TMI Blog2020 (12) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... 57% as per the Table-B mentioned above and therefore, the Respondent has benefited from the additional ITC to the tune of 5.91% (8.57% - 2.66%) of the total turnover which he was required to pass on to the buyers of this Project. The DGAP has also found that the Respondent has not reduced the base prices of his shops by 5.91% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre-GST basic prices, he has contravened the provisions of Section 171 of the CGST Act, 2017. Respondent has contended that the incremental tax paid on the services should not form part of the profiteered amount - HELD THAT:- The benefit of additional ITC has to be computed by comparing the amount of ITC which has become available to the Respondent in the post GST period with the amount of CENVAT and VAT credit which he has availed during the pre GST period and accordingly, the amount of additional ITC has to be passed on by the Respondent to his buyers. Therefore, the ITC amounting to Rs, 1,08,55,599 claimed to have been paid by the Respondent as incremental tax on the procurement of input services cannot be excluded from the total amount of profiteering as it has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profiteered amount from the 228 shop buyers other than the Applicant No, 1. The details of the profiteered amount and the buyers have been mentioned by the DGAP in Annexure-14 of his Report dated 23.03.2020. These buyers are identifiable as per the documents placed on record. Therefore, as per the provisions of Section 171 (1) read with Rule 133 (3) (b) the Respondent is directed to pass on an amount of ₹ 2,44,80,835/- and an amount of ₹ 66,463/- to the other flat buyers and the Applicant No. 1 respectively along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made, within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-14, attached with the Report dated 23.03.2020. Penalty - HELD THAT:- Perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.06.2019 when the Respondent had committed the above violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether he admitted that the benefit of input tax credit had not been passed on to the recipients by way of commensurate reduction in prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the above Notice as well as furnish all documents in support of his reply. The DGAP has further stated that the Respondent was afforded opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period from 15.07.2019 to 17.07.2019 but he did not avail of the said opportunity. The DGAP also gave opportunity to the above Applicant to inspect the non-confidential documents/reply furnished by the Respondent on 04.03.2020 or 05.03.2020. However, the Applicant No. 1 did not avail of the said opportunity. 5. The period covered by the DGAP during the current investigation is from 01.07.2017 to 30.06.2019. The time limit to complete the investigation was extended up to 27.03.2020 by this Authority vide order dated 12.12.2019 in terms of Rule 129 (6) of the above Rules. 6. The DGAP has stated that the Respondent replied to the above Notice vide various letters/e-mails but did not furnish the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T regime. The Respondent had further submitted that the project Mercado consisted of total 531 units (comprising total area of 3,11,000 sq. ft.) out of which 409 units having an area of 2,15,457 sq. ft. had been sold as on 30.06.2020. 10. The DGAP has also stated that he has carefully scrutinised various replies of the Respondent and the documents/evidence placed on record. The DGAP has found the following issues which needed to be determined: (i) Whether there was benefit of reduction in the rate of tax or input tax credit on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017 and if so, (ii) Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. 11. The DGAP has further stated that the Respondent had submitted the payment plan (part of Builder Buyer agreement), demand letters and payment receipts for the sale of Shop No. GF-0131-A, to the above Applicant, measuring 210 sq. ft. (super area), at total basic sale price of ₹ 21,33,285/- (₹ 8,500/- basic sale price per sq. ft., ₹ 637.50/- per sq. ft. for PLC Courtyar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16,065 1,49,940 9. On Casting of 10th Floor Slab 15.05.2018 7.50% 1,33,875 - - 16,065 1,49,940 10. On Casting of 12th Floor Slab 11.06.2018 7.50% 1,33,875 - - 16,065 1,49,940 11. On Casting of 14th Floor Slab 7.50% 1,33,875 - - 16,065 1,49,940 12. On Casting of top Floor Slab 28.09.2018 7.50% 1,33,875 - - 16,065 1,49,940 13. On Start of Brick Work 31.10.2018 7.50% 1,33,875 - - 16,065 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 DGAP has submitted that the input tax credit pertaining to the unsold units would not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling prices of such units to be sold to the prospective buyers by considering the net benefit of additional input tax credit available to them post-GST. 13. The DGAP has also observed that prior to 01.07.2017 i.e. before the GST was introduced, the Respondent had availed credit of Service Tax paid on the input services and the credit of VAT paid on the purchase of inputs and also deduction of the payments made to the sub-contractors from the VAT turnover. However, CENVAT credit of the Central Excise Duty paid on inputs was not admissible as per the CENVAT Credit Rules, 2004, which were in force at the material time. Further, post- GST, the Respondent was entitled to avail input tax credit of GST paid on all the inputs and the input ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,14,66,224 5,88,67,573 9,03,33,797 7. Turnover for Commercial Shops as per Shop Buyers List (G) 37,53,15,213 36,98,45,829 8. Total Saleable Area (in SQF) (H) 3,11,000 3,11,000 9. Total Sold Area (in SQF) (I) 1,19,981 1,09,085 10. Relevant ITC [(J)= (F)*(I)/(H)] 99,70,306 3,16,85,088 Ratio of Input Tax Credit Post-GST [(K)= (J)/(G) 2.66% 8.57% 14. The DGAP has further submitted from the Table-'B' that the input tax credit as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 2.66% whereas during the post-GST period (July, 2017 to June, 2019), the percentage was 8.57%. Therefore, the DGAP has stated that post-GST, the Respondent has benefited from additional inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,17,58,553 11. Commensurate demand price J=H+I 38,97,46,493 12. Excess Collection of Demand or Profiteering Amount K=G-J 2,44,80,835 15. The DGAP has also stated from the Table-'C' that the additional input tax credit of 5.91% of the turnover should have resulted in the commensurate reduction in the base prices as well as cum-tax prices. 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 respective recipients. 16. The DGAP has further stated that on the basis of the aforesaid CENVAT/Input Tax Credit availability in the pre and the post-GST periods and the details of the amount raised/collected by the Respondent from the Applicant No. 1 and the other shop buyers during the period from 01.07.2017 to 30.06.2019, the Respondent had benefited by an additional amount of input tax credit of ₹ 2,44,80,835/- which included GST @12% on the base profiteered am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent has also realized an additional amount of ₹ 2,44,14,372/- which included both the profiteered amount @ 5.91% of the base prices and GST on the said profiteered amount, from 228 other recipients who were not Applicants in the present proceedings. These recipients were identifiable as per the documents provided by the Respondent which mentioned the names and addresses along with Unit Nos. allotted to such recipients. Therefore, this additional amount of ₹ 2,44,14,372/- was required to be returned to such eligible recipients. 20. The DGAP has also contended that the present investigation covered the period from 01.07.2017 to 30.06.2019. Profiteering, if any, for the period post June, 2019, has not been examined as the exact quantum of input tax credit that would be available to the Respondent in future could not be determined when the Respondent was continuing to avail input tax credit in respect of the present project. 21. The DGAP has further contended that Section 171 (1) of the Central Goods and Services Tax Act, 2017, requiring 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on input services, which meant that ITC amounting to ₹ 1,08,55,599 (6,51,33,595 * 3/18) pertained to the incremental tax paid on procurement of input services and the same should be excluded from the total amount of profiteering calculated by the DGAP. 24. The Respondent has further submitted that the profiteered amount should have been restricted to the ITC availed w.r.t. goods only. He has also argued that during the pre-GST regime, credit of taxes paid (Excise Duty and VAT) on goods was not available which has become available under the GST regime. Therefore, the benefit that actually arose due to GST implementation was that of ITC of taxes paid on goods. The Respondent has further submitted that in the calculation of DGAP, the benefit which has accrued to him from the additional ITC has been taken into consideration for goods as well as for services. Out of total ITC of INR 9,03,33,797/-, INR 2,52,00,202/- was related to goods. Therefore, the amount of profiteering calculated by the DGAP should have been restricted to the ITC availed by the Respondent on procurement of goods only and that too in ratio of sold and unsold area because on completion of the project Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 171 of the Central Goods and Services Tax Act, 2017. Profiteering amount should be restricted to Central Tax portion of ITC availed w.r.t. Goods: In this regard, the DGAP has submitted that in the erstwhile pre-GST regime, various taxes and cess were being levied by the Central Government and the State Governments, which got subsumed in the GST. Out of these taxes, the input tax credit of some taxes was not being allowed in the erstwhile tax regime. In case of construction service, while the input tax credit of Service Tax was available, the input tax credit of Central Excise Duty paid on inputs was not available to the service providers. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST with effect from 01.07.2017, all these taxes have got subsumed in the GST and the input tax credit of GST was available in respect of all the goods and services, unless specifically denied. Further, there was no such one to one link that the Central Tax (CGST) subsumed erstwhile Service Tax and the Central Excise Duty while State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as directed to file submissions on the difference in the turnovers. 28. Accordingly, the Respondent vide his e-mail dated 13.11.2020 has stated that difference in the turnovers pertaining to the post-GST period as depicted in the Home-Buyer's List and GST Returns has arisen due to the turnovers of the another project of the Respondent namely Epic being included in them. 29. We have carefully considered all the submissions filed by the Applicants, the Respondent and the other material placed on record and find that the Applicant No. 1 had alleged that the Respondent was not passing on the benefit of ITC to him on the Shop No. GF-0131-A, which he had purchased in the Mercado Project being executed by the Respondent in Sector-42, Gurugram, in spite of the fact that he was availing ITC on the purchase of the inputs at the higher rates of GST which had resulted in benefit of additional ITC to him and was also charging GST from him @12%. This complaint was examined by the Standing Committee on Anti-Profiteering and was forwarded to the DGAP for investigation who vide his Report dated 23.03.2020 has found that the ITC as a percentage of the total turnover which was available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to his buyers. Therefore, the ITC amounting to Rs, 1,08,55,599 (6,51,33,595 * 3/18) claimed to have been paid by the Respondent as incremental tax on the procurement of input services cannot be excluded from the total amount of profiteering as it has not been paid by the Respondent from his own account. Accordingly, the above claim of the Respondent cannot be accepted. 31. The Respondent has also contended that the profiteered amount should have been restricted to the ITC availed in respect of goods only. In this regard it would be relevant to mention that the Respondent has not only availed benefit of ITC on the purchase of goods but he has also availed it on the purchase of services. Therefore, the whole amount of ITC which has additionally become available to him in the post GST period as compared to the pre GST period has to be taken in to account while passing on the benefit of ITC in terms of Section 171 (1). Any additional ITC earned on account of increase in the tax rate from 15% to 18% on the purchase of services also comes from the public exchequer and the Respondent cannot claim that only the ITC which has become available to him on the Central Excise Duty and VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of Section 171 (1) read with Rule 133 (1). The Respondent has realized an additional amount of ₹ 66,463/- which includes both the profiteered amount @ 5.91% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1. He has also realized an additional amount of ₹ 2,44,14,372/- which includes both the profiteered amount @ 5.91% of the taxable amount (base price) and 12% GST on the said profiteered amount from the 228 shop buyers other than the Applicant No, 1. The details of the profiteered amount and the buyers have been mentioned by the DGAP in Annexure-14 of his Report dated 23.03.2020. These buyers are identifiable as per the documents placed on record. Therefore, as per the provisions of Section 171 (1) read with Rule 133 (3) (b) the Respondent is directed to pass on an amount of ₹ 2,44,80,835/- and an amount of ₹ 66,463/- to the other flat buyers and the Applicant No. 1 respectively along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made, within a period of 3 months from the date of passing of this order as per the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing included in them. Keeping in view the above self-admissions of the Respondent, the liability of the Respondent to pass on the benefit of additional ITC as per the provisions of Section 171 of the above Act, is required to be investigated in respect of his Epic project, as there are sufficient reasons to believe that the Respondent is required to pass on the benefit of additional ITC to the eligible buyers which he may not have passed on, as has been established in the present case. Accordingly, this Authority is bound to examine and take suo moto cognizance of the benefit of ITC which the Respondent is apparently liable to pass on to the buyers of the Epic project, as per the provisions of Section 171 (2) of the CGST Act, 2017, once it has been brought to its notice. Accordingly, the DGAP is directed to investigate the Epic project being executed by the Respondent and submit his Report under Rule 129 (6) stating whether the Respondent is liable to pass on the benefit of ITC to the buyers of the above project and their entitlement thereof. The Respondent is directed to extend full co-operation to the DGAP during the course of the investigation. 37. This Authority as per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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