining to the residential units which were under construction but not sold was provisional ITC which may be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the completion 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e furnished in Table- C below:- Table C (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) 01.07.2017 to 24.01.2018 (GST @ 12%) 25.01.2018 to 31.12.2018 (GST @ 8%) Total (Post-GST) (1) (2) (3) (4) (5) = (3) + (4) (6) (7) (8) = (6) + (7) 1. Credit of Service Tax Paid on Input Services used for Commercial Shops (A) 37,31,445 6,96,568 44,28,013 - - - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) 1,18,74,428 19,15,674 1,37,90,102 - - - 3. Rebate of VAT(WCT) Paid to Sub-Contractor (C) 2,43,95,572 44,85,189 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 5.65% and during the post-GST period (July, 2017 to December, 2018), it was 7.30%. This clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 1.65% [7.30% (-) 5.65%] of the turnover. 14. The DGAP further observed 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) on construction service, fixed vide Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable and low-cost houses upto a carpet area of 60 square metres per house was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. In view of the change in the GST rate after 01.07.2017, the DGAP has examined the whole issue of profiteering in two parts, i.e., by comparing the applicable tax rate and ITC available in the pre-GST period (April, 2016 to June, 2017) when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,77,82,958 10. GST @12% or 8% I=H*B 4,51,64,217 1,05,69,088 2,34,67,100 7,92,00,045 11. Commensurate demand price J = H+I 42,15,32,697 9,86,44,818 31,68,05,848 83,69,83,363 12. Excess Collection of Demand Or Profiteering Amount K=G-J 70,71,977 16,54,946 53,14,994 1,40,41,917 15. The DGAP further stated that from Table- C above, it was clear that the additional ITC of 1.65% of the turnover should have resulted in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on to the recipients. 16. The DGAP has also Submitted that on the basis of the aforesaid CENVAT/input tax credit availability in the pre and post-GST periods and the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Residential) 862 4,00,775 40,68,36,770 73,84,087 1,07,77,656 -33,93,569 Excess Benefit Passed on as per Annex-15 3 Other Buyers (Residential) 132 58,916 23,92,84,262 43,60,031 15,84,366 27,75,665 Further Benefit to be passed on. List Attached as Annex-16 4 Unsold Flats 2 1,290 - - - - Unsold Units Total Residential (A) 1,000 4,62,932 64,81,01,445 1,17,80,062 1,24,14,481 5 Commercial Shop Buyers 81 17,891 12,15,94,699 22,47,070 4,45,474 18,01,596 Further Benefit to be passed on. List Attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of additional ITC to the tune of 1.65% of the turnover, which had accrued to the Respondent post-GST, was required to be passed on by the Respondent to the above Applicants and the other recipients. He has also claimed that the provisions of Section 171 of the CGST Act, 2017 appeared to have been contravened by the Respondent, in as much as the additional benefit of ITC of the base price received by the Respondent during the period 01.07.2017 to 31.12.2018, had not been passed on by the Respondent to 213 recipients (132 buyers of residential flats plus 81 buyers of commercial shops). Although the Respondent claimed to have passed on excess amount of ₹ 16,515/- to the Applicants as mentioned at Sr. No. 1 of table- E , the investigation reveals that the Respondent has realized an additional amount ₹ 45,77,261/- as mentioned in Sr. No. 3 5 of Table- E , from 213 other recipients (132 home buyers and 81 shop buyers) who were not Applicants in the present proceedings. These recipients were identifiable as per the documents provided by the Respondent, giving the names and addresses along with unit nos. allotted to such recipients. Therefore, this additional amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive relief to The Respondent in terms of ITC which was incorrect. Higher ITC compared to VAT output tax liability meant that less material was transferred as compared to the material that was purchased which was also incorrect. III. He has further stated that as per DGAP s supplementary Report dated: 01.11.2019, he had reviewed Form LS-11 and Column 2B (9.1) of VAT-R1 of the Respondent which formed part of Annexure-8 and the following information could be derived from the 5 PDF documents:- Deduction claimed by a works contractor as regular dealer I QT 2016-17 486,56,425 II QT 2016-17 1323,86,143 III QT 2016-17 1344,34,175 IV QT 2016-17 2186,18,558 TOTAL 5340,95,301 I QT 2017-18 923,59,961 TOTAL 6264,55,262 However, in order to get complete understanding of how much deduction from the taxable turnover under VAT (WCT) could the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r complaints made against him were false, mischievous and against the facts. The fact that these complaints were admitted for adjudication for determining the issue of alleged profiteering reflected the bias that the adjudicating authority has against him. II. The complaints were lodged with Screening Committee on 28.08.2018 by the above Applicants. These complaints were mischievous as he had already compensated the flat owners on his own accord as per his calculations on 31.05.2018, 03 months prior to the complaints being lodged. The DGAP despite having knowledge of the complaints being against the facts, had proceeded to investigate the same. III. While the complaint was against not passing on the benefit of tax reduction in the post GST period, the DGAP had proceeded to quantify the alleged profiteering on average basis which in itself was arbitrary. This was not the ground of complaint made against him which made the proceedings illegal and therefore null and void. IV. As per findings of the DGAP in Table E, the above Applicants had been paid in excess by ₹ 16,515/- which further established that their complaints were frivolous. V. The complainants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 in the GST period and hence the provisions of Section 171 of the CGST Act did not get attracted. IX. While the details were with the DGAP, having been furnished vide Annexure 16 17 for the residential and commercial space buyers, the DGAP chose to ignore these details while computing the alleged profiteering on the arbitrary average basis. The excess amount so computed by the DGAP in his report was as follows:- i. Residential flat owners. 132: ₹ 43,60,031/- ii. Commercial shops 20 : ₹ 10,04,982/- After factoring the Applicants who had applied in the post GST period, he had paid ₹ 42,52,946/- in excess to the flat / shop owners as per the arbitrary calculation given in the DGAP s report (Table E). X. He had requested the DGAP to pass a speaking order before finalizing investigation proceedings, which has not been done, hence the Order was defective. He also contended that this inference was also supported by the apex court of India in the case of M/s. GKN Driveshafts (India) Ltd. [2002] 1 SCC 72 = 2002 (11) TMI 7 - SUPREME COURT the relevant para of the judgment is reproduced below:- He also clarified that when under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Ltd. 1984 150 ITR 539 (SC) = 1984 (10) TMI 41 - SUPREME COURT National Mineral Development Corporation (2004) 65 SCC 281 = 2004 (5) TMI 575 - SUPREME COURT XIII. Further, in respect of works contracts, the Patna High Court has held in the case of Larsen Toubro vs State of Bihar 2004 134 STC 354 (Pat.) = 2003 (11) TMI 565 - PATNA HIGH COURT affirmed by the hon ble Supreme court in Voltas Ltd. (2007) 7 VST 317 (SC) = 2007 (5) TMI 18 - SUPREME COURT , that in the absence of all exclusions which were to be prescribed for computation of tax, no tax was payable. The recent Larsen Toubro judgment, 2015 SCC Online SC 738, supra = 2015 (8) TMI 749 - SUPREME COURT , has also quoted with approval the decisions of the Patna, Madras and Orissa High Courts relating to machinery provisions in following terms:- We find that the Patna, Madras and Orissa High Courts have, in fact, either struck down machinery provisions or held machinery provisions to bring indivisible works contracts into the service tax net, as inadequate. The said judgment also quoted the judgment of Hon ble Supreme Court in the case of State of Jharkhand v. Voltas Ltd., East ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Applicants of profiteering by the Respondent has been found to be incorrect, can the proceedings against him couldn t continue suo-moto. Paragraph 9 read with paragraph 12, 13 and 14 of the Procedure Methodology did not mention circumstances for continuing with the proceedings on own motion once it has been observed that there has been no undue profiteering in the case of the above Applicants. XVI. He conclude by submitting that the DGAP has erred on several grounds in concluding in his report that there has been benefit of additional input tax credit of 1.65% of the GST turnover including the turnover from the buyers of the project who had made payments in the GST regime which would result in consequent reduction in the basic price as well as cum-tax price, the benefit of which should be passed by him to the recipients. 23. The Respondent has also submitted details of credit notes vide which he has claimed to have passed on the benefit of ITC in the ledger account of the flat buyers vide his submissions dated 09.12.2019. 24. The DGAP has made his submissions vide his Reports dated 01.08.2019, 06.09.2019, 01.11.2019 which may be summed up as follows:- l. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be set off against the additional benefit that was required to be passed on to some other recipients. 25. We have carefully considered the Report of the DGAP, submissions made by the Respondent and based on the record it is revealed that the Respondent is in the Real Estate business and the DGAP s Report is with regard to construction of flats and shops by the Respondent. On examining the various submissions we find that the following issues need to be addressed:- a. Whether there was reduction in the rate of tax on the services in question supplied by the Respondent w.e.f. 01.07.2017? b. Whether there was any net additional benefit of ITC which has accrued to the Respondent? c. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017, by not passing on the benefits by the Respondent? 26. In the present case we find that the Respondent has started construction of the project Solera for constructing 1000 Residential and 1 12 Commercial units. The Residential units are known as Sclera-107 and the commercial units were called by the name of Signum-107 . It is also revealed that the Applicants No. 1, 2, 3 and 4 had complaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent that he has taken in account the amount claimed by the Respondent in respect of two projects viz. Sector-107 and 93 whereas the present case pertains to the project which is being executed in Sector-107. Therefore, there is bound to be mismatch in the figures taken by the DGAP and considered by the above Applicant. The above Applicant has also claimed that the ITC was not available on the value of and and the cost incurred on labour and services however, there is no evidence that the above items have been taken by the Respondent in to account while claiming ITC in the pre GST period. Therefore, the Chart submitted by the Respondent in this behalf cannot be relied upon. It is also apparent from Table C prepared by the DGAP that he has taken the amount of rebate of VAT (WCT) paid by the sub-contractors in the pre GST period as ₹ 2,89,80,761/- as per the Form LS-11 and column 2B (9.1) of Form VAT-R1 and hence the above contention of the Respondent is incorrect 30. The Applicant No. 3 has further contended that the transitional credit belonging to the residential units of the project must be passed on to the buyers in terms of Section 140 of the CGST Act, 2017 however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be passed on to some other recipients. 33. He has further claimed that the DGAP has neither passed a speaking order before finalisation of the Report nor he has given opportunity either to controvert or respond to the DGAP s adoption of the average method for determining the alleged profiteering. In this connection it would be appropriate to mention that as per the provisions of Rule 129 (1) of the CGST Rules, 2017 the DGAP has been entrusted with the responsibility of carrying out detailed investigation in the allegations of profiteering and collect necessary evidence and therefore, he is not required to afford opportunity of hearing to the Respondent being an investigating agency. As per the provisions of Rule 129 (3) the DGAP is required to serve notice on the Respondent which he has done on 15.01.2019 and hence he has complied with the due process. Proper opportunity of being heard has been provided to the Respondent by this Authority in which the Respondent has controverted the computations of the DGAP through his written submissions and hence he should have no objection on this ground. However, he has not cared to attend any of the personal hearings which were afforded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x which is not the issue in the present proceedings. Hence, it is respectfully submitted that the above case is of no help to the Respondent. The Respondent has also cited the case of Commissioner of Income Tax v. The Official Liquidator Palai Central Bank Ltd. (1984) 150 ITR 539 (SC) in which the main issue related to the charging of super profit tax however, this issue is not relevant in the facts of the present case, hence the above case does not help the Respondent. The Respondent has also quoted the judgement passed in the case of National Mineral Development Corporation v. State of M. P. and another (2004) 65 SCC 281 = 2004 (5) TMI 575 - SUPREME COURT which pertained to the levy of royalty on slimes hence, the above case is does not help the Respondent as no such issue is involved in these proceedings. He has also cited the case of Larsen Toubro v. State of Bihar and others 2004 (134) STC 354 (Pat.) = 2003 (11) TMI 565 - PATNA HIGH COURT which was affirmed by the Hon ble Supreme Court in the case of State of Jharkhand and others v. Voltas Ltd. (2007) 7 VST 317 (SC) = 2007 (5) TMI 18 - SUPREME COURT , in which it was held that in the absence of all exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent is untenable since the DGAP has computed the benefit of additional ITC by comparing the ratios of ITC which was available to him in the pre and the post-GST period and it is clear from his computation that the Respondent has got additional benefit of 2.61% of the turnover. As discussed supra the DGAP has also not calculated the profiteered amount by using averages. Hence, the above arguments of the Respondent are incorrect 39. The Respondent has further argued that no mechanism for computing profiteering has been provided in the Act, Rules or in the Procedure Methodology formulated by this Authority in terms of Rule 126 of the CGST Rules and hence his own calculation should be accepted as method of passing on the ITC benefit. But it is apparent from the record that the mathematical methodology is not required to be prescribed as it would vary from case to case. In the present case the DGAP has computed the ratio of ITC to turnover after taking into account the benefit of credit available during the pre GST period (April 2016 to June 2017) to the taxable turnover received during the said period and compared it with the post GST period (01.07.2017 to 31.12.2018). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusal of the ledger accounts of the buyers shows that there is no evidence to suggest that he has passed on the benefit of ₹ 1,29,29,849/- to the 998 home and 91 commercial shop buyers on account of ITC as there is no such entry in the ledger accounts of these buyers. A typical entry of ₹ 13,115/- made in the ledger account on 31.05.2018 of one Ms. Ritika Chhabra, who has been allotted unit No. A-203 in the above project by the Respondent, reads as Receipt Ref. CRS1/02174/18-19 (12, 143.00+ Tax 972.00) which shows that no where it has been mentioned that this amount has been transferred on account of ITC benefit. Perusal of the copies of the ledger accounts of the other house buyers to whom the Respondent has claimed to have passed on the benefit of ITC also shows that the same entry has been made in all such cases on 31.05.2018. By no stretch of imagination this entry can be construed to have been made on account of passing on of the benefit of ITC, therefore, the above amount cannot be taken to have been passed on account of the ITC benefit. Moreover, the DGAP in his Report dated 14.06.2019 has not verified the above claim of the Respondent. The Applicant No. 3 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has profiteered by an amount of ₹ 1,40,41,916/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce/refund the price to be realized from the buyers commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 31.12.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 to 4 or any Other buyer they shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 Of the above Act against the Respondents. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future. 47. It is evident from the above that the Respondent has denied the benefit of ITC to the buyers of the flats/shops being constructed by him and has profiteered in contravention of the provisions of Section 171(1) of the CGST Act, 2017. Therefore he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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