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TMI Blog2020 (6) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... at by the Applicant No. 1 in the project "Elegant Berkeley" situated at Hennur Village, Kasaba Hobli, BBMP Ward No. 30, Bangalore North. In the said application the Applicant No. 1 alleged that the Respondent had not provided any tax invoice for the supply of construction service, charged higher GST @ 18% instead of 12% w.e.f. 01.07.2017 and also Service Tax was charged after GST came into force. Further, the Applicant alleged that the Respondent had raised the cost of the flat from Rs. 99,00,000 (Agreement Value) to Rs. 1,05,48,000/- after implementation of GST by extracting Service Tax on the already paid amount in the pre-GST era and also charged GST @ 18% (instead of 12%) on the balance amount after the introduction of GST. The said application was examined by the Applicant No. 2 and the Investigation Report dated 04.10.2018 under Rule 129(6) of the Rules, 2017 was submitted to the Authority. 2. The DGAP vide the said Report dated 04.10.2018 concluded that the allegation in the application dated 28.05.2018 related to excess charging of Service Tax and GST by the Respondent which could not be redressed through the provisions of Section 171 of the Central Goods and Services Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2019 along with an Inspector of the jurisdictional CGST Commissionerate (Bengaluru East). The Respondent was also intimated about the date of the visit by a letter dated 21.05.2019 which was duly acknowledged by him. During the visit, all the requisite documents/information were collected from the Respondent and also statement of Sh. B. Rajashekar, partner, Respondent had been recorded on 27.05.2019. However, copies of purchase bills were not readily available with the Respondent which were assured to be sent over email within three working days. 6. The Respondent submitted his replies to the DGAP vide letters/e-mails/statement dated 11.12.2018, 19.12.2018, 27.12.2018, 05.03.2019, 02.04.2019, 23.04.2019, 23.05.2019, 24.05.2019, 25.05.2019, 27.05.2019, 28.05.2019, 29.05.2019, 30.05.2019, 31.05.2019, 03.06.2019, 04.06.2019, 07.06.2019, 08.06.2019, and 10.06.2019. The replies of the Respondent are summed up as follows:- (a) That he was a partnership firm, having two partners namely i) B. Rajashekhar and ii) Smt. Vijaya Chamundi, having single GST registration. He was engaged in Civil Works and Contracts for Construction and sale of Residential Flats under the Joint Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (excavation). He entered into the Joint Development Agreement on 29-04-2015. As per MOU and JDA entered with the landowner, he was required to construct a total of 36 Residential Flats, one Club, and one Recreational Centre. He owned right to sell 20 out of total 36 Residential flats and he had already sold all the 20 flats of has share. Further, he stated that he had neither received nor applied for Occupation Certificate or Completion Certificate as it was not mandatory to get such a Certificate for a small project. It was mandatory for high rise buildings only. He also furnished the Account statement of all the 20 Residential flats buyers in the project "Elegant Barkley". As per the agreement entered with the buyers, he had received the consideration from the prospective buyers of flats and gave the receipts. He also submitted that he did not raise any tax invoice towards the money received. (h) That he had furnished the summary ledger of Input VAT and GST for the period from 01.04.2016 till 31.10.2018 for the project Elegant Barkley. As the Project was completed in December 2016, there was no major work pending and only minor finishing work like painting and cleaning had take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .No. Payment Date Voucher No. Cheque No. BSP 1 21.07.2014 214, 215 & 216 NEFT 5,00,000 2 22.08.2014 311 NEFT 2,50,000 3 23.08.2014 313 NEFT 2,50,000 4 25.08.2014 314 & 315 NEFT 5,00,000 5 26.08.2014 319 NEFT 2,50,000 6 27.08.2014 322 NEFT 2,50,000 7 13.12.2014 543 065819 64,00,000 8 30.12.2017 236 003824 13,29,000 9 04.01.2018 233 832144 72,000 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 Rs. 99,00,000/- towards the basic cost of the flats and balance amount of Rs. 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 Rs. 90,000 collected from the Applicant No. 1 [(Rs. 15,00,000*18%) less (Rs. 15,00,000*12%)]. However, as per the books of account of the Respondent, he had transferred the whole amount of Rs. 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 transferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority or after its first occupation, whichever is earlier". 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' The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit 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 pertaining to the Land Owner (G) = (D*F/E) 3,07,235* 2,72,618* ITC pertaining to the Landowner' share.* 8 Input Tax Credit pertaining to the Respondent (H) = (D) - (G) 3,79,006 3,36,302 ITC pertaining to the Respondent' share. 9 Turnover for Residential Flats as per Home Buyers List (l) 2,05,58,000 1,38,16,899 As per books of accounts furnished by the Respondent 10 Total Saleable Super Built-up Area (in SQF) of the Respondent (J) = (E)-(F) 33,818 33,818 11 Total Sold Super Built-up Area (in SQF) relevant to turnover (K) 9,076 19,552 As per books of accounts furnished by the Respondent 12 Relevant ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,53,32,558 12. Excess Collection of Demand or Profiteering Amount K=G-J 1,42,369 15. He further claimed that from Table-'C' above, it could be deduced that the additional input tax credit of 0.92% 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 Central Goods and Services Tax Act, 2017, the benefit of such additional input tax credit was required to be passed on by the Respondent to the recipients. Further regarding the amount of additional benefit of the input tax credit, it appeared that based on the aforesaid CENVAT/input tax credit availability in the pre and post-GST periods and the details of the amount collected by the Respondent from the Applicant No. 1 and other home buyers during the period from 01.07.2017 to 31.10.2018, the amount of benefit of input tax credit that needed to be passed on by the Respondent to the recipients, came to Rs. 1,42,369/- which includes 12% GST on the base profiteered amount of Rs. 1,27,115/-. The home buyer/ unit-wise break-up of this amount was given as per Annex-45 of the Report. This amount was inclusive of Rs. 21,113/- (including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the Respondent in the future could not be determined at this stage, when the Respondent is continuing to availe input tax credit in respect to the present project. 18.The above Report was considered by the Authority in its meeting held on 15.10.2019 and it was decided to hear the Applicants and the Respondent on 06.11.2019. Notice dated 17.10.2019 was also issued to the Respondent to explain why the Report furnished by the DGAP should not be accepted and his liability for having violated the provisions of Section 171 of the CGST Act, 2017 should not be fixed. Further opportunities of hearings were given on 26.11.2019 and 10.12.2019 however, neither the Applicants nor the Respondent appeared in any of the hearings. 19. The Applicant No. 1 vide his submissions dated 06.11.2019 submitted that the Respondent had sent a cheque of Rs. 90,000/- to him claiming that the excess GST charged has been refunded and so that the Anti-profiteering case should not be proceeded, however, it was very less than the actual profiteering established against the builder. The Applicant No. 1 further submitted the Respondent had claimed that the project "Elegant Berkeley" was completed in De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DGAP as 0.49% of the turnover as per Table-B supra. Similarly, the above ratio has been calculated as 1.41 % for the post-GST period from 01.07.2017 to 31.08.2018. Accordingly, the DGAP has claimed that the Respondent has benefited to the tune of 0.92% of the turnover which he is required to pass on to his buyers. The above ratios of ITC to turnover have been arrived at by the DGAP based on the information/documents supplied by the Respondent which has been duly verified by the DGAP and hence the above ratios can be relied on. The Respondent has not disputed the above ratios and had instead requested to close the matter as he has voluntarily refunded an amount of Rs. 90000/- to the Applicant No. 1 being the excess GST amount which was erroneously collected. However, the DGAP in his report dated 08.10.2019 has calculated the amount to be refunded to the Applicant No. 1 as Rs. 21,113/- as per Annexure-45 of the said report. The Respondent has not attended any of the three hearing opportunities afforded to him and hence we have no option except to conclude the hearing on basis of his sole submissions dated 05.11.2019. 23. Applicant No. 1 vide his submissions dated 06.11.2019 submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall 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. In case this additional benefit is not passed on to the Applicant No. 1 or other buyers they shall be at liberty to approach the State Screening Committee Karnataka for initiating fresh proceedings under Section 171 of the above Act against the Respondent. 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 the future. 27. It is evident from the above 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 hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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