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TMI Blog2020 (11) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the purchase of flat No. 804, in Tower J in the Respondent project "Logix Blossom County", Sector-137, Noida-Greater Noida Expressway, Uttar Pradesh. The Uttar Pradesh State Screening Committee on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC had forwarded the application of Applicant No. 1 with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 (1) of the above Rule, which was examined by the Standing Committee on Anti-profiteering in its meeting held on 06.09.2018 whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. 2. Another application filed by the Applicant No. 2 against the Respondent was also forwarded by the Standing Committee on Anti-profiteering, vide minutes of its meetings held on 13.12.2018 to the DGAP for detailed investigation. 3. After completing the investigation, the DGAP has submitted his report under Rule 129 (6) of CGST Rules, 2017 on 04.04.2018 pertaining to the period w.e.f. 01.07.2017 to 31.09.2018. 4. The DGAP in his report has stated that a notice under Rule 129 of the CGST Rules, 2017 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A total number of 2381 units spread across 17 towers on an area of 35,63,342 sq. ft., were being constructed in the Project 'Blossom County', out of which Completion Certificates had been received for a total of 1454 units spread across 10 towers on an area of 20,90,333 sq. ft. The remaining 927 units in 7 towers, covering total area of 14,73,009 sq. ft., were still under construction. 6. The DGAP in his Report has further stated that the Respondent had claimed that the benefit of accumulated CENVAT credit (input tax credit) could not have been transferred to the units in respect of which the Completion Certificates had been issued before the introduction of GST, since the accumulated balance of CENVAT credit, as on 30.06.2017, was the CENVAT credit on the input services procured in respect of the units that were still under construction as on 30,06.2017 and the same applied to the input tax credit of GST earned post-GST implementation w.e.f. 01.07.2017, as it pertained only to the inputs and input services used for the under-construction units. The DGAP had also stated that the Respondent had submitted that he had not taken any credit of VAT in the pre-GST regime. 7. The DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit Rules, 2004, which were in force at the material time. The Respondent had also submitted to the DGAP that he was neither availing any VAT credit nor was charging VAT from his customers, as was evident from the demand letters, but he was discharging his output VAT liability on deemed 20% value added to the purchase value of the inputs and therefore, there was no direct correlation between the turnover reported in the VAT returns for the period April 2016 to June 2017, filed by the Respondent and the actual consideration collected from the home buyers. The DGAP further stated that as no credit of VAT paid on the inputs was availed by the Respondent, hence, the credit of VAT and the VAT turnover were not considered for computation of the ratio of input tax credit to the turnover for the pre-GST period and further, post-GST, the Respondent could avail the input tax credit of GST paid on all the inputs and input services. Upon further scrutiny by the DGAP, it was observed by him that there was a mismatch in the total demand made from customers as per the home-buyers list and its reconciliation with the turnover reported in the GSTR-3B and ST-3 Returns. It was also observed that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le taxes and input tax credit available to the Respondent during the pre-GST period (April 2016 to June 2017) when Service Tax @ 4.5% was payable with the post-GST period (July 2017 to September 2018) when the effective GST rate was 12%. Based on the figures contained in the table above, the comparative figures of the ratio of input tax credit availed/available to the turnover in the pre and post-GST periods, the recalibrated base price, and the excess collection (Profiteering) during the post-GST period, has been tabulated by the DGAP in the Table-C below:- Table-C (Amount in) S.No. Particulars Pre-GST Post- GST 1. Period A April, 2016 to June, 2017 July 2017 to Sep 2018 2. Output tax rate (%) B 4.50% 12.00% 3. The ratio of CENVAT/ Input Tax Credit to Total Turnover as per Table- E above (%) C 0.71% 0.85% 4. Increase in input tax credit availed post-GST (%) D - 0.14% 5. Analysis of Increase in input tax credit: 6. Total Basic cost Demand raised from July 2017 to September 2018 as per home-buyers data E 84,96,67,010 7. GST charged F=E*12% 10,19,60,041 8. Total demanded G 95,16,27,051 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the hearings, the Respondent filed his written submissions on 06.06.2019 vide which he submitted that being a law-abiding company he accepted the profiteering of Rs. 13,32,278/- as per the DGAP's report and did want to litigate the matter further and was ready to pass on the said amount to his homebuyers in line with the DGAP's report. He also submitted the following:- a. Working sheet evidencing that each of the home buyers had been passed on the benefit by way of issue of credit notes. b. Copy of the GST registration certificate. c. Copies of Service Tax and GST returns from December 2016 to March 2019. d. He further stated that as per the builder buyer agreement last instalment was due at the time of possession; that he had received the completion certificate for phase II of the project comprising 5 towers (I/J/0/P/Q) in January 2017; that even after receiving the completion certificate, certain furnishing activities had to be done before the possession could be handed over to the homebuyers; that he had offered possession after finishing of the towers in all respects; and that, therefore, he had raised final demand on his homebuyers only at the time of posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist submitted before the DGAP by the Respondent is much greater than the corresponding turnover reflected in the statutory returns filed by the Respondent himself. Thus, the area sold relevant to turnover worked out based on the home buyer list as mentioned in Table-C of the DGAP report is required to be reinvestigated. (iii) The Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate 12% given 1/3rd abatement on value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable and low-cost housing was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 w.e.f. 25.01.2018. However, the same was not been reflected correctly in the GSTR-3B returns, and accordingly, this aspect was also required to be further investigated. 18. As per the directions of this Authority passed vide I.O. No. 22/2019 dated 18.12.2019 under Rule 133 (4), the DGAP furnished his Report dated 27.02.2020 in accordance with Rule 129 (6) of the CGST Rules, 2017. The DGAP has stated that on receipt of the aforesaid Order from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyers. The DGAP has nevertheless added that since there was a mismatch between the demand made from the home-buyers and the turnover reported by the Respondent in his statutory GSTR-1 and GSTR-3B returns, the Respondent was asked to submit proper reconciliation of the same. The Respondent vide his email dated 14.02.2020 (Annex-5), submitted reconciliation of the turnover of the Respondent reported by him in his statutory returns and the aggregate of the demands raised by him from his home-buyers. Further, the Respondent has also provided details of actual B2C invoice value and actual advances received which has been incorporated in his revised GSTR-1 Returns. As such the total turnover in GSTR-3B of the Respondent was Rs. 89,04,58,155/-, while in his GSTR-1 Returns it was Rs. 89,04,58,423/-, and thus there was a nominal mismatch of Rs. 269/- only. Hence, the primary issue of mismatch between the actual demand made from the home-buyers and the turnover as reported in his statutory returns was resolved. The next issue regarding the explanation sought as to why the figures from the statutory returns should not be taken to arrive at the profiteered amount. In this regard, the DGAP has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect was also required to be further investigated, the DGAP has reported that as has been stated by this Authority, the effective GST rate on construction service in respect of affordable and low-cost housing was reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 w.e.f. 25.01.2018, however, as the impugned project under consideration was not an affordable housing project, this rate reduction had no bearing whatsoever in this matter. 21. The DGAP has further reported that the amount of profiteering by the Respondent on account of contravention of provisions of Section 171 of the CGST Act, 2017 for the period covered was correctly estimated as Rs. 13,32,278/-. 22. The DGAP has concluded that as has been mentioned in the report dated 03.04.2019, the benefit of additional ITC of 0.14% of the turnover had accrued to the Respondent and the same was required to be passed on to the Applicants and other recipients. The Respondent has contravened the provisions of Section 171 of the Act, since the benefit of additional ITC @0.14% of the relevant turnover raised by the Respondent from his home-buyers, during the period 01.07.2017 to 31.08.2018, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file their consolidated written submissions. The Respondent vide his submissions dated 05.06.2020 has stated that:- a. He had accepted his liability against the profiteered amount as has been calculated by the DGAP and would not like to litigate the matter further. b. That he had already passed on the benefit of ITC amounting to Rs. 13,32,278/- to his customers/flat buyers by way of credit notes and accordingly reducing the demands raised by him on his customers. c. That he had submitted the ledger of credit passed in respect of the flat/home buyers whom such credit had been passed and had submitted the sample copies of the credit notes in compliance vide his reply dated 06.06.2019. d. That he did not want to be heard in person and requested to take up the case based on the facts and documents already submitted to this Authority. 25. Vide order dated 09.06.2020, the DGAP was directed to verify the claim of the Respondent that he had passed on the benefit of additional ITC to the flat/home buyers. The DGAP vide his supplementary report dated 20.07.2020 has reported that the Respondent had submitted the ledger account in respect of 355 home buyers and Credit Notes (20) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had passed on the benefit of Rs. 13,32,278/- to his customers/flat buyers by way of credit notes and by way of reducing the instalments to be paid by his homebuyers against the demands pending from them and the proof of the same has also been submitted before the DGAP. This claim of the Respondent has been accepted as verified by the DGAP vide his supplementary report dated 20.07.2020. We observe that the DGAP has verified the detail of the ITC passed on by the Respondent to his homebuyers/ recipients (355 home buyers) from the ledger account, Credit Notes (20) and Annexure-17 of the DGAP's report. 30. We also observe that the Applicant No. 1 & 2 have stated that they had booked their flats with the builder on 31.10.2013 and as per the builder buyer agreement, the flats were to be delivered by 31.10.2015. The Respondent raised the final invoices on 19.01.2020 after receipt of the Completion Certificate from NOIDA in January 2017 but one year after receiving the Completion Certificate and by that time GST had been implemented thus resulting in extra financial burden to them which was Rs. 3,00,000/- approx. In this regard, it is pertinent to mention that as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DGAP vide his supplementary report dated 20.07.2020. The DGAP has reported that the Respondent had submitted the ledger account in respect of 355 home buyers and credit notes (20) on a sample basis wherein the details of the benefit of ITC passed on to the recipients (355 home buyers) have been mentioned and that the details of the ITC passed on to the recipients (355 home buyers) have been verified from the ledger account and the credit notes against Annexure-17 of the report of the DGAP dated 03.04.2019, and the same were found to be in order. However, the Applicant No. 1 & 2 have not submitted acknowledgement of having received the benefit. Therefore, the concerned jurisdictional Commissioner is directed to ensure that the amount profiteered by the Respondent is passed on to the above Applicants. 33. Further, it is also revealed from the submissions of the Respondent that he has not passed on interest @18% to his recipients/flat buyers on the profiteered amount, which shall be paid by the Respondent to his recipients/flat buyers from the date of receipt of the additional price till the amount is paid to each buyer, as he has used this amount in his business, as per the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate had been received for a total of 1454 units spread across 10 towers. The remaining 927 units in 7 towers were under construction. Keeping in view the above findings of the DGAP there are sufficient reasons to believe that there is need to examine whether the Respondent has passed on the benefit of ITC to the buyers of the remaining 7 towers or not. Therefore, this Authority, in terms of the provisions of Section 171 (2) of the CGST Act, 2017 directs the DGAP to further investigate the above 7 towers of the project of the Respondent for violation of the provisions of Section 171 of the CGST Act 2017 and to submit his Report to this Authority in terms of Section 171 (2) of CGST Act 2017. 38. 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 28.02.2020 the order was to be passed on or before 27.08.2020. However, due to the prevalent pandemic of COVID-19 in the country, this order could not be passed on or before the above date due to force majeure. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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