TMI Blog2020 (6) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Rules, 2017, failing which the above amounts shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers. The Respondent has profiteered by an amount of ₹ 1,42,369/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 31.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. Penalty - HELD THAT:- The Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also incorporating the observations dated 07.11.2018, made by the Screening Committee of Karnataka on the said report dated 04.10.2018. 3. The DGAP on receipt of the above reference from this Authority decided to collect the evidence necessary to determine whether the benefit of the input tax credit has been passed on by the Respondent to the Applicant No. 1 in respect of the construction service supplied by the Respondent and a Notice under Rule 129 (3) of the Rules was issued by the DGAP on 04.12.2018 to submit reply as to the whether the ITC benefit was passed on to the recipients and also asked the Respondent to suo-moto determine the quantum of benefit which was not passed on. The Respondent as well as the above Applicant was allowed to inspect the evidence submitted by the other party however both of them did not avail the same. 4. The DGAP claimed that the Respondent had also not supplied the complete information sought by him by stating that he was not in a position to submit the desired information as all the relevant documents had been seized by the Commercial Taxes Department (Enforcement), South Zone-02 Bengaluru. Accordingly, the DGAP asked the jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s signed on 29.04.2015 after the approval for the construction of the project was obtained on 04.02.2013. The project consisted of 36 Residential Units of which the Respondent s share was 20 Residential units all of which have been sold and he had charged GST @ 18% earlier from his customers in the absence of clear-cut directions and then he was charging GST @ 12% and was in the process of refunding the excess amount charged from the Applicant No. 1 and other customers. (c) That he was not in a position to furnish the requisite information to this office since all the records had been taken by DCCT- (Enforcement). The Respondent further submitted that he had taken the GST registration on 03.04.2018 and thus not filed the GSTR-1 and GSTR-3B for the period from July 2017 to March 2018. (d) That the project Elegant Berkeley was completed in December 2016, there was no major work pending, and only minor finishing like painting and cleaning took place post GST on which he had availed ITC. (e) That ST-3 returns have not been filed by him and thus he has received a Show Cause Notice dated 20.04.2018 from the Office of the Principal Commissioner of Central Tax, GST Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Commercial Taxes, Bengaluru for cancellation of registration for the reason of not furnishing GST returns for a continuous period of six months. He also submitted that a survey was also conducted at his premise on 25.03.2019 by the Deputy Commissioner of Income Tax, Circle- 1(2)(1), Bengaluru under Section 133A of the Income Tax Act, 1961 and he impounded the books of account. 7. The DGAP has covered the period from 01.07.2017 to 31 .10.2018 for investigation. The Respondent. vide his aforementioned letters and e-mails, has submitted the following documents/information: (a) Copies of GSTR-1 Returns for the period from April 2018 to March 2019. a. Copies of GSTR-3B Returns for the period from April 2018 to March 2019. (b) Copies of VAT returns for the period from April 2016 to June 2017. (c) Copies of all the demand letters and the sale agreement/ contract issued in the name of the Applicant. (d) Copy of Joint Development Agreement dated 29.04.2015 entered with the Land Owner. (e) Details of applicable tax rates, pre-GST, and post-GST. (f) Copy of Balance Sheet (including all annexures and profit loss account for FY 2016-17 FY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 04.01.2018 (Towards Service Tax) 234 832145 3,78,000 11 04.01.2018 (Towards GST) 235 832146 2,70,000 12 TDS 1% of Basic 99,000 99,000 Total 1,05,48,000 9. The DGAP further observed that the Respondent have collected ₹ 99,00,000/- towards the basic cost of the flats and balance amount of ₹ 6,48,000 representing Service Tax and GST from the Applicant No. 1. The Respondent also informed that he will be refunding excess GST amounting to ₹ 90,000 collected from the Applicant No. 1 [(₹ 15,00,000*18%) less (₹ 15,00,000*12%)]. However, as per the books of account of the Respondent, he had transferred the whole amount of ₹ 1,04,49,000 (Net of TDS) to Sales A/c vide journal voucher no. 2043 dated 16.01.2018 which showed that the Respondent had not transferred ₹ 6,48,000 into the output tax liability ledgers and consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier . Thus, the input tax credit pertaining to the residential units which are under construction but not sold is a provisional input tax credit which may be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the completion certificate, in terms of Section 17(2) Section 17(3) of the Central Goods and Services Tax 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 this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies Section 17 (3) The value of exempt supply under sub-section 2 shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building Therefore, the input tax credit pertaining to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT of Service Tax Paid on Input Services used (A) - - Rule 4 of the Cenvat Credit Rules, 2004 2 Input Tax Credit of VAT Paid on Purchase of Inputs (B) 6,86,241 - As per Ledger furnished by the Respondent 3 Input Tax Credit of GST Availed (C) - 6,08,920 As per books of accounts furnished by the Respondent 4 Total CENVAT/lnput Tax Credit Available (D) = (A+B) or (C) 6,86,241 6,08,920 5 Total Saleable Super Built-up Area (in SQF) (E) 61,232 61,232 As per JDA dated 29.04.2015 6 Super Built-up Area share of Land Owner (in SQF) (F) 27,414 27,414 As per JDA dated 29.04.2015 7 Input Tax Credit pertaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for land value) on construction service, levied vide Notification No. 11/2017Central Tax (Rate), dated 28.06.2017. Accordingly, on the basis the figures contained in table- B above, the comparative figures of the ratio of input tax credit availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, are tabulated in Table- C below. Table- C (Amount in Rs.) S.No. Particulars Post-GST 1. Period A July 2017 to October 2018 2. Output GST rate (%) B 12% 3. The ratio of CENVAT credit/ Input Tax Credit to Total Turnover as per table - B above (%) C 1.41 % 4. Increase in input tax credit availed post-GST (%) D= 1.41% less 0.49% 0.92% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove computation of profiteering was concerning 11 home buyers, whereas the Respondent had booked 20 units till 31.10.2018, out of which 9 customers who had booked the flats and also paid the booking amounts in the pre-GST period have not paid any consideration during the post-GST period 01.07.2017 to 31.10.2018 (period under investigation). Therefore, if the input tax credit in respect of these 9 units was considered to calculate profiteering in respect of 11 units where payments have been received after GST, the input tax credit as a percentage of turnover may be erroneous. Therefore, the benefit of the input tax credit in respect of these 9 units may be calculated when the consideration is received from such units by taking into account the proportionate input tax credit in respect of such units. He also observed that the said services have been supplied by the Respondent in the State of Karnataka only. 17. He conclusively submitted that provision of Section 171 of the Central Goods and Services Tax Act, 2017 have been contravened by the Respondent, since the additional benefit of input tax credit @0.92% of the base price received by the Respondent during the period 01.07.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate or occupancy certificate, as it was not mandatory for a small project was incorrect as per the building by-laws of BBMP Bangalore, OC and CC are mandatory for any residential complex with more than 5 units. Further, vide submissions dated 11.11.2019 Applicant No. 1 submitted that the Respondent has increased the cost of the flat from ₹ 99,00,000/- to ₹ 1,05,48,000/- after implementation of GST by charging an extra sum of ₹ 3,78,000/- and also refused to provide the appropriate tax invoice for the same which may be due to tax avoidance. He further submitted that he could not attend the hearing and he agreed to the Report submitted by the DGAP. 20. The Respondent vide his submissions dated 05.11.2019 stated that he had refunded an amount of ₹ 90,000/- vide cheque no. 000824 dated 4.11.2019 to the Applicant No. 1 being the excess GST amount which was erroneously collected. He further submitted that as he had cleared/settled the excess GST amount the matter may be closed. He also submitted that he was aged about 67 years and due to old age problems he could not attend the hearing. 21. We have carefully considered the Report of the DGAP, submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- to ₹ 1,05,48,000/- after implementation of GST by charging an extra sum of ₹ 3,78,000/- and also refused to provide the appropriate tax invoice for the same which may be due to tax avoidance however, this issue is outside the preview of Anti-Profiteering provisions. He may approach the appropriate forum for redressal of the same. 24. Based on the above facts this Authority determines the profiteered amount as ₹ 1,42,369/- (inclusive of applicable GST @ 12%) for the 11 residential units for the period from 01.07.2017 to 31.08.2018 as per the details furnished by the DGAP vide Annexure-45 of his above Report. The above amount includes an amount to the tune of ₹ 21,113/- due to the Applicant No. 1 (inclusive of applicable GST) and an additional amount of ₹ 1,21,256/- (inclusive of applicable GST) to 10 other recipients who were not Applicants in the present proceedings as per the details furnished by the DGAP vide Annexure-45 of the above Report. 25. It is also established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has failed to pass o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on him. 28. Further, the Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Karnataka to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to all the buyers as per Annexure-45 of the Report. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioners within a period of 4 months from the date of receipt of this order. 29. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was to be passed on or before 09.04.2020 as the investigation Report was received from the DGAP on 10.10.2019. However, due to the COVID-19 pandemic prevailing in the Country the order could not be passed on or before the above date. Hence, the same is being passed today in terms of the Notification No. 35/2020-Central Tax dated 03.04.2020 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes Customs under Section 168 A of the CGST Act, 2017. 30. A copy each of this order be supplied to the Applicants, the Respondent, Commissioners CGST /SGST ..... X X X X Extracts X X X X X X X X Extracts X X X X
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