TMI Blog2019 (12) TMI 1159X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent from his buyers. Therefore, as per the provisions of Section 171 (1) of the CGST Act, 2017, the Respondent is required to pass on the benefit of such additional input tax credit to the recipients. Computation of profiteered amount has been done in respect of 473 home buyers whereas the Respondent has booked 493 units till 31.12.2018. 20 customers who have booked flats and also paid the booking amounts in the pre-GST period, have not paid any amount during the post-GST period from 01.07.2017 to 31.12.2018 (period under investigation). Therefore, the benefit of input tax credit in respect of these 20 units is required to be calculated when the consideration is received from such buyers taking into account the proportionate input tax credit in respect of such units. The Respondent is directed to commensurately reduce the prices of his units as per the provisions of Rule 133 (3) (a) of the above Rules. He is further directed to pass on the benefit of ITC of ₹ 9,03,44,071/- to the above 473 recipients including the Applicant No. 1 as per the details submitted by the DGAP vide Annexure-18 of his Report alongwith the interest @ 18% PA to be paid from the date when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been received from the Applicant No. 2 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. The brief facts of the case are that the Applicant No. 1 had filed an application dated 12.10.2018 before the Standing Committee on Anti-profiteering, under Rule 128 (1) of the CGST Rules, 2017 and submitted that he had purchase a flat in the Respondent s project Godrej City Panvel Phase-I situated at Khanvale, Panvel, Raigarh-410206 and alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price of the flat, in terms of Section 171 of the CGST Act, 2017. 2. The above reference was examined by the Standing Committee on Anti-profiteering and vide minutes of its meeting dated 13.12.2018 it had forwarded the same to the DGAP for detailed investigation under Rule 129 (1) of the above Rules. 3. The DGAP on receipt of the application had issued notice dated 15.01.2019 to the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Panvel (Phase-I) Pre-GST regime 6,96,969 560 - Residential 8 - Commercial Golf Meadows Godrej City, Panvel Phase-II GST regime 5,38,988 524-Residential Phase-III Yet to be launched However, construction of EWS units and common area had started. 4,98,976 Under Approval. Not launched yet. EWS Units 3,84,092 833-Residential Commercial Project 3,66,103 60-CommerciaI Total 24,85,128 --- 7. The Respondent has also stated that he was undertaking two projects, namely, Godrej City Panvel Phase-I and Golf Meadows Godrej City, Panvel (Phase-II) which were separately registered under the Real Estate Regulatory Authority (RERA). Though the present project was launched in September, 2014, the Respondent has received commencement certificate for the project in Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in prices due to accrual of anticipated additional ITC under the GST regime. The Respondent has also furnished the details of the actual benefit passed on to the different categories of recipients in Table- B given below:- Table- B Category Number of Units Amount of ITC benefit passed on Customers who booked units in pre-GST regime end advances were also received pre-GST As on 30.06.2017 = 380 Less: Units cancelled in GST regime = 90 Net units = 290 Units for which tax invoices had not been raised till now = 19 Remaining units for which benefit had been passed on = 271 3.35% has been passed to the customers of 271 units on the amount billed in GST regime. Further, Respondent has passed on additional benefit to the tune of extra GST levied vis-a-vis Service Tax on advances received in earlier regime but billed in GST regime (around 3% to 4%). Respondent would pass on the benefit on 19 units as and when tax invoice would be raised. Customers who booked units during 01.07.2017 to 31.03.2018 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also provided GST benefit of 6% which was duly mentioned in the cost sheets of his customers. Accordingly, the complaint was vexatious and was not covered by the Anti-Profiteering provisions under the GST. The Respondent has also contended that the comparison of ratio of ITC to turnover for the pre-GST period with the post-GST period was not the correct method for calculation of profiteered amount for the reason that under the real estate sector, there was no correlation of the turnover and the cost of construction of a project. Moreover, the additional ITC in the hands of the Respondent was such ITC on goods or services which was not available earlier. He has further contended that the approach adopted for calculating the additional benefit of ITC that has accrued to the Respondent, has considered the change in the rate of tax on input goods and services whose credit was available earlier also and has not taken into account the tax cost which was earlier blocked in the hands of the Respondent. Hence, the approach adopted for comparison of the ratio of ITC and turnover in the pre-GST and post-GST periods, was not the correct approach. Further, the Respondent has himself computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit along with TRAN Verification order. (d) Copies of VAT ST-3 Returns for the period from April, 2016 to June, 2017. (e) Copies of all demand letters and sale agreement/contract issued in the name of the Applicant No. 1. (f) Details of applicable tax rates, pre-GST and post-GST. (g) Copies of Balance Sheets (including all annexures and profit loss account) for FY 2016-17 2017-18. (h) Copy of Electronic Credit Ledger for the period from 01.07.2017 to 31.12.2018. (i) CENVAT Credit/ITC register for the period from April, 2016 to December, 2018. (j) Details of turnover, output tax liability, GST payable and ITC availed. (k) List of home buyers in the present project. (l) Reconciliation of turnover reported in the GSTR-3B returns with that in the list of home buyers. 16. The Respondent had also requested the DGAP to treat all the data/information furnished by him as confidential, in terms of Rule 130 of the above Rules except RERA certificate (Phase-I and Phase-2), complaint letter and invoices, and the SOA cost sheet issued to the Applicant No. 1. 17. The DGAP upon examining the application, the various replies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,76,822 6. On completion of 8 th floor slab 28.09.2018 5% 3,17,105 18,360 38,052 3,305 3,76,822 7. On completion of 11 th floor slab 09.12.2018 5% 3,17,105 18,360 38,052 3,305 3,76,822 8. On completion of terrace floor slab 23.12.2018 5% 3,17,105 18,360 38,052 3,305 3,76,822 9. Completion of watts of said apartment Not demanded as on 31.12.2018 4% 2,53,684 14,688 10. Completion of internal plaster, floorings, doors and windows of said apartment and lift wells upto floor level of said apartm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has contended that the project Golf Meadows Godrej City, Panvel which was launched in September, 2018, i.e. in the GST regime should have been kept outside the ambit of anti-profiteering provisions, in terms of the Order of this Authority dated 24.05.2019, passed in the case of Hermeet Kaur Bakshi v. Conscient Infrastructure Pvt. Ltd. = 2019 (5) TMI 1395 - NATIONAL ANTI-PROFITEERING AUTHORITY . In this regard, the DGAP has submitted that the present proceedings were initiated with reference to the present project which was launched in September, 2014, i.e. in the pre-GST regime and no reference has been received from the Standing Committee on Anti-profiteering with regard to the project Golf Meadows Godrej City, Panvel and hence the said project has been kept outside the ambit of this investigation by the DGAP. 21. The Respondent s another contention was that the Applicant No. 1 has filed the complaint under Section 171 of the CGST Act, 2017 on the ground that the Respondent has not passed on the benefit on account of reduction in the GST rate on Paints and Varnishes from 28% to 18%. In this regard, the DGAP has intimated that the Applicant No. 1 might not possess al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this regard, the DGAP has stated that the Authority, being statutorily empowered to determine the methodology and procedure for determining whether the reduction in rate or benefit of ITC had been passed on by the supplier to the recipient by reducing the prices, might take a view on the issue raised by the Respondent. 25. The DGAP has also submitted that para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) reads as Sale of land and, subject to clause (b) of paragraph 5 of Schedule Il, 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 ITC pertaining to the residential units which were under construction but not sold was provisional ITC which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly, 2017 to March, 2018 April, 2018 to December, 2018 Total (Post-GST) (1) (2) (3) (4) (5) = (3)+(4) (6) (7) (8) = (6)+(7) 1 Credit of Service Tax Paid on Input Services (A) 51,18,288 43,71,851 94,90,139 - - - 2 ITC of GST Availed (B) - - - 4,94,26,835 8,19,78,649 13,14,05,484 3 Turnover from List of Home buyers (net of cancellation) (C) 28,07,35,805 2,98,00,244 31,05,36,049 1,89,79,84,692 4 Total Saleable Carpet Area (Excluding Balcony Area) (in SQF) (D) 6,96,969 6,96,969 5 Total Sold C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July, 2017 to December, 2018 (Post-GST Period) 1. Period A Total 2. Output GST rate (%) B 12% 3. Ratio of CENVAT credit/ ITC to Total Turnover as per table - E above (%) C 5.79% 4. Increase in ITC availed post-GST (%) D=5.79% less 1.54% 4.25 5. Analysis of Increase in ITC: 6. Base Price raised during July, 2017 to December, 2018 (Rs.) E 1,89,79,84,692 7. GST raised over Base Price @12% (Rs.) F=E*B 22,77,58,163 8. Total Demand raised G=E+F 2,12,57,42,855 9. Recalibrated Base Price H=E*(1-D) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed when the consideration was received from such units by taking into account the proportionate ITC in respect of such units. 33. The DGAP has thus submitted that the benefit of additional ITC to the tune of 4.25% of the turnover, has accrued to the Respondent post-GST and the same was required to be passed on by the Respondent to the Applicant No. 1 and other recipients. Section 171 of the CGST Act, 2017 appeared to had been contravened by the Respondent, in as much as the additional benefit of ITC @ 4.25% of the base price received by the Respondent during the period from 01.07.2017 to 31.12.2018, has not been passed on by the Respondent to the Applicant No. 1 and the other recipients. He has also stated that on this account, the Respondent has realized an additional amount of ₹ 2,23,696/- from the Applicant No. 1 which included both the profiteered amount @ 4.25% of the base price and GST on the said profiteered amount. Further, the DGAP s investigation has revealed that the Respondent has also realized an additional amount of ₹ 9,01,20,375/- which included both the profiteered amount @ 4.25% of the base price and the GST on the above profiteered amount, from 472 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where he was actually charged 12% GST on the base value. 38. The Respondent has filed his written submissions on 06.09.2019 vide which he has submitted the details of the units booked under the present project in different periods in a Table which is given below:- Particulars No. of Units Saleable Area (sq.ft.) A. Units booked in pre-GST regime 295 3,38,964 B. Units booked in GST regime (till 31.12.2018) 198 2,44,058 C. Units booked as on 31.12.2018 (A+B) 493 5,83,022 D. Unsold units as on 31.12.2018 75 1,13,947 E. Total Units 568 6,96,969 39.He has also submitted that there were some minor differences in comparison to the figures shared with the DGAP in his Report dated 25.06.2019 as follows:- A. The number of units booked as on 30.06.2017 indicated the number of units on which advances had been recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per GSTR-3B 214.94 Unreconciled Difference (0.09) 41.He has also submitted that there were some minor differences in comparison to the figures shared with the DGAP in his Report dated 25.06.2019 which were as follows:- Miscellaneous Income 1.02 Amount received from unidentified customer 0.33 Amount pertaining to cancellation of units 0.19 Total 1.53 42. The Respondent has also contended that there were some cancellations of units in the pre-GST period and the total amount refunded to the customers on account of cancellation of units in the pre-GST period itself was ₹ 2.24 Crore, the adjustment of which has been taken in the Service Tax returns. He has also submitted that he has availed credit under section 142 (11) (c) of CGST Act to the tune of Rs, 1.66 Crore on the amount of ₹ 40.04 Crore. He has also added that he has also applied for refund of tax on account of units cancelled in terms of Section 142 (5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.04 Difference - - - 45. The Respondent has also added that in the above Table, the amount of CENVAT credit included the specific credit for the project and the common credit. The Respondent has also maintained project wise profit and loss account and accordingly allocated expenses to the projects as per the methodology provided by Accounting Standards/ IND AS and generally accepted accounting policies. He has further submitted that the common credit has been categorised in three broard categories on the basis of expenses allocated as per his accounting policy. Thereafter, the common credit of each category has been allocated to the present project and other projects in the ratio of saleable area. 46.He has also stated that the amount mentioned in Other projects included credit pertaining to the Golf Meadows Godrej City, Panvel, EWS Units, Commercial units and future projects as per the Table given below:- GST Regime - ITC Details Projects (In Crores) 01.04.2017 to 31.12.2018 Godrej City Panvel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 Prices of units were fixed after considering the demand and supply factors and ITC available to Respondent. Total units booked till 31.12.2018 493 48. He has also submitted that there were some minor differences in comparison to the figures shared with the DGAP in his Report dated 25.06.2019 which are as follows:-. Number of Units had been calculated as follows: Net Units as on 30.06.2019 (after cancellation) = 295 Units for which tax invoice had not been raised till now = 20 Remaining units on which benefit passed on = 275 The Respondent has also furnished proof of passing on of the benefit to different categories of customers, on sample basis. 49. The Respondent has also contended that the Standing Committee has erred in referring the matter to the DGAP for further investigation as per Rule 128 (1) of the CGST Rules, 2017 which states as under:- On receipt of an application, the Standing Committee shall examine the accuracy and adequacy of the evidence provided in the application to determine whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond the application submitted by the Applicant No. 1 on 12.10.2018. It was further submitted that an anti-profiteering investigation prior to the amendment made vide Notification No. 31/2019-Central Tax, dated 28.06.2019, since the DGAP s Report was dated 25.06.2019, could be initiated only on receipt of a written application from an interested party, commissioner or any other person. In the instant case, the proceedings were initiated on the basis of an application received from the Applicant No. 1 which was only in respect of one Flat purchased by the Applicant No. 1 in the present project. Hence, the investigation could not go beyond the application and cover other customers also who had not questioned the benefit passed on to them. In this regard, reliance was placed by the Respondent on the following orders of this Authority, wherein investigation, report and final order of this Authority was only on the product for which complaint was filed in the respective cases:- (i) Dinesh Mohan Bhardwaj v. M/s. Vrandavaneshwree Automotive Private Limited 2018-VIL-OI-NAA = 2018 (4) TMI 1377 - THE NATIONAL ANTI-PROFITEERING AUTHORITY : In this case, the Applicant had filed an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority in this regard. He has further added that an application filed by dissatisfied Applicant No. 1 might be compared to a show cause notice for a tax proceeding wherein the assesse was required to show as to why tax, interest and penalty, etc. should not be levied and collected from him. He has also pleaded that it was settled principle of law that an order adjudicating a show cause notice could not travel beyond the scope of a show cause notice. In this regard reliance was placed by the Respondent on the case of Toyo Engineering India Limited v. CC, Mumbai 2006 (201) E.L.T. 513 (S.C.) = 2006 (8) TMI 184 - SUPREME COURT wherein the Hon ble Supreme Court has held that the department could not travel beyond the show cause notice. The extract of the relevant portion of the judgment was provided below for quick reference:- 16. Learned counsel for the Revenue tried to raise some of the submissions which were not allowed to be raised by the Tribunal before us, as well. We agree with the Tribunal that the revenue could not be allowed to raise these submissions for the first time in the second appeal before the Tribunal. Neither adjudicating authority nor the appellate auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commission had not directed the DG to investigate whether the OP had abused its dominant position in contravention of Section 4 of the Act. Further, both Information - 1 and Information - 2 filed by the Informants, only allege contravention of Section 3 (4) read with Section 3 (1) of the Act. No allegations of abuse of dominance had been put forth by the Informants. ...45. Accordingly, the Commission was of the view that the DG s investigation of contravention of Section 4 of the Act by the OP, being dehors the directions given to the DG, was ultra vires the scope of investigation deserves to be disregarded. 57. The Respondent has also submitted that without prejudice to the above, Rule 133 of CGST Rules, 2017 was inter alia amended vide Notification No. 31/2019-Central Tax, dated 28.06.2019 by way of inserting sub-rule (5), which provides as under:- (5) (a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Anti-profiteering referred to in sub-me (6) of rule 129, the Authority has reasons to believe that there had been contravention of the provisions of section 171 in respect of goods or services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mensurate reduction in prices, however, as on date, CGST Rules, 2017 had not prescribed any procedure/ methodology/ formula/ modalities for determining/ calculating profiteering . 59. The Respondent has also contended that the Methodology and Procedures, 2018 issued on 19.07.2018 by this Authority only provided the procedure pertaining to investigation and hearing. However, no method/formula had been notified/prescribed pertaining to the calculation of the profiteered amount. Rule 127 of the CGST Rules, 2017, prescribed the duties of the Authority whereby it could order reduction in prices, return to the recipient an amount equivalent to the amount not passed on as benefit, imposition of penalty and cancellation of registration under the CGST Act. The duties of the Authority as enumerated in Rule 127 included determination whether benefits consequent to reduction in rate of tax or allowance of ITC were being passed on to the recipients, identification of registered persons who had not passed on the benefits to the recipients and passing of orders effecting reduction in prices. However, under the CGST Act, 2017 or CGST Rules, 2017 made thereunder, there was no indication, let al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that relying on the case of B. C. Srinivas Shetty, the Hon ble Allahabad High Court in the case of Samsung (India) Electronics Pvt. Ltd. v. Commissioner of Commercial Taxes U.P. Lucknow, 2018 [11] G.S.T.L. 367 = 2018 (1) TMI 911 - ALLAHABAD HIGH COURT had observed that in the absence of any procedure or provision in the UP VAT Act, 2008 Act conferring such authority, in the case of sale of composite packages bearing a singular MRP, the authorities under the Act could not possibly assess the components of such a composite package separately. Such an exercise, if undertaken, would also fall foul of the principles enunciated by the Supreme Court In this regard, reliance was also placed on the case of Union of India v. Suresh Kumar Bansal 2017 (4) G.S.T.L. J128 (S.C.) = 2016 (11) TMI 1640 - SC ORDER , wherein it was confirmed by the Hon ble Supreme Court that explanation added to Section 65 (105) (zzzh) of the Finance Act, 1994 vide the Finance Act, 2010 expanding scope of taxability of construction of complexes intended for sale by builders, was ultra vires as there was no statutory mechanism to ascertain value of service component of the subject levy. 62. It was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be less in lean period while credit would still be higher due to continuous use of inputs/input services for construction; ITC was an absolute number which would vary as per the Govt. rate policies. A lot of goods had been moved from 28% to 18% slab. This had not resulted into any benefit to the registered buyers as they were entitled to credit in both scenarios. However, this would significantly vary the ratios as calculated by the DGAP to assess the anti-profiteering benefit; Reversal of ITC in future due to receipt of Completion Certificate might also had a bearing on ITC availed by the supplier/developer. Such a critical factor needed to be given appropriate weight while making the final computation. The calculation made under the aforesaid methodology proceeded on an assumption that all the expenses incurred in the GST period were towards the turnover, as all the credit had been attributed towards the same. No regard was given to the fact that ITC would also get accumulated on account of construction of unsold units. 65. Based on the above contentions it was submitted by the Respondent that the additional ITC in his hands in terms of Section 171 of the CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC which would accrue to the Respondent under the GST regime. However, the DGAP has ignored the same and has considered the ratio of ITC to the turnover of pre-GST and post-GST period for calculating the benefit of additional ITC which would never yield the correct quantum of profiteering. He has also furnished the details of actual benefit passed on to the different categories of customers. 68. The Respondent has also contended that without prejudice to the above submissions, applying the methodology adopted by the DGAP, the period considered by the DGAP for the pre-GST period should have been from September 2014 to June 2017 instead of the period from September 2014 to March 20116. 69. The Respondent has further contended that the DGAP has ignored the CENVAT credit availed for the period from April 2016 to June 2017 while computing the profiteering based on the premise that there was no consideration received during the period from April 2016 to June 2017. The DGAP has observed that pre-GST period should be considered from September 2014 to March 2016 as only during this period, both the indicators (ITC as well as the turnover) existed. But this observation of the DGAP wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover during a particular period, which in the instant case was pre-GST and post-GST period. He has also claimed the DGAP has himself stated that the said uniformity did not hold good as it had excluded the period of April 2016 to June 2017 from the computations by observing that during that period, the Respondent had Nil turnover with huge CENVAT credit, therefore his own assumption stood defeated and the impugned methodology was inappropriate for computation of profiteering. He has also submitted that after considering the methodology adopted by the DGAP including the period from April 2016 to June 2017, the result would be different which is given in the Table below:- Table (Amount in Rs.) S.No. Particulars Apr 14 to June 17 July 17 to Dec 18 A Credit of Service Tax Paid on Input Services 2,32,05,080 B ITC of GST Availed 13,06,94,423 C Turnover from List of Home buyers (net of cancellation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. For computing the profiteered amount, the difference should be calculated between the base price during the relevant period vis- a-vis the recalibrated base price, excluding the GST amount. Further, the recalibrated base price should be computed as inclusive of profiteered amount instead of the computation made above. The correct computation of quantum of profiteering is given by him as below:- Analysis of Increase in ITC: Base Price raised during July, 2017 to December, 2018 (Rs.) A 1,89,79,84,692 Recalibrated Base Price B=A/104.25% 1,82,06,08,817 Excess Collection of Demand or Profiteered Amount C = A-B 7,73,75,874/- 76. The Respondent has also filed his next written submissions on 20.09.2019 vide which he has submitted that he has not filed Form GST TRAN-2 during transition in the GST regime. Further, the revised number of units and corresponding area for the present project has been mentioned as is given below:- Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder Buyer Agreement. He has also enclosed copy of cost sheet of the Applicant No. 1 who had booked the flat on 19.11.2017. 79. Clarification were also sought from the DGAP on the Respondent s submissions dated 20.09.2019. The DGAP vide his Report dated 07.10.2019 has submitted that the amount of ITC of GST availed mentioned in Table- B of his Report dated 20.05.2019 had been considered from the Respondent s submissions dated 21.06.2019. However the Respondent has now submitted different figures of ITC availed during the post-GST period before the Authority which were inconsistent with the earlier figures as follows:- Table:- (Amount in Rs.) S.No. Period Submitted during investigation Submitted vide letter dated 20.09.2019 Difference 1. July 2017 to March 2018 4,94,26,855 4,92,01,366 2,25,489 2. April 2018 to December 2018 8,19,78,649 8,14,64,629 5,14,020 80. Regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference was majorly on account of proportionate credit reversal adjusted while computing ITC for the project. The same was done after observation by the Authority during the personal hearing that proportionate credit reversal of corporate office credit should be adjusted. The above reversal has been summarised as follows:- S.No. Particulars July 2017 to March 2018 April 2018 to December 2018 A. Submitted during investigation 4.94 8.20 B. Submitted to Authority 4.92 8.15 C. Gross amount [A-B] 0.02 0.05 D. Amount due to proportionate credit reversal considered while submitted figures to the Authority [C-D] 0.02 0.05 C. The DGAP had observed that the home-buyers details submitted to the Authority seemed to be inconsistent with the details of home-buyers submitted during the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litch in the system to extract unadjusted advances as on 31.12.2018. This was mainly due to following two reasons:- i. Advances received in pre-GST regime on which Service Tax had already been paid were also accounted in the unadjusted advances as on 31.12.2018. This had led to increase in unadjusted advances as on 31.12.2019 when details were submitted to the DGAP. ii. Advances received in GST regime when billed to customers were knocked off in the system. However, for certain customers, advances were knocked off in the system after 31.12.2018 even though billing was done prior to 31.12.2018. However, while extracting data, the system computed unadjusted advances which were knocked even after 31.12.2018. This had led to decrease in unadjusted advances as on 31.12.2018 when details were submitted to the DGAP. 82. We have carefully considered all the Reports filed by the DGAP, submissions of the Respondent, the Applicant No. 1 and other material placed on record and it is revealed that the Respondent is executing Godrej City Panvel Phase-I project at Khanvale, Panvel, Raigarh-410206. It is also revealed that the Applicant No. 1 had booked a flat in the above proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder is not passing me any discount or benefit . 8. The builder cannot appropriate this benefit (₹ 1.50 Cr) as this is a concession given by the Government from its own tax revenue to reduce the prices being charged by builders. The builder is not being asked to extend this benefit out of his own account and he is liable to pass on the benefit. 9. The government in the public interest reduced the rate on tax on the various products being sold by sacrificing its own revenue and therefore, the builder is bound to pass on this benefit to customers and by no stretch of imagination he can pocket this reduction to the detriment of the ordinary customer. 10. The builder cannot be allowed to top up his margins from the amount of tax reduction which he is legally required to pass on this to his customers. The Builder is not willing to pass on any benefit to me: The above-said benefit amount may be passed on to all flat owners. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (Emphasis supplied) 84. It is clear from the perusal of the above Application that the Applicant No. 1 had specifically mentioned in his application that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recipients or not and hence during the course of investigation if it comes to his notice that the above two benefits have not been passed on to those recipients who had not filed complaint against the registered person, he is legally bound to investigate the same and bring the facts before this Authority for determination of those benefits to the eligible recipients. It is also clear that the above benefit has accrued to the Respondent due to the concession given by the Central as well as the State Government out of the public exchequer, therefore, the DGAP is bound to investigate to ascertain whether the Respondent has misappropriated the amount of ITC which he was required to pass on to the buyers. The DGAP cannot overlook commission of an offence which has occurred under Section 171 (1) of the above Act once it has come to his notice during the course of the investigation and hence the above contentions of the Respondent are not correct. 87. The Respondent has also submitted that power to order investigation in respect of those cases where allegations were not made in the original complaint was conferred on this Authority vide Notification No. 31/2019-Central Tax dated 28.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the above case does not help the cause of the Respondent. 90. The Respondent has also placed reliance on the decision given by this Authority in the case of Kerala State Screening Committee on Anti-Profiteering and another v. M/s. Pulimoottill Silks 2019 (2) TMI 296 in which no reduction had occurred in the rate of tax. In the case of Kerala State Screening Committee on Anti-Profiteering and another v. M/s. Velbon Vitrified Tiles Pvt. Ltd. 2019 (3) TMI 370 the benefit of tax reduction had already been passed on. In both these cases violation of the provisions of Section 171 (1) had not been committed hence the facts of these cases were not similar to the facts of the present case where violation of the above provisions has been made and hence the decisions passed in these cases are not being relied upon. 91. The Respondent has further submitted that the DGAP could not suo moto assume jurisdiction with regard to other customers. As has been discussed supra the DGAP has acted on the specific allegation made by the above Applicant that the benefit of ITC had not been passed on by the Respondent which should be given to alt the other flat buyers and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent and hence the above case does not come to the rescue of the Respondent. 94. The Respondent has also quoted the case of Fx-Enterprise Solutions India Pvt. Ltd. and ors. v. Hyundai Motor India Limited 2017 Comp 586 (CCI) however, in this case the Director General had investigated those issues which were not ordered to be investigated by the Competition Commission whereas the DGAP has only investigated whether the Respondent has passed on the benefit of ITC or not which he is legally entitled to investigate as per the provisions of Rule 129 and hence the above case is of no help to the Respondent. 95. The Respondent has also submitted that under Rule 133 (5) (a) of the CGST Rules, 2017 this Authority can order investigation if there had been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the Report furnished by the DGAP under Rule 129 (6), however, in the present case no such reference was made by this Authority to the Respondent. As already discussed above the DGAP has not exceeded his jurisdiction as the application filed by the above Applicant had disclosed that the Respondent had not passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertical level or at the invoice level. Denial of the above benefits on any such ground will amount to violation of the provisions of Section 171 (1) of the CGST Act, 2017 as well as Article 14 of the Constitution. Hence, there is no scope of arbitrariness on this ground as has been alleged by the Respondent. 97. In this connection it also would be relevant to state that under Rule 126 of the CGST Rules, 2017 this Authority has been granted power to determine Methodology Procedure for determination whether the benefit of rate reduction or of ITC has been passed on by the registered person to the recipient or not, by the Central Government as per the provisions of Section 164 of the above Act which has approval of the Parliament. Rule 126 has further been framed on the recommendation of the GST Council which is a constitutional body created under the Constitution (One Hundred and First Amendment) Act, 2016. Therefore, the above power has both legislative sanction es well as incorporation in the CGST Act, 2017 and the CGST Rules, 2017. The delegation provided to this Authority under the above Section and Rule is clear, precise, unambiguous and necessary and is well within the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fixing of prices which is not the intention of the provisions of Section 171 (1) of the above Act as it proposes to only pass on the above two benefits and does not propose to control the prices. It is strange that the Respondent is not willing to pass on the above benefits which he is not to pay from his own pocket as both of them are being given out of the tax revenue of the Central as well as the State Governments but is advocating fixing of prices of his flats by the Government. Therefore, the above contentions of the Respondent are frivolous and cannot be taken in to consideration. 99. In this regard reliance was placed by the Respondent on the case of Eternit Everest Ltd. v. Union of India 1997 (89) E.LT. 28 (Mad.) = 1996 (6) TMI 90 - MADRAS HIGH COURT . In this connection it is mentioned that no tax has been levied under Section 171 (1) of the above Act and hence no machinery is required to compute it. However, adequate machinery has been provided to implement the Anti-profiteering measures as under Section 171 (2) of the above Act this Authority has been constituted to determine whether the above benefits have been passed on or not. Under Rule 123 Standing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a correct quantum of profiteering could not be computed. In this connection it would be relevant to state that Section 171 (1) of the above Act requires that the benefit of additional ITC which a registered person has received in the post- GST period is required to be passed on. This benefit is also required to be passed on, on the basis of the payment made by a recipient i.e. the turnover. Therefore, computation of the ratios of ITC to turnovers for the pre-GST and post-GST period is required to be made so that the benefit can be passed on to every flat buyer proportionate to the payment made by him. Therefore, computation of the above ratios as has been made by the DGAP vide Table E supra is correct. 103. He has also claimed that the comparison of the above ratios was not appropriate for the reason that under the real estate sector, there was no correlation of turnover with the cost of construction or development of a project. The above plea of the Respondent is incorrect as there is correlation between the turnover and the ITC as he was discharging his GST output liability out of the ITC available to him on the basis of the turnover i.e. the cost realised by him from the buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has passed on benefit of 3.35% however, the DGAP has ignored the same and has considered the ratio of ITC to the turnover of pre-GST and post-GST periods for calculating the benefit of additional ITC which would not yield the correct quantum of profiteering. As discussed supra the DGAP has correctly computed the ratios of ITC to turnovers for the pre and post GST period and hence the above contention of the Respondent is not correct. 108. The Respondent has also claimed that he has passed on benefit of 3.35% to the eligible customers by way of commensurate reduction in prices due to additional benefit of ITC. He has also furnished sample copies of the tax invoices and credit notes to substantiate his claim made vide his submissions dated 06.09.2019. However, perusal of the above documents shows that he has only made entry of Discount or GST credit passed back or GST benefit in them and nowhere it has been mentioned that the above amount has been transferred on account of benefit of ITC. Therefore, this discount/GST credit passed back/GST benefit cannot be considered to have been passed on due to the benefit of ITC as has been claimed. A typical entry made in respect of Mrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e- 10013771) total billing till 31st December, 2018 as per the Respondent s submissions was ₹ 24,66,747/- whereas, the Respondent vide his e-mail dated 19.06.2019 had submitted total billing as ₹ 23,72,434/-. He has also contended that the same was the case in respect of most of the other customers. It is apparent from the above that the Respondent had no evidence of passing on the benefit of ITC till the investigation Report was filed by the DGAP on 25.06.2019 whereas the credit note issued to Mrs. Joshi shows that the benefit was passed on 13.10.2017. Therefore, there is no doubt that these tax invoices and the credit notes have been prepared by the Respondent after 25.06.2019 and hence all his claims of having passed on the benefit of ITC are frivolous and hence they cannot be relied upon. 110. The Respondent has also contended that the period considered by the DGAP for the pre-GST period should have been from September 2014 to June 2017 instead of the period from September 2014 to March 2016. However, the DGAP vide para 20 of his Report has stated that he had taken the above period as the Respondent had not received any consideration during the above period altho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1.54% calculated by the DGAP for the pre-GST period from April 2014 March 2016 is correct and consequently the ratio of profiteering of 4.25% is also correct. Accordingly, his claim that he has passed on benefit of 3.35% as compared to the ratio of 2.17% is incorrect and hence the same cannot be relied upon 113. The Respondent has further claimed that he had turnover of ₹ 4,81,176/- during the period from April 2016 to March 2017. However, no reliable evidence supported by the entry of the above amount in his returns has been produced by the Respondent and hence, the same cannot be accepted. 114. The Respondent has also contended that the DGAP has wrongly computed the profiteered amount as he should have taken the relevant period vis- -vis the recalibrated base price, excluding the GST amount. However, the above claim of the Respondent is not tenable since he has not only charged extra amount from his buyers which he should not have charged due to commensurate reduction in the prices as he had availed benefit of additional ITC, by recalibrating his prices but he has also illegally charged GST on this extra amount. Had he not charged additional GST his customers would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Section 171 (1) of the CGST Act, 2017, the Respondent is required to pass on the benefit of such additional input tax credit to the recipients. Since, both the above Tables have been prepared by the DGAP on the basis of the Returns filed by the Respondent and the information submitted by the Respondent himself the computations made in the above Tables are taken to be correct and can be relied upon. 118. Accordingly, the excess amount collected by the Respondent from the above Applicant and other home buyers during the period from 01.07.2017 to 31.12.2018 or the amount of benefit of input tax credit which is required to be passed on by the Respondent to the recipients or the profiteered amount is determined as ₹ 9,03,44,071/- which includes 12% GST on the base profiteered amount of ₹ 8,06,64,349/-, in terms of Rule 133 (1) of the CGST Rules, 2017. The home buyer and the unit no. wise break-up of this amount has been given in Annexure-18 of the Report furnished by the DGAP on 25.06.2019. This amount also includes profiteered amount of ₹ 2,23,696/- including GST on the base profiteered amount of ₹ 1,99,729/- which is the benefit of input tax credit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of Section 171 (1) of the CGST Act, 2017 and has apparently committed an offence under Section 171 (3A) of the above Act and therefore, he is apparently 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. Accordingly, the notice dated 02.07.2019 vide which it was proposed to impose penalty under Section 29, 122-127 of the above Act read with Rule 21 and 133 of the CGST Rules, 2017 is withdrawn to that extent. 123. It is also revealed from the perusal of Table-'A mentioned in para 8 (a) of the Report dated 25.06.2019 furnished by the DGAP that the Respondent has admitted that he is executing two more projects viz. Golf Meadows Godrej City, Panvet Phase II project and the EWS project . It is also apparent from para 8 (c) of the above Report that the Respondent has also admitted that he has availed benefit of CENVAT credit in the pre-GST period for the above two projects The Respondent has also furnished the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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