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TMI Blog2019 (2) TMI 1757X X X X Extracts X X X X X X X X Extracts X X X X ..... Sector-102/102A, Gurugram, Haryana. The Applicant No. 1 had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price. This Complaint was examined by the Haryana State Screening Committee and it was observed that due to availability of ITC on input materials, the Respondent's tax burden had been reduced which needed to be passed on to the customers, in terms of Section 171 of the CGST Act, 2017. The State Screening Committee forwarded the said application with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the CGST Rules, 2017. 2. The above Complaint was examined by the Standing Committee on Anti-profiteering in its meeting held on 13.12.2018 and vide its minutes was forward to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017. 3. The DGAP in his report has stated that the Applicant had submitted the following documents along with his application: (a) Copies of demand letters issued to him, both pre-GST and post-GST. (b) Copies of the communication with the Respondent regarding benefit of input tax credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable) Total 1,62,79,414 7. The DGAP has further stated that vide the aforementioned letters/emails, 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 Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018 (d) Copies of Tran-I for the period July, 2017 to December, 2017. (e) Copies of VAT & ST-3 Returns for the period April, 2016 to June, 2017. (f) Copies of all demand letters, sale agreement/contract issued in the name of the Applicant No. 1 (g) CENVAT/ITC register for the period April, 2016 to December, 2018. (h) copy of Balance Sheets for FY 2016-17 & 2017-18. (i) Tax rates, pre-GST and post-GST. (J) Details of turnover, output tax liability/GST payable and ITC availed and its reconciliation with the turnover as per the list of home-buyers. In terms of Rule 130 of the CGST Rules, 2017, the Respondent also submitted that except the copies of demand letters and the sale agreement/contract issued to the Applicant No. 1, all other details/information furnished by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building." Therefore, the ITC pertaining to the unsold units was outside the scope of the investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate additional ITC available to them post-GST. 10. The DGAP also claimed that prior to 01.07.2017, i.e. before CST implementation, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services. However, CENVAT credit of Central Excise Duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which were in force at the material time. Moreover, since the Respondent was paying VAT @1% under Haryana VAT Composition Scheme, he was not eligible to avail ITC of VAT paid on the inputs. Further, post-GST, the Respondent could avail the ITC of GST paid on all the inputs and input services including the sub-contracts. As per the information submitted by the Respondent for the period April, 2016 to December, 2018, the details of the ITC availed by him, his turnover from the project "Oyster Grande", the ratio of ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess collection (profiteering) during the post-GST period, have been tabulated in Table-'C' below:- Table-C (Amount in Rs.) S. No. Particulars Pre-GST Post-GST 1. Period A April, 2016 to June, 2017 July, 2017 to Dec, 2018 2. Output tax rate (%) B 5.50% 12.00% 3. Ratio of CENVAT/VAT/GST Input Tax Credit to Total Turnover as per Table - B above (%) C 5.57% 7.08% 4. Increase in input tax credit availed post-GST (%) D - 1.51% 5. Analysis of Increase in input tax credit: 6. Total Basic Demand during July, 2017 to December, 2018 E 741,104,272 7. GST@12% F=E*12% 88,932,513 8. Total demand G=E+F 830,036,785 9. Recalibrated Basic Price H=E*(1-D) or 98.49% of E 729,913,597 10. GST @12% I=H*12% 87,589,632 11. Commensurate demand price J=H+I 817,503,229 12. Excess Collection of Demand or Profiteered Amount K=G-J 12,533,555 12. The DGAP has further stated that as per the Table-C, it was clear that the additional ITC of 1.51% of the turnover should have resulted in commensurate reduction in the basic price as well as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1 51% of the turnover and the same was required to be passed on to the Applicant No. 1 and the other recipients. Section 171 of the CGST Act, 2017 appeared to have been contravened by the Respondent, in as much as the benefit of ITC @1.51% of the demand raised by the Respondent during the post-CST period from 01.07.2017 to 31.12.2018, has not been passed on to the Applicant No. 1 and the other recipients. On this account, the Respondent has realized an excess amount to the tune of Rs. 1,46,656/- from the Applicant No. 1 which included both the profiteered amount @1.51% of the basic price and GST on the said profiteered amount. Further, the investigation revealed that the Respondent had realized an excess amount of Rs. 1,23,86,899/which included both the profiteered amount @1.51% of the basic price and GST on the said profiteered amount, from 434 other recipients who were not Applicants in the present proceedings. However, these recipients were identifiable as the Respondent had provided their names and addresses along with unit no. allotted to them. Therefore, this additional amount of Rs. 1,23,86,899/- was required to be returned to such other eligible recipients. 16. The DGA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kh on BSP alone. However, as per the DGAP's report the benefit of ITC to be passed on to him was only Rs. 1.46 Lakhs. He also submitted calculation of tax pre and post-GST as under:- Table:- Tax pre and post GST Amount Tax Pre-GST (4.5% Service tax and 1 % HVAT) Tax Post GST (12/18%) Additional Tax BSP 68,85,930 3,78,726 8,26,312 4,47,585 Car parking 7,50,000 41,250 1,35,000 93,750 PLC 2,57,900 14,185 46,422 32,238 Interest free maintenance security 2,57,900 14,185 46,422 32,238 Club membership registration charges 2,50,000 13,750 45,000 31,250 Power backup charges 2,00,000 11,000 36,000 25,000 Electric meter, FTTH, CCTV and fire alarm 70,000 3,850 12,600 8,750 Electrification and utility connection charges 2,57,900 14,185 46,422 32,238 Total Tax 4,91,130 11,94,178 7,03,048 v. In his submissions, the Applicant No. 1 further stated that the above mentioned points were meant only to provide clarifications and they were not meant to challenge any of the points mentioned in the investigation report. He agreed to the findings and would accept the refund from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245 C-104 5,937/- 22. Vide order dated 01.08.2019, The Authority directed the Respondent to submit the following documents:- a. Statement showing project-wise ITC/CENVAT Credit availed and Turnover as per the statutory Returns (GST, ST, VAT Returns) for the period from 01.04.2016 to 31.12.2018. b. Project-wise list of all payments received from each of the buyers and the ITC benefit passed on, if any, to them. c. Balance Sheets for the years 2016-17, 2017-18 & 2018-19 along with the project wise Trial Balance for the same period. d. Ledger for the period from 01.04.2016 to 31.12.2018. e. Details of the total number of apartments/flats/commercial units/residential units in the project with total area of each flat. f. Tran-2 Returns. g. Details of Credit Reversal, if any h. Agreement between the land owner and the builder for the subject project. 23. The Respondent, vide his submissions dated 21.08.2019, submitted the following information/documents:- a. Statement showing project wise ITC/Cenvat Credit availed and Turnover as per the statutory Returns for the period from 01.04.2016 to 31.12.2018. He has stated that he has only one project. b. Project wise l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of Credit/lTC available as on 12.02.2019. e. Details of Reversal of credit as on 12.02.2019 f. Total profiteered amount for the flats sold up to 31.12.2018 Details thereof. g. Copy of sample receipt from the Applicant alongwith other recipients/flat owners in respect of the profiteered amount made to them. 27. The Respondent, vide his submissions dated 10.09.2019, submitted that 87 flats have been constructed in each of the Towers A to F, 58 flats in Tower-G and 88 flats each in Tower H & J. He also submitted the details relating to the number of flats sold up to 31.12.2018. He also submitted that he had not sold any flat during the period from 01.01.2019 to 12.02.2019. He further stated that the opening GST credit balance as per the Electronic Credit Ledger was Rs. 10,10,96,515/- in February 2019 and that since February 2019, he has reversed an amount of Rs. 2,24,71,268/- in terms of Rule 42 of the CGST Rules, 2017. He also submitted the unit wise breakup of profiteered amount. Further, he has stated that in respect of the 90 customers, who have been sold units but no demands were raised to them till 31.12.2018, he has undertaken to pass on the benefit of ITC applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass on the ITC benefit to the recipients. Hence we observe that the amount of profiteering computed by the DGAP is correct and therefore, we take the view that the provisions of Section 171 (1) of the CGST Act, 2017 have been contravened in the present case as the Respondent had been benefited from additional ITC in the post-GST regime. 31. Further, it has been revealed from the record that the Respondent has profiteered an amount of Rs. 1,25,33,555/- for the period of investigation. Therefore, in view of the above facts, this Authority, under Rule 133 (3) (a) of the CGST Rules, 2017, orders that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The above amount of Rs. 1,25,33,555/which includes 12% GST on the base profiteered amount of Rs. 1,11,90,675/-, has been profiteered by the Respondent from the Applicant No. 1 and other flat buyers which is required to be refunded to the Applicant No. 1 and other flat buyers alongwith interest @18% from the date when the above amount was profiteered by him till the date of payment as per the provisions of Rule 133 (3) (b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible buyers. Further, passing on of the ITC benefit by the Respondent to the Applicant No. 1 and the four recipients in respect of whom he has furnished credit notes since the said credit notes were not furnished by the Respondent before the DGAP. For the same reason, the claim of the Respondent regarding his having passed on the benefit to the other eligible buyers can also not be accepted as evidence. Therefore, the said claim of the Respondent is not accepted. 34. It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his "Oyster Grande" 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. Accordingly, a notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Accordingly, the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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