TMI Blog2020 (7) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... to him directing him to explain why the penalty prescribed u/s 171 (3A) of the Act read with Rule 133(3)(d) of CGST Rules, 2017 should not be imposed on him. - Case No. 40/2020 - - - Dated:- 14-7-2020 - DR. B.N. SHARMA, CHAIRMAN, SH. J.C. CHAUHAN, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Present:- 1. None for the Applicants. 2. Shi Manoj M. Kasture, General Manager, Sh. Akhilesh Thakur, Employee, Sh. S, S, Gupta, Chartered Accountant and Sh. Archit Agarwal. Chartered Accountant for the Respondent ORDER 1. In the present case the first investigation Report dated 05.11.2018 was 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 were that an application before the Standing Committee on Anti-profiteering under Rule 128 (1) of the CGST Rules, 2017, was filed by the Applicant No. 1 alleging profiteering by the Respondent in respect of purchase of a fiat in the Respondent s Avadi Project at Chennai. He had also alleged that the Respondent had not passed on the benefit of Input Tax Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the pre and post GST periods as per the following table:- Particular Pre-GST Post-GST Difference CENVAT/ITC 43,54,904 2,47,49,762 -- Turnover 8,80,21,261 48,44,94,239 -- Ratio 4.95% 5.11% 0.16% 3. The Respondent had claimed that the net additional ITC benefit was 0.16% which was quite different from the benefit of 7.57% as per the investigation Report of the DGAP. It was evident from the above claims of the Respondent that there were serious differences in the calculations of the above ratios made by the Respondent and the DGAP which required re-investigation. 4. The DGAP in his Report as well as in his subsequent letters had also stated that the Respondent had not submitted complete information which was required for investigation. It showed that the Investigation Report submitted by DGAP was not based on accurate information and was not comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above Rules, were issued on 19.11.2019 to Sh. Manoj Kasture, General Manager of the Respondent asking him to appear at the DGAP s office on 25.11.2019 and produce the relevant documents, However, the Respondent neither appeared nor furnished the complete information. In response to the Summons dated 19.11.7019, the Respondent vide his e-mail dated 23.11.2019 had submitted partial documents and sought one week s time to submit the remaining documents. 10. The DGAP has further submitted that as all the documents were not received, another Summons dated 25.11.2019 were issued to Sh. Manoj Kasture, General Manager asking him to appear at the DGAP s office on 29.11.2019 and produce the relevant documents. In response to the above summons, the Respondent appeared on 29.11.2019 and submitted the documents vide his e-mails dated 29.11.2019 30.11.2019. 11. The DGAP has also intimated that in response to the DGAP s letter dated 09.04.2019 and further reminders vide letters/e- mails/summons, the Respondent had submitted his replies vide letters/e-mails dated 22.04.2019, 16.10.2019, 24.10.2019, 30.10.2019, 09.11.2019, 13.11.2019, 23.11.2019, 29.11.2019 and 30.11.2019. The submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had appointed various suppliers and one of them was M/s. Cushman and Wakefield which was e facility management company. The suppliers had maintained the building from year 2016 to 2018 for which they had charged fee plus applicable tax. Some portion of the tax charged by them had been availed as credit during the Service Tax period and balance in the GST period. The corresponding income of such expenses had been booked only in the Service Tax regime. At the time of possession. he had collected advance maintenance charges for two years which formed part of the taxable turnover appearing in the Returns. The credit of service had been taken in the post-GST period but the corresponding taxable income for the same had been taken in the pre-GST period. Therefore, for the purpose of proper comparison and computation, the turnover credit pertaining to such maintenance charges must be reduced. c. Transactions pertaining to Block C G: - That during the period from July, 2017 to August, 2018, the value of credit and turnover was not much impacted from the transactions of Block C and Block G. The sales for Block C were started from November, 2018 and the construction work of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of increased cost of construction as one of the major contributors. The average increase in construction cost was about 21%. Correspondingly, the sale prices during the pre and post GST periods had increased by only 1.75%. The average selling price of the units during the pre-GST regime was Rs- 3,329 per sq. ft. whereas during the post GST regime, the average selling price of the units was ₹ 3,387 per sq. ft. Hence, there was an increase of only ₹ 58/- (1.75%) per sq. ft. Therefore, the net input tax availed by the company. as reflected in Table-D of the DGAP s Report, should be reduced by 19.25% (for post-GST period) to make the figures of pre and post GST comparable. f. On the basis of above submissions, the Respondent had submitted that the Table- D should have been re-constructed as per the table -A below :- Table -A (Amount in Rs.) Sr. No. Particulars Total Pre-GST Total Post-GST 1 CENVAT of Service Tax paid to Input Services (A) 5,204,083 - 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io (A/B) 4.95% 5.11% 13. Vide the aforementioned letters and e-mails. the Respondent had also submitted the following documents/information:- a. Copies of GSTR-1 Returns for the period from July, 2017 to March, 2019. b. Copies of GSTR-3B Returns for the period from July, 2017 to October, 2019. c. Copies of VAT ST-3 Returns for the period from April, 2016 to June, 2017. d. Copy of Project Report submitted to RERA for Tower D along with all periodic progress reports. e. Copy of Project Report submitted to RERA for Tower F along with all periodic progress reports. f. Copy of Completion Certificate for Block-F D dated 25.02.2019 issued by Chennai Metropolitan Development Authority. g. Copy of Electronic Credit Ledger for the period from 01.07.2017 to 31.10.2019 h. CENVAT Credit/lnput Tax Credit ledgers for the period from April, 2016 to March, 2019. i. Details of Input Credit Reversal for post CC sales. j. Copies of Credit Notes issued by Contractor for differential tax charged from the Respondent. k. List of home buyers in the project Avadi Project Bock-F D along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit. 17. The DGAP has further contended that the claim of the Respondent that the credit to the extent of unsold area must be reduced from the post-GST period could not be accepted. In this regard, the DGAP has made reference to para 5 of Schedule-Ill of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) which reads as Sale of land and, subject to clause (b) of paragraph 5 of Schedule Ili sale of building . Further, clause (b) of Paragraph 5 of Schedule Il of the CGST 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 had been received after issuance of completion certificate, where required, by the competent authority or after his first occupation, whichever was earlier , Thus, the ITC pertaining to the residential units which were under construction but not sold was provisional ITC which might be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the completion certificate. in terms of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent for the period from April, 2016 to October, 2019. the details of the ITC availed by him, his turnover from the impugned project Avadi , the ratios of ITC to turnovers, during the pre-GST (April, 2016 to June. 2017) and the post- GST (July, 2017 to October, 2019) periods. have been furnished by the DGAP as per Table- Bi given below:- Table- B (Amount in Rs.) Sr. No. Particulars Total 01.04.2016 to 30.06.2017 (Pre-GST) Balance Base price to be raised as on 30.06.2017 from pre-GST Customer Agreement value of booking made during 01.07.2017 to 25.02.2019 Total (Post GST) (1) (2) (3) (4) (5) (6)= (4)+(5) 1 CENVAT of Service Tax Paid on Input Service used (A) - - 2 Input Tax Credit of VAT Paid on Purchase of Input (B) - - 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017) when Service Tax @ 6% and VAT @ 2% was payable with the post-GST period (July. 2017 to October, 2019) when the effective GST rate was 12% (GST @18% along with 1/3rd abatement for land value) on construction service imposed vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.9017. Accordingly. on the basis of the figures contained in Table- B above, the comparative figures of ratios of ITC availed/available to the turnovers in the pre-GST end post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, has been tabulated by the DGAP as is given in Table- C below:- Table C (Amount in Rs.) S.No. Particulars Post- GST 1. Period A After 01.07.2017 2 Output GST Rate (%) B 12.00% 3 Ratio of CENVAT credit/ ITC to Total Turnover as per table- B above (%) C 7.06 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand or Profiteering Amount S=M-R 2,87,64,178 21. The DGAP has also stated from the Table- C above that the additional ITC of 7.06% of the turnover should have resulted in the commensurate reduction in the base prices as well as cum-tax prices of the flats, Therefore, in terms of Section 171 of the CGST Act, 2017. the benefit of such additional ITC was required to be passed on by the Respondent to the respective recipients. 22. The DGAP has further stated from the amount of additional benefit of input tax credit on the basis of the aforesaid CENVAT/input tax credit availability pre and post-GST and the details of the amount to be collected by the Respondent from the Applicant No. 1 and other home buyers as on 30th June 2017 and the new bookings made post 01.07.2017 till CC was received that the amount of benefit of ITC that had not been passed on by the Respondent to the recipients or in other words, the profiteered amount came to ₹ 2,87,64,178/- which included GST @ 12% on the base profiteered amount of ₹ 10,48,832/- and GST @ 8% on the base profiteered amount of ₹ 2,55,45,821/- The home buyers and unit n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,91,063 - Setting off of increase in cost on account of various factors with the benefit of ITC not considered as detailed in para-15 above 7. Less: Reversal of Credit on account of Credit Notes given by Contractors (G) - 15,80,262 ITC reversed on account of Credit Notes given be Contractors to be reduced. 8. Net ITC of GST Availed (H)=(A-B-C-D+E-F-G) 2,47,49,762 2,65,98,348 9. Total Taxable Turnover (H) 47,45,52,629 37,66,94,790 Turnover pertaining to Block-F D 10. Less: Turnover of Blocks C G (I) 2,15,89,649 - Turnover of C G had already been excluded 11. Add: Balance demand to be raised for F Block (J) 3,15,11,259 - Demand to be raised had already been Considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76,290 23,25,93,580 1,77,51,683 4,75,442 1,72,76,241 Further Benefit to be passed on as per Annex-15 3. 38 19,168 5,54,24,959 - - - Units sold post receiving of Completion Certificate 4. 1 514 - - - - Unsold Units 5. Buyers other than Applicant (Block-D) 67 39580 14,15,55,980 1,08,40,665 2,91,831 1,06,48,834 Further Benefit to be passed on as per Annex-16 6. 1 963 49,68,782 - - - Units sold post receiving of Completion Certificate Total 244 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent be asked to appear before this Authority on 09.01.2020. The Respondent was issued notice on 20.12.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed. During the course of the hearings no one appeared for the Applicants and the Respondent was represented by Sh. Manoj M. Kasture, General Manager, Sh. Akhilesh Thakur Employee, Sh. S. S. Gupta and Sh. Archit Agarwal, Chartered Accountants. The Respondent has filed written submissions dated 28.01.2020 and 27.02.2020. The issues raised by the Respondent have been mentioned in the subsequent paras. 30. The Respondent has submitted that the construction activity for Block D F had commenced in the GST regime (i.e. in Sept 2017). All the activities related to construction of the project had been undertaken in the GST regime only. Since the project had commenced only under the GST regime, hence, the project could not be subject to the anti- profiteering proceedings at all, Further, he had also sent an e-mail dated 01.06.2018 to the Applicant No, 1 intimating that the project had been launched by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in case GST had not been introduced vis-a-vis the actual tax collected from the complainant. The Respondent has reproduced the Table as is given below:- Particulars BSP Development other charges ST VAT GST@ 12% Total Agreement Value (A) 20,64,850 2,31,175 1,57,279 - 24,53,304 Paid in pre-GST era (B) 4,49,050 - 21,256 - 4,70,306 Balance to be paid post-GST (C = A-B) 16,15,800 2,31,175 1,36,023 - 19,82,998 Demanded by the Noticee (D) 16,15,800 2,31,175 - 2,22,858 20,69,833 Excess Demand by the Noticee (D - C) 86,835 The Respondent has submitted that he had collected Rs- 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction. It was also claimed that owing to increase in the construction cost, the credit availment (numerator) had also increased. However, there was no corresponding increase in the turnover (denominator) as the contracts with customers were not revised owing to increase in the cost of construction. Hence, the method of calculation adopted in Table-D was Incorrect and could not be accepted. The Respondent has further claimed that in case of M/s. N. P. Foods 2018 (9) TMI 1763 - NAA this Authority had held that when there was an increase in the cost of inputs then profiteering could not be alleged if the price of goods had been increased. b. Increase in ITC was also due to increase in the rate of tax chargeable to services : The Respondent has also contended that under the pre-GST regime, services were subject to Service Tax at the rate of 15%. under the GST, in most of the cases, services were taxable at 18%. Therefore, there was an increase of 3% (18% - 15%) in the ITC available to the Respondent. This increase of 3% was not due to any additional benefit that the Respondent was getting due to the advent of GST but it was due to increase in the rate of tax applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pre-GST GST Total ITC - 2,12,22,551 Turnover (As per DGAP Report) 1,68,60,836 37,66,94,790 Ratio - 5.63% Based on the above working, the ratio has been re-calculated by the Respondent as 5.63% (5.63% - 0%). 35. The Respondent has also pleaded that the calculation made by the DGAP in the reinvestigation Report should have considered only those flat buyers who had purchased flats before the introduction of GST. It was further pleaded that in case of flats sold after 01.07.2017, the total sale value agreed between the Respondent and the flat buyer was fixed after considering the benefit arising to the Respondent due to advent of GST and the said benefit had already been considered in the final amount charged to the customer. The Respondent has also submitted that the profiteering amount should have been restricted to only those flats which were booked in the pre- GST regime and the same should have been calculated as follows :- Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust have filed his Report within 6 months from the date of order passed on 26.08.2019. However, the reinvestigation Report by the DGAP had been filed on 18.12.2019 and no evidence of any extension being approved by this Authority had been given in the Report, Even if the extension was allowed. then the period of nine months (six months regular period + three months extended period) had expired on 26.11.2019 Whereas the Report had been furnished by the DGAP on 18.12.2019. Therefore, the reinvestigation Report submitted by the DGAP was time barred and therefore, it must be set aside. 37. The Respondent has also averred that the Report of the DGAP was beyond the scope of this Authority s above Order, The DGAP in his re-investigation Report dated 18.12.2019 had computed the benefit of ₹ 2.79 Crore which had been profiteered by the Respondent, whereas. this Authority in its Order dated 27.02.2019 had directed the DGAP to re-investigate the matter and submit comprehensive Report specifically on the issue of large difference in the ratio of ITC on the total taxable turnover calculated by him as well as the Respondent. The Respondent has further averred that the directions were to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm profiteering had been described in various dictionaries as follows:- Black s Law Dictionary - Taking advantage of unusual or exceptional circumstances to make excessive profits Law Lexicon - To seek or obtain excessive profits, one who is given to making excessive profits Shorter Oxford English Dictionary - Make or seek to make an excessive profit Mount vs Welsh - Any conduct or practice Involving the acquisition of excessive profit Islamic Academy of Education vs State of Karnataka = 2003 (8) TMI 469 - SUPREME COURT - Profiteering would mean taking advantage of unusual or exceptional circumstances to make excessive profits. It was further submitted from the above definitions that only those amounts which had been collected and kept by the Respondent could be termed as profiteering on the part of the Respondent The amount Which had been paid by the Respondent to the Government could not be considered as profiteering since the same was not retained by the Respondent. Therefore amount of ₹ 21,69,525/- should not form part of the profiteered amount. 40. The Respondent has also stated that the allegation by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.11.2019 1. Summons issued for submission of Data under Section 70. 2. Bifurcation of post-GST turnover in 8% and 12% demands. 3. Details of balance demands to be raised on 30-06.2017. 29.112019 Summons was attended by Mr. Manoj Kasture and all the information was submitted and explained. 11 From the above chronology, the Respondent has further stated that whenever the DGAP had asked for the data it was provided by the Respondent promptly- 41. The submissions of the Respondent dated 28,01.2019 were forwarded to the DGAP for his Report. The DGAP Vide his supplementary Report dated 10.02.2020 has replied on the issues raised by the Respondent as follows:- a. On the claim of the Respondent that construction activity commenced in the GST regime. therefore. Anti-profiteering proceeding cannot be initiated against the company:- The DGAP has stated that the submissions made by the Respondent on this issue had already been dealt in his Report dated 05.11.2018 vide para 15 and 16. The DGAP has further stated that the Respondent had himself admitted in his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss than the actual input tax credit of ₹ 2,65,98,348/- availed by the Respondent d. On the claim of the Respondent that turnover of the company did not synchronize with the actual work done by the company, therefore the turnover considered in the pre-GST regime should have been considered to be the turnover of GST regime:- The DGAP has stated that the above submission made by the Respondent did not hold good as the Respondent had discharged Service Tax liability on the amount raised/collected in pre-GST regime in accordance with the provisions of Finance Act, 1994 and no GST was discharged on such turnover therefore, DGAP had correctly considered the turnover in the pre-GST regime. e. On the claim of the Respondent that increase in ITC availed in GST regime due to increase in the cost of construction:- The DGAP has stated that the increase in cost was a business risk which had already been taken care of while entering into an agreement with the home buyers as there was no cost escalation clause in the agreement entered into with the home buyers. f. On the claim of the Respondent that increase in ITC due to increase in the rate of tax chargeable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the Respondent that reinvestigation Report of the DGAP had been issued beyond the time limit given in Rule 129 of CGST Rules, therefore. the same was time barred:- The DGAP has stated that Rule 129 (6) of the Central Goods and Services Tax Rules, 2017 reads as Director General of Anti-profiteering shall complete the investigation within a period of six months of the receipt of the reference from the Standing Committee or within such extended period no! exceeding a further period of three months for reasons to be recorded in writing as may be allowed by the Authority and upon completion of the investigation, furnish to the Authority, a report of its findings along with the relevant records . In the instant case, the DGAP had received the reference from the Standing Committee on 08.06.2018 to initiate an investigation against the Respondent and he had submitted his Report on 05.11.2018 which was well within the prescribed time frame of 06.11.2018 after obtaining due sanction of this Authority vide Order dated 07.09.2018, to extend the period of investigation by two months till 06.11.2018, Further. vide Order No. 01/2019 dated 27.02.2019. this Authority had ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reduction to the recipients by way of commensurate reduction in price. Price included both, the base price and the tax paid on it, If any supplier had charged more tax from the recipients, the aforesaid statutory provisions would require that such amount should be refunded to the eligible recipients or alternatively deposited in the Consumer Welfare Fund, regardless of whether such extra tax collected from the recipient had been deposited in the Government account or not, Besides, any extra tax returned to the recipients by the supplier by issuing credit notes could be declared in the returns filed by such supplier and his tax liability should stand adjusted to that extent in terms of Section 34 of the CGST Act, 2017. Therefore, the option was always open to the Respondent to return the tax amount to the recipients by issuing credit notes and adjusting his tax liability for the subsequent period to that extent. k. On the claim of the Respondent that all the documents had been timely provided by the company:- The DGAP has stated that as already mentioned in his Report dated 18.12.2019, in spite of the specific directions given by this Authority in its order to the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advent of GST, the entire credit on purchases was available to the Respondent. Thus, the additional benefit on introduction of GST was only the component of Excise Duty with respect to the materials used in the execution of the project during the GST period. The Respondent has further submitted that he had never procured any material wherein Excise Duty was levied. Thus, the entire credit of taxes levied in the pre-GST regime was available to the Respondent Hence no benefit was derived by the Respondent on implementation of the GST. However, the Respondent has submitted the benefit which has accrued to him on account of Excise Duty as follows:- Row Labels Material Name Sum of TOTAL GST Sum of Excise Duty @ 12.50% Material ACC Blocks 3,94,043 9,85,109 CLC Blocks 28,423 71,058 Door 1,96,281 1,36,306 Door accessories 89,08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent has also contended that the total profiteered amount as calculated by the DGAP was ₹ 2.87 Crore (inclusive of tax) which Included ₹ 1,71,830/- (inclusive of tax) to be passed on to the complainant. The amount which had been paid by the Respondent to the Government could not be considered as profiteering since the same was not retained by him The DGAP had observed that the reduction in price as per Section 171 of CGST Act, 2017 included both base price and the tax paid on it, however, the term Price was not defined in the CGST Act. Further, Section 15 of the CGST Act, 2017 provided for determination of value of supply for levy of GST. The basic provision of the said Section provided that value of supply was the price actually paid or payable for the supply. It was submitted from the above provision that prices of the goods was the value of supply but additionally value shall include taxes but not the GST. Thus, it was submitted that if the term price had already included tax on the same, then the interpretation of Section 15 would lead to vague meaning. Therefore, it was submitted that the observation of the DGAP that the price included GST was incorrect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to ₹ 2,87,64,178/- which included 12% GST as is evident from Table-C supra, The DGAP has also intimated that this amount also included the profiteered amount of ₹ 1,71,830/- including 12% GST in respect of the Applicant No. 1 and Rs, including 12% GST in respect of 205 other flat buyers. He has also supplied the details of all the buyers who have purchased flats from the Respondent along with their unit numbers and the profiteered amount in respect of each buyer vide Annexure-14, 15 16 attached with the Report. 49. It is clear from the record that the DGAP has computed the ratio of CENVAT as a percentage of the turnover for the pre GST period and compared it with the ratio of ITC to the turnover for the post GST period and then computed the percentage of benefit of additional ITC which the Respondent is required to pass on to the fiat buyers. The above ratios have been computed by the DGAP on the basis of the Service Tax and GST Returns filed by the Respondent during the both the above periods and the ITC Registers maintained for the above periods b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2018 to the Applicant No. 1 stating that the project had been launched after the GST Act had been passed and therefore, the sale value which was agreed upon by him included the benefit of ITC. The above contention of the Respondent is not established from the record as he had communicated this information to the Applicant No.1 on 01.06.2018 only whereas the Respondent had executed the agreements for sale and construction with the above Applicant on 20 06.2017 much prior to implementation of the GST. The above agreements also do not mention that the benefit of ITC would not be passed on to the above Applicant as it was included in the price to be paid by the Applicant No., 1. Another claim made by the Respondent is that when the flat was sold to the applicant in June, 2017 and 20% advance received, the GST laws were already enacted by the Parliament and the GST implementation date of 01.07 2017 was also well known. However. as has been discussed supra there is no mention of not passing on the benefit of ITC in the agreements executed by the Respondent with the above Applicant. Moreover, the Respondent had started booking of the flats in the month of September, 2015 and he had no oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by him but is to be computed @ 7.06% on the amount of consideration paid by him post-GST implementation. Since, the CC has been obtained by the Respondent now the DGAP has calculated the exact amount of benefit which is required to be passed on to the Applicant No. I on the basis of the actual ITC availed by him, Hence, the above amount of ₹ 1,71 ,830/- computed by the DGAP is correct and therefore, the above contention of the Respondent is not maintainable. 54. The Respondent has also stated that there was no correlation between the ITC and the turnover in case of the construction industry and hence the computation of the profiteered amount was incorrect In this connection it would be pertinent to mention that as per the provisions of Section 171 the Respondent is liable to pass on the benefit of additional ITC which has become available to him after coming in to force of the GST w.e.f. 01.07.2017. Therefore, comparison has to be made between the ITC which was available to the Respondent during the pre GST period with the ITC which has become available to him in the post GST period. Further the above benefit is required to be passed on the basis of the price which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the above period only otherwise the benefit of ITC can be computed correctly for passing on to the buyers. Hence, the above contention of the Respondent is not correct. 56. The Respondent has also submitted that the DGAP in Table-B of his Report has calculated that the Respondent has benefited by 7.06% of the total turnover in the GST regime due to the introduction of GST. However, the DGAP while calculating the above ratio has not considered that there was increase in the cost of construction due to which there was increase in the ITC and there was no increase in the prices of the flats, The above claim of the Respondent is not borne out from the provisions of the CGST Act, 2017 as the rates of GST are similar to the rate of taxes which were prevalent during the pre-GST regime and hence, the rates of GST have no impact on the cost of construction. It is also evident that the benefit of ITC has also been extended on the goods and services which are used in the construction service which has further reduced the cost of construction. The Respondent was himself not eligible to avail benefit of ITC on Service Tax. VAT, Central Excise Duty and other local taxes during the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead of 7.06%. Hence, the above claim of the Respondent cannot be accepted, 59. The Respondent has also pleaded that the calculation of benefit should be made only in respect of those flat buyers who had purchased them before the introduction of GST as all the flat buyers who had purchased them post GST have already got the benefit due to reduction in the sale prices, Accordingly, the profiteering amount should be restricted to ₹ 57.37 Lakhs only. As has been discussed in para supra the Respondent had started booking the flats on 19.09.2015 when he was not aware what would be the benefit of ITC post GST and hence, he had not built it in his prices. There is also no mention in the sale agreements executed by the Respondent with the post-GST buyers that the prices to be paid by them Included the benefit of ITC and hence, they would not be entitled to the benefit of ITC. In case the post-GST buyers were not entitled to the ITC benefit there was no ground to pass on the benefit of ITC of ₹ 7,71,830/- by the Respondent to the post GST flat buyers including the above Applicant. Therefore, the Respondent is bound to pass on the benefit of ITC to those flat buyers who have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have been furnished beyond the period on limitation. Moreover, the period fixed under Rule 129 (6) as well as Rule 133 (5) of the above Rules is only directory and not mandatory as no consequence have been provided in case the time limit prescribed under the above Rules is not followed, The Respondent cannot enrich himself at the expense of the flat buyers and misappropriate the public money under the above claim as he is not required to pass on the benefit of ITC from his own pocket. Therefore, the above argument of the Respondent is not maintainable. 61. The Respondent has also averred that the order of the DGAP was beyond the scope of this Authority s order dated 27.022019 as the DGAP was directed to reconcile the large difference in the ratios of ITC to the total taxable turnovers only whereas he has extended the investigation period from August, 2018 to October, 2019. Perusal of the earlier Report dated 05.11.2018 submitted by the DGAP shows that the period of investigation was from 01.07.2017 to 30 06.2018 whereas the period of investigation in the present Report is from 01.07.2017 to 31.10.2019. In this connection perusal of the submissions dated 25-01.2019 filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the recipient by way of commensurate reduction in prices. It is clear from the plain reading of the above provision that it mentions reduction in the rate of tax or benefit of ITC which means that if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails benefit of additional ITC as a result of coming in to force of the GST the same have to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their tax revenue, It also provides that the above benefits are to be passed on any supply i.e. on each Stock Keeping Unit (SKU) of a product or unit of construction or service to every buyer and in case they are not passed on, the quantum of denial of these benefit or the profiteered amount has to be computed for which investigation has to be conducted in respect of all such SKUs/units/services by the DGAP. What would be the profiteered amount has been clearly mentioned in Sub-Section 171 (3A) and the explanation attached to Section 171 of the CGST Act, 2017. These benefits can also not be passed on at the entity/ organisation/ branch/ invoice/ product/ busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Us or the units or the services, can be set for passing on the above benefits or for computation of the profiteered amount, as the facts of each case are different. In the case of one real estate project, date of start and completion of the project, price of the flat/shop. mode of payment of price or instalments, stage of completion of the project, rates of taxes pre and post GST implementation. amount of CENVAT and ITC availed/available total saleable area, area sold and the taxable turnover received before and after the GST implementation would always be different from the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project not be similar to the other project. Therefore, no set procedure/methodology/guidelines/principles/modalities/formula can be for determining the benefit of Additional ITC which has to be passed on to the buyers of the units. Moreover this Authority under Rule 126 has been empowered to determine Methodology Procedure and not to prescribe it. Similarly, the facts of the cases relating to the sectors of Fast Moving Consumer Goods (FMCG), restaurant service, construction service and cinema service are com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not required to pay due to the benefit of additional ITC but he has also compelled them to pay additional GST on these excess prices which they should not have paid. The Respondent has thus defeated the objective of both the Central and the State Government to provide the benefit of ITC by sacrificing their tax revenue. The Respondent was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of ITC to the ordinary buyers by charging excess GST. Had he not charged the excess GST the buyers would have paid less price while purchasing flats from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the above Respondent. It would also be appropriate to sate here that that price includes GST also. Therefore, an amount of ₹ 21,69,525/-collected as GST by the Respondent cannot be reduced from the profiteered amount. Hence, the above contention of the Respondent is untenable and it cannot be accepted. 65. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has been reduced or the benefit of ITC has been availed. Hence, the definitions quoted by the Respondent from various dictionaries and casus are not applicable. Similarly, his contention that the above term refers to excessive, exorbitant and unjustifiable profits arising due to supply of essential goods is also not correct. 67. The Respondent has also stated that the of the DGAP that he had not provided complete data as and when asked for by the DGAP were not correct as ha had promptly supplied the required information as was shown in the chart prepared by him. In this connection perusal of the Report dated 05.11.2018 shows that the Respondent had not supplied the required information to the DGAP and repeated reminders and summons under Section 70 of the above Act read with Rule 132 of the Rules had to be issued to the Respondent. Therefore the above contention of the Respondent is incorrect and hence, same cannot be accepted. 68. The Respondent has further stated that merely because he had passed on benefit of input tax credit, it did not mean that the liability could be fastened upon him. In this regard perusal of the record shows that the Respondent has availed benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC on all the goods and services purchased by the Respondent during the post GST period and not the Excise Duty only, the exact amount of which has been reflected by him in his GST Returns and which he has also utilised while discharging his tax liability. Therefore, lite amount of additional ITC available to the Respondent has been correctly computed by the DGAP on the basis of the information supplied by the Respondent himself which cannot be based on the amount of Excise Duty paid by the Respondent, Therefore, the profiteered amount cannot be restricted to ₹ 50,19,008/- as has been contended by the Respondent. Hence, the above claim of the Respondent is not tenable. 71. The Respondent has further submitted that the new prices determined for the flats sold post GST regime were as per the market forces which included the benefit of ITC and the customers were also aware of this benefit while negotiating the prices. As has been discussed above the Respondent has not passed on the benefit of ITC as he has not reduced his prices commensurate with the benefit of GST which he has charged to the buyers who had purchased them during the post GST period. There is no evidence or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of supply includes the tax also and hence, the price of the flat which is nothing but transaction value of the supply of the flat includes the GST also which is a tax. The Respondent is unnecessarily trying to misinterpret the provision of section 15 therefore, the above contention of the Respondent is wrong and hence it cannot be accepted. 74. It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 7.06% of the turnover during the period from 01.07.2017 to 31.10.2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers and thus he has profiteered an amount of ₹ 2,87,64,178/- inclusive of GST @ 12% as is evident from the above Report dated 18.12.2019. Further, the Respondent has realized an additional amount of ₹ 1,71,830/- which includes both the profiteered amount @ 7.06% of the taxable amount {base price) and 12% GST on the said profiteered amount from the Applicant No. 1. He has further realized an additional amount of ₹ 2,85,92,348/- which includes both the profitee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Show Cause 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. 78. This Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Tamil Nadu 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 eligible buyers. A report in compliance of this order shall be submitted to this Authority by the Commissioners CGST/SGST within a period of 4 months from the date of receipt of this order. 79. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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