TMI Blog2020 (2) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... ve amount of ₹ 35,28,744/- (including 12% GST) that has been profiteered by the Respondent from his home buyers, including Applicant No. 1, shall be refunded by him, along with interest @18% thereon. from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. This Authority orders that the Respondent shall reduce the price per unit/ flat to be realized from the other home buyers by an amount commensurate with the benefit of ITC, as provided under Rule 133 (3) (a) of the CGST Rules, 2017. Imposition of penalty - HELD THAT:- Since the Respondent has denied benefit of ITC to his homebuyers in his Project Edge Towers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus committed an offence under Section 171 (3A) of the above Act, he is liable to be penalized under the provisions of the above Section. Accordingly. a 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. It is clear to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 171 of the CGST Act, 2017. 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 on 30.10.2019. 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 on 07.01.2019. 3. The DGAP in his Report has stated that the Applicant submitted the following documents along with his application: (a) Duly filled in Form APAF-1. (b) Copies of the demand letters. (c) ID proof (Aadhar Card). 4. The DGAP on receipt of the said reference from the Standing Committee on Anti-profiteering, issued a notice under Rule 129 of the 14.01.2019, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all supporting documents. Vide the above mentioned notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 171 of the CGST Act, 2017. 8. The DGAP has further stated that the Respondent had submitted copy of the sale agreement dated 20.08.2010, for the sale of Flat No. K-1603 to the above Applicant in his project Edge Towers , measuring 1340 square feet, at the basic sale price of ₹ 2683/- per square feet. The details of amounts and taxes paid by the Applicant No. 1 to the Respondent, has been furnished by the DGAP in Table- A below:- Table- A (Amount in Rs.) S.No. Demand Date Basic Sale Price Other Charges Service Tax/GST Total 1. 19-07-2010 12,73,862 6,87,201 38,937 20,00,000 2. 30-08-2010 - 11,699 301 12,000 3. 04-02-2011 9,479 - 251 10,000 4. 04-02-2011 2,08,94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45,15,832 9. The DGAP has further claimed that the contention of the Respondent that the accurate quantum of ITC benefit would be passed on to the recipients once the project was fully completed and the Respondent had knowledge of the exact benefit of ITC, may be correct but the profiteering, if any, has to be established at a given point of time, in terms of Rule 129 (6) of the CGST Rules. Therefore, the ITC available to the Respondent and the amount received by him from the Applicant No. 1 and other recipients till 31.12.2018. has to be taken into account for determining profiteering. 10. The DGAP has further stated that another aspect to be borne in mind while determining profiteering was that para 5 of Schedule-III of the Central Goods and Services Tax 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- Table- B (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) July, 2017 to March, 2018 April, 2018 to December, 2018 Total (Post-GST) 1. CENVAT credit of Service Tax Paid on Input Services (A) 1,74,99,398 70,57,101 2,45,56,499 2. Credit of VAT on Inputs (B) 3. Total CENVAT/VAT Credit Available (C)= (A+B) 1,74,99,398 70,57,101 2,45,56,499 4. Input Tax Credit of GST (D) 1,45,53,570 1,95,62,787 3,41,16,257 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril, 2016 to June, 2017 July, 2017 to December, 2018 1. Tax Rate B 4.5% 12% 2. Ratio of CENVAT credit/ Input Tax Credit to Turnover as per Table B above (%) C 1.72% 2.64% 3. Increase in input tax credit availed post-GST (%) D=2.64% less 1.72% - 0.92% Analysis of Increase in input tax credit: 4. Basic Price collected during post-GST (July, 2017 to December, 2018) period. E 34,24,63,472 5. GST @ 12% on Basic Price F=E*12% 4,10,95,617 6. Total Demand collected/raised post-GST G=E+F 38,35,59,089 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that before concluding the investigation, it was pertinent to mention that the above computation of profiteering was with respect to 397 home buyers from whom payments had been received by the Respondent during the post-GST period covered by the investigation, i.e., 01.07.2017 to 31.12.2018, whereas the Respondent had booked a total number of 1242 flats till 31.12.2018. In respect of the remaining 845 flats, though the customers had booked the flats on or before 31.12.2018, they had not paid any consideration during the post-GST period from 01.07.2017 to 31.12.2018. If the ITC in respect of these 845 units was taken into account to calculate profiteering in respect of 397 units where payments had been demanded or received in the post-GST period, the ITC as a percentage of turnover would be distorted and erroneous. Therefore, the benefit of ITC in respect of these 845 units would have to be calculated when the consideration was received in the post-GST period from the concerned home buyers, by taking into account the proportionate ITC in respect of such units. On the basis of the details of outward supplies submitted by the Respondent, it was observed that construction service h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There were 15 towers in the subject project out of which possession had been given to the flat buyers of 5 towers and the remaining 10 towers were still under construction. iv. He would pass on the benefit of ITC through the demands raised for the balance 10 towers. 21. This Authority vide Order dated 20.08.2019 had directed the Respondent to submit the following documents/information:- 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. Details of all the Projects under the present Registration along with copies of Completion Certificate, if any. c. Project-wise list of all payments received from each of his buyers along with the details of booking date amount and ITC benefit passed on, if any, to them. 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-1 and Tran-2 Returns. g. Details of Credit Reversal, if any. h. Details of purchase of land alongwith agreements with G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years. iv. The office of the DGAP had asked for various information/documents from him, which all had been duly submitted by him before the DGAP. v. He has been engaged in the business of real estate in which the contracts were for long term duration and as per the GST law, he was required to reverse the ITC in respect of unsold units once the completion certificate was issued. Therefore, computation of the accurate quantum of ITC benefit which was required to be passed on to the recipients could only be computed when the completion certificate was issued and ITC in respect of the unsold units was reversed. vi. That the law was ever changing and there was always a possibility in case of long term contracts that law may change over the period of time. vii. The DGAP has itself noted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee was opposed to the mandate of law, which was bad in law and was liable to be quashed. xii. Further, he has stated that the bare reading of Rule 128 provides the Standing Committee should examine the accuracy and adequacy of the evidence provided in the application to determine whether there was prima-facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of ITC had not been passed on to the recipient by way of commensurate reduction in prices. However, nowhere in the minutes of the meeting of the Standing Committee, the above requirement was met. The Standing Committee had merely decided to forward the complaint for further investigation without discussing any evidence on record and without recording any satisfaction whatsoever regarding the evidence, which could give the Standing Committee the right to forward the complaint. Therefore, neither the Screening Committee nor the Standing Committee provided any opportunity of hearing to the Respondent to present its case before them as such proceedings had civil consequences for him. Hence, it had violated the principles of na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 1 - SUPREME COURT . b. National Mineral Development Corporation 2004 (6) SCC 281 = 2004 (5) TMI 575 - SUPREME COURT . c. Govind Saran Ganga Saran v. Commissioner of Sales Tax 1985 (60) STC 1 (SC) = 1985 (4) TMI 65 - SUPREME COURT . d. Mathuram Agrawal v. State of Madhya Pradesh, (1999) 8 SCC 667 = 1999 (10) TMI 125 - SUPREME COURT . Hence, in absence of any method/manner/basis for defining profiteering or for determining the manner in which the amount was to be computed, the provisions of Section 171 of the CGST Act, 2017 became unenforceable and therefore, the procedure and methodology adopted by the DGAP was completely wrong, arbitrary, unreasonable and without authority of law on the ground that the Report had proceeded to calculate the profiteering amount on average basis, which was neither provided in the Act not in the Rules, and same had been adopted by the DGAP unilaterally and according to its own whims and fancies. In the present case, the DGAP in the absence of procedure and methodology provided in the CGST Act read with the allied Rules had proceeded to determine the amount of profiteering on the basis of methodology for computation self ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions of the petitioner. Since the petitioner has raised a fundamental issue of jurisdiction of respondent No. 3 to proceed in the matter, the respondent No. 3 shall pass a reasoned order, firstly, on the aspect of jurisdiction. In case the respondent No. 3 passes a reasoned order holding that they have jurisdiction, it shall be open to respondent No. 3 to pass an order on merits. 25. As per the above directions of the Hon ble High Court, despite a time bound procedure, the Respondent was given an opportunity to appear for the hearing on 16.12.2019. However, the Respondent despite the directions of the Hon ble High Court did not appear for the hearing. Instead, vide his e-mail dated 16.10.2019 he had informed that he would not be able to appear for the hearing and had requested for adjournment of one week. Therefore, to ensure compliance of the Hon ble High Court the Respondent was again given an opportunity to appear before this Authority on 24.12.2019. The Respondent appeared for the hearing on 24.12.2019 and without filing his written submissions orally requested to allow him more time to file written submissions. Accordingly, request of the Respondent was accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thodology/procedure according to which this Authority shall examine whether any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. He further contended that the methodology and procedure would have come into force with effect from the issuance of the notification by this Authority. In this connection it would be pertinent to mention that the main contours of the Procedure and Methodology for passing on the benefits of reduction in the rate of tax and the benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself which states that Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices . It is clear from the perusal of the above provision that it mentions reduction in the rate of tax on any supply of goods or services which does not mean that the reduction in the rate of tax is to be taken at the level of an entity/group/company for the entire supplies made by it. Therefore, the benefit of tax reduction has to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on in respect of one project would not be similar to another project. Issuance of Occupancy Certificate/ Completion Certificate would also affect the amount of benefit of ITC as no such benefit would be available once the above certificates are issued. Therefore, no mathematical formulae can be fixed for determining the benefit of additional ITC which would be required to be passed on to the buyers of such units. Further, the facts of the cases relating to the Fast Moving Consumer Goods (FMCGs), restaurants, construction and cinema houses are completely different and therefore, the mathematical methodology employed in the case of one sector cannot be applied in the other sector otherwise it would result in denial of the benefit to the eligible recipients. Moreover, both the above benefits have been granted by the Central as well as the State Governments by sacrificing their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and hence they have to pass on the above benefits as per the provisions of Section 171 (1). 31. He has also cited the judgement passed in the case of Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une-2017) was 1.72% and during the post-GST period (July-2017 to December-2018), it was 2.64%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 0.92% (2.64%-1.72%) of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as ₹ 35,28,744/- on the basis of the information supplied by the Respondent, which the Respondent had himself admitted and hence the amount of profiteering computed by the DGAP is hereby accepted as correct. 34. In view of the discussions in para 33 above, it is clear that the Respondent has profiteered by an amount of ₹ 35,28,744/-(Annex-17) during the period of investigation i.e. 01.07.2017 to 31.12.2018. The above amount of ₹ 35,28,744/- (including 12% GST) that has been profiteered by the Respondent from his home buyers, including Applicant No. 1, shall be refunded by him, along with interest @18% thereon. from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 19.06.2019 vide which it was proposed to impose penalty under Sections 29 and 122-127 of the above Act read with Rule 21 and 133 of the CGST Rules, 2017 is withdrawn to that extent. 39. It is clear to us that the Respondent has profiteered in the project Edge Tower . Therefore, as per the provisions of Section 171 (2) of the CGST Act, 2017, this Authority has reasons to believe that there is a need to verify all the Input Tax Credits of the Respondent so as to arrive at the aggregate profiteering of the Respondent, since profiteering on the part of the Respondent has already been established in the case of Edge Towers project of the Respondent as also the fact that supplies from various projects of the Respondent are being made through a single GST registration and the same ITC Pool/Electronic Credit Ledger is being used for all the supplies being made from that registration. Therefore, the Authority, in line with the provisions of Section 171 (2) of the CGST Act, 2017 and as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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