TMI Blog2022 (5) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. That section 171 (3A) of the CGST Act, has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 30.11.2020, therefore, he is liable for imposition of penalty under the above section. Application disposed off. - Case No. 15/2022 - - - Dated:- 13-5-2022 - SH. AMAND SHAH, TECHNICAL MEMBER CHAIRMAN., SH. PRAMOD KUMAR SINGH, TECHNICAL MEMBER. SH. HITESH SHAH. TECHNICAL MEMBER. Present:- 1. None for the Applicant. 2. None for the Respondent. ORDER 1. The present Report dated 16.12.2021 has been received from the Director-General of Anti-Profiteering (DGAP) after a detailed investigation in accordance with Rule 129 (6) of the Central Goods Service Tax Rules, 2017. The brief facts of the present case are that the Sh. Sudhir Jain had filed an application under Rule 128 of the CGST Rules, 2017 alleging profiteering by the Respondent in respect of purchase of flat no. J-062, Tower-J, 6th Floor in the Respondent's Project The Sky Court , in the DLF Garden City. Sector-86, Gurugram. He had also alleged that he had purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation in respect of the above project and submit Report to this Authority for determination whether the Respondent is liable to pass on the benefit of ITC in respect of the above project to the buyers or not as per the provisions of Section 171(1) of the above Act. 26. Due to the above reasons the Report dated 31.08.2020 furnished by the DGAP cannot be accepted. Therefore, in terms of the provisions of Rule 133 (4) and Section 171 (2) of the CGST Act, 2017 the DGAP is directed to further investigate the present case on the above issues and submit his Report under Rule 129 (6) of the above Rules. The Respondent is directed to extend all assistance to the DGAP and furnish him necessary documents or information as required during the course of the investigation. 3. Therefore, the DGAP has submitted the present Report under Section 171 (2) of the CGST Act, 2017 covering the issues raised by this Authority in Para 25 of the above said I.O. dated 11.12.2020. 4. The DGAP has submitted that as per the directions of this Authority vide aforesaid Order dated 11.12.2020, all the projects on which the Respondent was availing ITC from the common pool were required to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcluded in computing the limitation period as per the Hon'ble Supreme Court's Order dated 27.04.2021 passed in Miscellaneous Application No. 665/2021 in SMWP(C) No. 3/2020. Further, the above relief has been further extended and the period from 02.10.2021 shall have limitation period of 90 days from 03.10.2021 as per the Hon'ble Supreme Court's Order dated 23.09.2021 passed in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020. Therefore, the present Report has been filed during the period of limitation. 8. The Respondent has responded to the DGAP vide letter dated 23.09.2021 and subsequent reminders. the Noticee submitted his replies vide letters/e-mails dated 05.10.2021, 12.10.2021, 02.11.2021, 15.11.2021, 23.11.2021, 07.12.2021, 10.12.2021, 11.12.2021, 12.12.2021, 13.12.2021, 14.12.2021 and has submitted:- a) That he has filed a writ petition under Article 226 and 227 of the Constitution of India before the High Court of Delhi (numbered as W.P (C) No.12329 of 2021) inter alia against the DGAP and the National Anti-Profiteering Authority (NAA) seeking amongst others an appropriate writ, order or direction quashing the Order dated 11.12.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting of all inputs and input services and output services/ supplies etc. and all the purchase orders, work orders, other orders as well as demand letters to property buyers are being issued project wise only. Project wise details are compiled/consolidated GSTIN wise i.e., state wise to file the monthly GST return in form GSTR-1 GSTR-3B. g) That the project wise record of all inputs/outputs is necessarily required to be kept for the purpose of reversal under Rule 42 since all the projects are having different OC dates. different areas and the reversal is mandatorily required to be made project wise only on the basis of area sold vs. area unsold on the date of receiving of OC. The reversal cannot be made and would be impossible in absence of project wise record/ accounting. Further. for the post implementation period of GST the Respondent submitted he had already passed the available benefit to the property buyers on account of reduction in cost due to increase in tax credits or for any other reasons. Such benefit can be passed project wise only and has been passed accordingly. h) That only Ultima Phase-2 project was registered under RERA and there was no agreement/regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, which the Respondent submitted. Hence the case has been investigated again on the basis of fresh information/data submitted by the Noticee. The main issues for determination were: (i) Whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017 and if so. (ii) Whether the Respondent has passed on such benefit to the recipients of all three projects by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017 and; (iii) To comply with the directions contained in the Interim Order No. 38/2020 dated 11.12.2020 of this Authority. 12. The DGAP has further reported that in para 5 of Schedule-III 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 II, sale of building . Further. clause (b) of Paragraph 5 of Schedule II 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Camellias , and the ratios of input tax credits to turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to November, 2020) periods, have been furnished by the DGAP in Table-A below:- Table-A - Project The Camellias (Amount in Rs.) Sr.No. Particulars April,2016 to June,2017 (Pre-GST) July, 2017 to November, 2020 (Post-GST) 1. CENVAT of Service Tax Paid on Input Services (A) 38,25,32,956 - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) 0 0 3. Total CENVATNAT/Input Tax Credit Available (C=A+B) 0 53,22,44,630 4. Input Tax Credit of GST Available (D) 38,25,32,956 53,22,44,630 5. Total Turnover from Residential Area (E) 20,85,75,99,622 5,48,89,78,351 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Total Basic Demand during July, 2017 to December, 2019 D 5,48,89,78,351 7. GST @12% E=D*12% 65,86,77,402 8. Total demand F=D+E 6,14,76 55,753, 9. Recalibrated Basic Price G=D*(1-C) or 98.82% of D 5,42,43,80,017 10. GST @12% H=G*12% 65,09,25,602 11. Commensurate demand price I=G+H 6,07,53,05,619 12. Excess Collection of Demand or Profiteered Amount J=I-F 7,23,50,135 15. Similarly the details of the ITCs availed by the Respondent, his turnovers from the project The Crest , and the ratios of ITC to turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to November, 2020) periods, from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the excess realization (profiteering) during the post-GST period in respect of project The Crest have been furnished by the DGAP in Table-D below:- Table-D - Project The Crest (Amount in Rs.) S. No. Particulars 1. Period A July, 2017 to November, 2020 2. Output tax rate (%) B 12.00% 4. Increase in ITC availed post-GST (%) C=14.40% less 2.64% 11.76% 5. Analysis of Increase in ITC: 6. Total Basic Demand during July, 2017 to December, 2019 D 98,29,79,749 7. GST @12% E=D*12% 11,79,57,570 8. Total demand F=D+E 1,10,09,37,319 9. Recalibrated Basic Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the Respondent in respect of the project The Ultima during the pre-GST period (April, 2016 to June, 2017) was 2.45% and during the post-GST period (July, 2017 to November, 2020), it was 17.46%. thus post-GST, the Respondent had been benefited from additional ITC to the tune of 15.01% of the turnover in respect of the project The Ultima . 18. Accordingly, on the basis of the figures contained in Table `E' above, the comparative figures of the ratios of ITCs availed/available to the turnovers in the pre-GST and post-GST periods as well as the turnovers, the recalibrated base price and the excess realization (profiteering) during the post-GST period in respect of project The Ultima have been furnished by the DGAP in Table-F below:- Table-F - Project The Ultima (Amount in Rs.) S. No. Particulars 1. Period A July, 2017 to November, 2020 2. Output tax rate (%) B 12.00% 4. Increase in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e projects The Camellias to the extent of Rs. 6.96,08,150/-, The Crest of Rs. 4.59,47,817/- and The Ultima of Rs. 5,58,32,865/-. However, to support his claim of benefit of ITC having been passed on, the Respondent has not submitted any documentary evidence i.e., copies of cheques, copies of Credit Notes issued to home buyers, copies of Ledger Accounts of the home buyers maintained by the Respondent. Furthermore, the Respondent had not provided the email ids/phone numbers of the home buyers to enable the DGAP to verify the authenticity of the Respondent's claim from the respective home buyers. Therefore, on the basis of above; claim of the Respondent was not verifiable and thus the same had not been appropriated against the profiteered amount as computed by the DGAP. Further, on the basis of the details of outward supplies of the construction service submitted by the Respondent, it was observed that the service has been supplied in the State of Haryana only. 20. Therefore, the DGAP has concluded that:- a) Section 171 of the CGST Act, 2017 has been contravened by the Respondent by not passing on the benefit of additional ITC to the tune of 1.18% of the turnover for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the provisions of Section 171 of the above Act should not be fixed. 23. The Respondent filed his consolidated written submissions dated 06.05.2022 vide which he has submitted that:- a) The three projects in question were not registered under RERA as the projects did not qualify as RERA projects. b) The order dated 11.12.2020 of this Authority and the DGAP's notice dated 23.09.2021 were challenged before the Hon'ble Delhi High Court in Writ Petition (Civil) No. 12329/2021. The writ petition was disposed off as withdrawn on 03.01.2022 with liberty to raise all the grounds urged in the petition as also such other grounds which may be available in law, with the appropriate legal authority. c) In the pre-GST regime, various duties/taxes like Central Excise Duty, VAT on purchase of inputs were becoming a cost. On introduction of GST, the said taxes were subsumed and ITC of GST paid was made available subject to restrictions and conditions provided in Section 16 and Section 17 of the CGST Act. The Respondent had determined the benefit accruing to him which was required to be passed on to the flat buyers and accordingly had passed on the benefit to all the elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC means credit of input tax, and input tax means CGST, SGST, UTGST and IGST. Based on the definition of ITC and input tax, it would mean benefit in the form of availability of ITC of GST charged on procurement of certain goods/services, which was earlier not available as ITC (either fully or partially) but became now available as ITC. For instance, under section 17(5)(a) of the CGST Act, ITC in respect of motor vehicles was not available (except in certain cases) and the said bar was on ITC in respect of all types of motor vehicles, irrespective of seating capacity. This was subsequently amended by the CGST (Amendment) Act, 2018 to provide that ITC shall not be available only in respect of motor vehicles having seating capacity of not more than 13 persons (including the driver), except in certain cases. The effect of this amendment was that in respect of motor vehicles exceeding the seating capacity of 13 persons, ITC was available. Section 171 is intended to cover such kind of situations, where ITC was not available earlier in GST regime itself and the benefit of same becomes subsequently available. v. Furthermore, even the transitional provisions under Chapter XX of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the investigations had been initiated pursuant to this Authority's direction. it was nothing but suo moto initiation of action which could not be allowed. In fact, this Authority at para 25 of its order dated 11.12.2020 records that after taking suo mote cognizance directed the DGAP in respect of Respondent's project, The Ultima . Consequently, the order dated 11.12.2020 of this Authority and the DGAP's report dated 16.12.2021 had no legal sanctity and it was without authority or jurisdiction. iii. The Respondent has placed reliance on the judgment of the Hon'ble Supreme Court in Gujarat Urja Vikas Nigam Limited vs. Solar Semiconductor Power Company (India) Private Limited and Ors. (2017) 16 SCC 498, wherein it was held that Electricity Commission being a creature of statute cannot assume to itself any powers which were not otherwise conferred on it. Furthermore, in Rajeev Hitendra Pathak and Ors. v. Achyut Kashinath Karekar and Anr. 2011 (9) SCALE 287, the Hon'ble Supreme Court held that express power not having been conferred on the District Forum and the State Commission, they had no jurisdiction to recall an ex parte order. iv. That whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigations and had no suo moto powers under Rule 133 (4) to enquire into any project which was covered by the report. Therefore, the direction of this Authority to expand the investigations was unsustainable. vii. That Sh. Sudhir Jain in his application had submitted that the Respondent had wrongly charged GST @ 18% on the Preferential Location Charges on the sale of flat to him after the issuance of completion certificate. It is submitted that there was no allegation of any violation of Section 171 of the CGST Act by him. viii. That this Authority itself observed that the Applicant had made no allegation of violation of Section 171 in the application. Therefore, it is submitted that neither the DGAP nor this Authority had any jurisdiction to investigate pursuant to application/complaint made by Sh. Sudhir Jain. There was no legal basis for this Authority to direct investigations in Respondent's other projects as there was no complaint against the Respondent, alleging violation of Section 171 of the CGST Act. Thus, proceedings initiated against the Respondent were required to be dropped on this ground alone. ix. That the directions of this Authority vide its or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority, the DGAP's notice dated 23.09.2021 and DGAP's report dated 16.12.2021 were required to be set aside on this ground alone. h) PROCEEDINGS INITIATED ARE IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE:- i. That the Respondent was not provided any opportunity of hearing by the Standing Committee to present his case and / or address the concerns which Sh. Sudhir Jain might have had in this regard. The matter was referred by the Standing Committee to the DGAP without granting any opportunity to the Respondent. In the absence of the same, there was gross violation of the principles of natural justice. The proceedings initiated in gross violation of the principles of natural justice could not be considered as valid and the same were liable to be dropped on this ground alone. ii. That the present proceedings have been issued in violation of principles of natural justice as show cause notice has not been issued to the Respondent proposing the action to be taken by this Authority. Moreover, the investigation was initiated basis the application filed by Sh. Sudhir Jain and the Respondent was not given any chance to clarify or explain its communication. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sm of determination and calculation of profiteering. In absence of the same, the calculation and methodology used in the report was arbitrary and was in violation of principles of natural justice. ii. As per Rule 126, the Authority had the power to determine the methodology and procedure for determination as to whether the reduction in rate of tax on the supply of goods or services or the benefit of ITC had been passed on by the registered person to the recipient by way of commensurate reduction in prices. It was pertinent to note that as on date, CGST Rules had not prescribed any procedure/ methodology/ formula/ modalities for determining/ calculating 'profiteering'. iii. The Procedure and Methodology and Procedure issued by the Authority on 19.07.2018 only provided the procedure pertaining to investigation and hearing. However, no method/formula had been notified/prescribed pertaining to calculation of profiteering amount. iv. That under CGST Act or Rules made thereunder; there was no indication, let alone description as to how to conclude that there was profiteering due to reduction in rate of tax or benefit of ITC. Whether such computation had to be done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation provision is inapplicable. It is submitted that relying on the case of BC Srinivas Shetty, Allahabad HC in the case of Samsung (India) Electronics Pvt. Ltd. vs. Commissioner of Commercial Taxes U.P. Lucknow, reported as 2018 [11] G.S.T.L. 367 observed that in the absence of any procedure or provision in the UP VAT Act, 2008 Act, in the case of a sale of composite packages bearing a singular MRP, the authorities under the Act cannot possibly assess the components of such a composite package separately. Such an exercise, if undertaken, would also fall foul of the principles enunciated by the Supreme Court. In this regard, reliance has also been placed on the case of Union of India vs. Suresh Kumar Bansal reported as 2017 (4) G.S.T.L. J128 (S.C.), wherein it was confirmed by the Hon ible SC that explanation added to Section 65 (105) (zzzh) of the Finance Act, 1994 vide the Finance Act, 2010 expanding scope of taxability of Construction of Complex intended for sale by builders, was ultra vires as there was no statutory mechanism to ascertain value of service component of subject levy. vii. That this Authority was itself using different methodology to ascertain ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment or booking plans issued by it which was purely based on market driven strategy. On the contrary, the ITC accrued to a developer on the basis of actual cost incurred by him while undertaking the development of a project. Accrual of ITC was not dependent on the amount collected from the buyers. In this industry, there might be cases where advance was received by the suppliers/dealers even before the commencement of the projects. Likewise, units might be sold after the completion of the project as well. Thus, receiving of inputs/input services and taking credit of the same did not have any immediate/direct relation with the turnover in real estate sector. Accordingly. calculating profiteering on the basis of turnover could not reflect the correct outcome of benefit of credit to the Respondent. iii. The method would result in incorrect computation of benefit for the following reasons/ assumptions:- a. Construction Project Life cycle effect had been ignored and it had been assumed that uniform expenses were incurred throughout the lifecycle of the project. In other words, this methodology assumed that uniform expenses were incurred throughout the project lifecycle and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional 3% tax to its service providers and taken ITC of the same. The amount (%) would increase in case services were procured in April'16 to May'16, when Service Tax rate was 14.5%. In other words, increase in the tax rate did not result in a benefit. Tax was paid in advance to supplier and availed as credit and utilized for payment of output tax. In other words, increase in rate of tax reduced the net amount of tax to be paid in cash and was not a benefit. g. Further, the Respondent submitted the below illustration to prove that different rates of GST would lead to difference in calculation of benefit:- Sr. No. GST rate of input Basic price of inputs ITC under GST Cost to Respondent (equal to basic price, since ITC fully available) Amount demanded from customer (i.e. turnover) Profit Ratio of ITC to turnover 1. 28% 100 28 100 110 10 25.45% 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.252 18.998 Turnover 47.634 568.287 Credit to turnover ratio 32.01 3.34 Difference in credit to turnover ratio 28 67 k. That within the same regime for two given periods, the credit to turnover ratio could vary as highlighted in the above table. Similar exercise could be done in the pre-GST regime to show that credit to turnover ratio would vary:- Particulars April 2016 to March 2017 April 2018 to March 2019 Cenvat Credit 29.329 8.924 Turnover 2251.512 1716 531 Credit to turnover ratio 1.30 0.52 Difference in credit to turnover ratio 0.78 l. The comparison of pre-GST credit to turnover ratio to the post-GST ratio had resulted in skewed and inconsistent results in various orders pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k) EXCLUSION OF LAND VALUE FROM THE CALCULATION OF PROFITEERING AMOUNT:- i. That the Respondent collected from his customers not only the value of taxable construction services, but also collected the value of land. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II. sale of building was treated as neither supply of goods nor supply of services, as per paragraph 5 of Schedule III of the CGST Act. ii. Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 provided for exclusion of land value from the value of taxable construction services and deems the value of land as 1/3rd of the total amount charged from customers. In this regard, reference could be made to Para 2 of the aforesaid notification, extracted below:- 2. In case of supply of service specified in column (3), in item (I); (I) (ia), (ib), (ic), (id), (ie) and (if) against serial number 3 of the Table above, involving transfer of land or undivided share of land, as the case may be, the value of such supply shall be equivalent to the total amount charged for such supply less the value of transfer of land or undivided share of land, as the case may be, and the value of such transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Total Base Price excluding land value raised during July, 2017 to August, 2018 E 2,04,02,02,792 7. Less: Base Price raised during July, 2017 to August, 2018 (Flats sold after 01.07.2017 as per new agreement) F 11,43,05,220 8. Base Price raised during July, 2017 to August, 2018 (Flats sold upto 30.06.2017) G=E-F 1,92,58,97,572 9. GST raised @ 18% over Base Price H=G*18% 34,66,61,563 10. Total Demand raised I=G+H 2,27,25,59,135 11. Recalibrated Base Price J=G*(1-D) or 97.77% of E 1,88,29,50,056 12. GST@18% K=J*18% 33,89,31,010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g). ii. That while arriving at the total alleged profiteering amount, the DGAP had incorrectly inflated the profiteering amount by adding 12% GST to the base price demanded by Respondent and comparing it with the commensurate base price including 12% GST, without adducing grounds as to why this amount had been added. iii. That whatever amount was charged as GST by the Respondent had been duly deposited in government account. There had been no allegation that the amount collected as GST had not been paid to the government. Once it was accepted that such amount was also tax and the public exchequer was not deprived of such sum, it failed to appeal to reason that the same tax amount could be demanded again from the Respondent or return of such tax amount in the homebuyers could be ordered. iv. It was an undisputed fact that the Respondent charged GST from his customers, over and above the value of services supplied by him, i.e., on ex-tax basis. It was also undisputed that the Respondent deposited the amount collected by him as GST, by filing monthly returns in Form GSTR-3B. Therefore the amount of GST collected by the Respondent from his customers stood paid to the gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect, the Respondent submitted that addition of 12% GST to calculate the alleged profiteering amount was incorrect, not sustainable and liable to be rejected. Therefore. the Respondent humbly submitted that out of the total amount of profiteering of Rs. 25,09,08,375/-, an amount of Rs 2,68,83,040 should be reduced from the total profiteering alleged by DGAP. Project wise GST amount is tabulated below:- (Figures in Rs.) Project wise GST component in the alleged profiteering amount Project Profiteering amount alleged by DGAP GST component Revised profiteering amount The Camellias 7.23,50,135/- 77,51,800/- 6,45.98,335/- The Crest 12,94,35,170/- 1,38,68,054/- 11,55,67,116/- The Ultima 4,91,23,070/- 52.63.186/- 4,38,59,884/- Total 25,09,08,375/- 2,68,83,040/- 22,40,25.33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate as tabulated above. The DGAP's report is contrary to THIS AUTHORITY's direction vide order dated 11.12.2020 and therefore. the proceedings against the Respondent are liable to be dropped. iv. that DGAP erred in considering the same area on both side while comparing the profiteering which has resulted in wrong calculation of percentage of profiteering e.g. a buyer has booked an apartment for Rs. 1.80,00,000/- having an area of 3,000 sq. ft. during the financial year 2016-2017 and has made a payment of Rs. 1,40,00,000/- during the period upto 30-06-2017 i.e. pre GST period and has made a payment of Rs. 20,00,000/- only during the GST period upto 30-11-2020 and balance Rs. 20,00,000/- was still payable by him as on 30-11-2020, the area of 3,000 Sq Ft. has been considered under pre-GST period as well as GST period, the same has resulted in wrong computation of profiteering. n) THE RESPONDENT HAS ALREADY PASSED ON THE BENEFIT OF ITC TO THE TUNE OF RS. 17,13,88,832/- FOR THE THREE PROJECTS COMBINED:- i. That without prejudice to the above, the Respondent vide his submissions dated 11.12.2021 (Annexure 12 of the DGAP's report) in excel sheets submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as required to be considered as the same has already been passed on to the flat buyers. (O) OTHER GROUNDS:- i. In absence of a judicial member, the constitution of this Authority is improper ii. Section 171 of the CGST Act and Rules made thereunder pertaining to anti-profiteering are unconstitutional being violative of Article 14 and Article 19 (1) (g) of Constitution of India; iii. Rules 126, 127 and 133 of the CGST Rules suffer from the vice of excessive delegation; iv. Non-prescription of any methodology or guidelines render the investigation report unsustainable. On the basis of the aforementioned submissions it is submitted that the proceedings being violative of principles of natural justice are liable to be dropped in entirety. 24. Vide the above submissions dated 06.05.2021 the Respondent has further stated that he did not want any personal hearing in this matter. 25. This Authority has carefully considered the Report filed by the DGAP, all the submissions and the documents placed on record and the arguments advanced by the Respondent. It is found that the Respondent is executing four projects namely The Sky Court', `The Ultima', &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain 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 effected by the Central or the State Governments or if a registered supplier avails the benefit of additional ITC 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. Although there has been no reduction in the rate of tax in the case of Construction Service, however, a number of taxes and duties which were being levied under the State Acts of Haryana has been subsumed in the GST under the CGST and Haryana GST Act, 2017 on which ITC is now available to the Respondent under Section 16 of both the above Acts. Accordingly, the Respondent has become entited to ITC as Central Excise Duty, Sales Tax and Entry Tax which was not available to him in the pre-GST regime, which has been turned as benefit of ITC which is required to be passed on as per Section 171 by the Respondent. ITC has been duly defined in the CENVAT Credit Rules, 2004, the Haryana VAT Act, 2003 and the CGST Act and hence there is no ambiguity in computing the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 171 (1) and Rule 133 (1) of the above Rules. Under Rule 129 (2) the DGAP has mandate to conduct investigation and collect necessary evidence to determine whether these benefits have been passed on. Further. the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs vide its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a. Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices, in terms of Section 171 of the Central Goods and Services Tax Act. 2017 and the rules made thereunder. b. Responsibility for coordinating anti-profiteering work with the National Anti-profiteering Authority, the Standing Committee and the State level Screening Committees. Therefore, the Authority finds from the above provisions that the Office of the DGAP has been charged with the responsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion about the Supplier who has not passed on the benefit', Sh. Sudhir Jain has specified the name of M/s DLF Ltd. i.e. the Respondent having address DLF Gateway Tower, R Block, DLF City Phase III, Gurugram-122002, Haryana as the supplier who has not passed on the benefit of ITC. Further. upon perusal of the Minutes of meeting of the Standing Committee on Anti-profiteering held on 05.07.2019, the Standing Committee on Anti-profiteering has found that the complaint of Sh. Sudhir Jain has been considered in its meeting and there was sufficient and necessary prima facie evidence of profiteering against the Respondent. Thus, upon being prima facie satisfied, the Standing Committee has forward the complaint to the DGAP for further investigation. Hence, the Authority finds that this contention of the Respondent being not tenable. 32. The Respondent has also argued that he had not been provided any opportunity of hearing by the Standing Committee to present his case which is gross violation of the principles of natural justice. 33. The Authority finds that, with respect to the above contention of the Respondent, that the procedure of the Standing Committee on Anti-Profiteering ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been alleged' have also been mentioned in the report of the DGAP and the same has been supplied to the Respondent. Hence, there is no need to issue separate show cause notice to the Respondent on the above grounds. The Respondent cannot claim that he should be served with the notice containing details of every flat buyer, the amount paid by him, the ITC and tax paid by him every month etc. He has been supplied with all the material/documents which have been relied upon by the DGAP while framing the Report and hence he has no ground to allege violation of principles of natural justice. Hence, the Authority finds that, this submission and objection of the Respondent is devoid of merit. 36. The Respondent has argued that in absence of prescribed method of calculation of profiteering in the Act or the Rules or the Procedure and Methodology, the proceedings are arbitrary and liable to be set aside. The Procedure and Methodology issued by the Authority on 19.07.2018 only provided the procedure pertaining to investigation and hearing. However, no method/formula had been notified/prescribed pertaining to calculation of profiteering amount. In the absence of the same, there was lack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision also mentions any supply which connotes each taxable supply made to each recipient thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer on a particular product therefore he would pass less benefit or no benefit to another customer than what is actually due to that customer, on another product. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him subject to his eligibility. The term commensurate mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the price which has to be computed in respect of each product or unit or service based on the price and the rate of tax reduction or the additional ITC which has become available to a registered person. The legislature has deliberately not used the word `equal' or 'equivalent in this Section and used the word `Commensurate' as it had no intention that it should be used to denote proportionality and adequacy. The benefit of additional ITC would depend on the comparison of the ITC/CENVAT credit which was available to a builder in the pre-GST peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from each other and therefore, the mathematical methodology adopted in the case of one sector cannot be applied to the other sector. Moreover, both the above benefits are being given by the Central as well as the State Governments as a special concession out of their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous, mandatory and legally enforceable. The above provisions also reflect that the true intent behind the above provisions, made by the Central and the State legislatures in their respective GST Acts, is to pass on the above benefits to the common buyers who bear the burden of tax and who are unorganised, voiceless and vulnerable. It is abundantly clear from the above narration of the facts and the law that no elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of tax reduction and computation of the profiteered amount. This Authority was under no obligation to provide the same to the Respondent. The Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts/input services and taking credit of the same did not have any immediate/direct relation with the turnover in real estate sector. Accordingly. calculating profiteering on the basis of turnover could not reflect the correct outcome of benefit of credit to the Respondent. 40. In relation to the above submission of the Respondent, the Authority finds that there is correlation between the Turnover and the cost of construction as the Respondent is raising demands on the basis of the completion of each stage of the development of the project. The raising of demand has no correlation with the market driven strategies of the Respondent as is evident from his 3 plans which he is offering to his buyers. Accordingly, the Respondent is earning ITC on the basis of the material purchased by him for each stage. Even if he has received advances from the buyers, he is applying the same to purchase material as per the development plan circulated by him to the buyers. The Respondent is also liable to pass on the benefit of ITC in case he sells the flats before receiving the Completion Certificate. Therefore, the Authority finds that the above contention is wrong and accordingly, the comparison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such addition. In this regard, the report of the DGAP is very clear on the issue of reversal of ITC. The issue of reversal of ITC has been duly taken care of in Para 16 of the DGAP's Report which clearly states that no ITC benefit is to be passed on the unsold units and the ITC earned on them is to be reversed. Therefore, the claim of the Respondent is not sustainable. 46. The Respondent has also averred that in the pre-GST regime, services were subject to Service Tax @15%; however, the said services were taxable @18% in the post-GST regime. Therefore, there was an increase of 3% in ITC available to the Respondent which was not due to any additional benefit due to increase in the rate of tax. This credit was was available to the Respondent even before GST and hence, the Respondent could not be asked to transfer this additional credit to the customers. In this context, it is to state that the change in rate of tax in Service Tax from 15% to 18% is an additional benefit which has accrued to the Respondent in the post-GST period which is required to be passed on to the flat buyers. The Respondent cannot be allowed to appropriate it illegally as it has been given from the publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/s Vatika Limited, Case No. 64/2019) and M/s Emaar MGF Land Ltd (Case No. 26/2020) are different, the ratio of ITC to Turnover has also been different in both the cases. Hence, the contention of the Respondent cannot be accepted. 51. It has also been contended by the Respondent that for the purpose of calculation of profiteering, the value of land needed to be excluded. As 1/3rd of the total amount charged was towards land and not towards the services provided by Respondent. in this regard, the Respondent has placed reliance on the Order of this Authority passed in the case of M/s. Fusion Buildtech Pvt. Ltd. and M/s. Bhartiya City Developers Pvt. Ltd. In the cases relied upon by the Respondent, the DGAP has excluded the value of land from its profiteering calculation Table and the same was upheld by this Authority. It is further contended that if the land value be excluded from the calculation of profiteering, the profiteering amount would reduce to Rs. 16,72,72,250/-. 52. With respect to the above submission of the Respondent, the Authority finds that in the present case, the Respondent has raised invoice to his home buyers which included the consolid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent. Therefore, the Authority finds that the above contention of the Respondent is untenable and hence it cannot be accepted. In support of his above claim, the Respondent has relied upon the decision given by the Hon'ble Apex Court in the case of R. S. Joshi Sales Tax Officer Gujarat v. Ajit Mills Limited (1977) 4 SCC 98. However. keeping in view the facts of the present case before us, the Authority finds that the law settled in the decision relied upon by the Respondent is not applicable to the Respondent. 55. The Respondent has further averred that for computation of credit to turnover ratio, the DGAP had considered period from 01.07.2017 to 30.11.2020 whereas he has received the Completion Certificate in all his three projects i.e. The Camellias, The Crest, The Ultima (Tower E, H, J, K, L EWS) and The Ultima (Tower- A, B ,N, Q, R Shops) on 27.07.2017, 24.07.2017, 11.06.2018 and 05.02.2019 respectively, which is against the directions of this Authority vide its I.O. dated 11.12.2020. 56. In relation to the above submission of the Respondent, the Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 58. The Respondent has also claimed that he has passed on the benefit of ITC amounting to Rs. 17,13,88,832/- to all the flat buyers in respect of all the three projects. In this regard. this Authority observes that the above claim of the Respondent is not correct. To support his claim, the Respondent has not submitted any documentary evidence indicating that the benefit of additional ITC has been passed on by him to his flat buyers/customers. The Respondent has submitted a mere excel sheet containing details of the flat buyers and the amount of benefit which was passed on in support of his claim, which cannot be relied upon in the absence of documentary evidence. 59. The Respondent has further stated that in the absence of a judicial member, the constitution of this Authority is improper. In this regard, the Hon'ble Supreme Court has applied the principle laid down in the case of S. P. Sampath Kumar v. Union of India others 1987 SCC Sppl. 734 , including in the relatively recent cases of Union of India v. R. Gandhi, Madras Bar Association v. Union of India supra and more recently in Rojer Mathews v. South Indian Bank Ors. Supra, in which it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, judicial power vested in superior courts cannot be transferred to coordinate courts/Tribunals. The answer is, that such transfer is permissible. But whenever there is such transfer, all conventions/customs/practices of the court sought to be replaced have to be incorporated in the court/Tribunal created. The newly created court/Tribunal would have to be established in consonance with the salient characteristics and standards of the court which is sought to be substituted. (Emphasis supplied) In the case of Rojer Mathew supra, the Hon'ble Court was inter alia considering provisions of the Finance Act, 2017 which led to merger of several Tribunals as well as the rules therein, where one of the issue was absence of a Judicial Member. With regard to this question, the relevant findings of the Hon ble Court are reproduced herein below:- 163. We concur with the above which reiterates the consistent view taken by this Court in a number of cases. It is also a well-established principle followed throughout in various other jurisdictions as well, that wherever Parliament decides to divest the traditional Courts of their jurisdiction and transfer the lis to some other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requisite qualification in law as well as experience in the field of law. However, it is worthwhile to note that having a qualification in law is not equivalent to having experience in law and vice versa. Experience in law . thus, is an expression of composite content and would take within its ambit both the requisite qualification in law as well as experience in the field of law . Some findings of the Hon ble Supreme Court in the case of Namit Sharma supra, reproduced herein above, have been reversed by the Hon'ble Court in the Review Petition filed by the Union of India. The Judgment in the review Petition has been reported as Union of India v. Namit Sharma (2013) 10 SCC 359 . The relevant findings from the said judgment are reproduced herein below:- ` 29. Once the Court is clear that the Information Commissions do not exercise judicial powers and actually discharge administrative functions, the Court cannot rely on the constitutional principles of separation of powers and independence of judiciary to direct that the Information Commissions must be manned by persons with judicial training, experience and acumen or former Judges of the High Court or the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices; (ii) to identify the registered person who has not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices; (iii) to order, (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Fund referred to in section 57; (c) imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act. (iv) to furnish a performance report to the Council by the tenth day of the close of each quarter. The aforementioned duties clearly do not involve settling o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n constituted under the Chartered Accountants Act, 1949. The ICAI also exercises quasi-judicial functions over its registered members and can pass orders which have far reaching consequences affecting the rights of Chartered Accountants but even its composition does not require a Judicial Member's presence. Its composition is provided in Section 9 (2) of the above Act and the same does not include a mandatory Judicial Member. Similarly, the Assessing Officers, Commissioners of Appeal under the Income Tax Act. 1961 and the CGST Act, 2017, the Authorities on Advance Rulings under both the above Acts and the Dispute Resolution Panel under the Income Tax Act, 1961 all perform quasi-judicial functions but there is no requirement that such persons who must be possessing either a law degree or have had judicial experience. Such a requirement is not only impractical but would also render several statutory authorities unworkable, which could never have been the intention of the Hon ble Supreme Court while laying down the legal principles discussed above. Therefore, in light of the above, it can be concluded that this Authority has not replaced any Courts, cannot be equated to a Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, all the State Legislatures, the Central and all the State Governments and the GST Council and therefore, Section 171 and the Rules are constitutional and are not violative of Article 14 and 19 (1) (g) of the Constitution. This Authority has nowhere interfered with the business decisions of the Respondent and therefore, there is no violation of Article 14 and 19 (1) (g) of the Constitution. 61. The Respondent has further contended that Rule 122, 127 133 of the CGST Rules suffered from excessive delegation. In this regard it would be pertinent to mention that above mentioned CGST Rules have been framed by the Central Government under Section 164 on the recommendation of the GST Council which is a constitutional body established under 101s' Amendment of the Constitution and comprises of all the Finance/Taxation Ministers of the States and the Union Finance Minister. Hence, the above Rules have express approval of the Parliament, all the State Legislatures, the Central and all the State Governments and the GST Council and therefore, constitution of this Authority under above Rules is legal and does not amount to excessive delegation. It is also mentioned that the Rule 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Camellias', The Crest' and The Ultima' respectively which was availed by the Respondent the details of which are mentioned in Table- B, D F supra. 63. In view of the above discussions, the Authority finds that the Respondent has profiteered by an amount of Rs. 7,23 50,135/-, Rs. 12,94.35,170/- Rs. 4,91,23,070/- for the projects 'The Camellias', The Crest' and The Ultima' respectively during the period of investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers in all the above three projects shall be refunded by him, along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. 64. The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP's Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 30.11.2020, in the instant case, as Rs. 7,23,50,135/-, Rs. 12,94,35,170/- Rs. 4,91,23,070/- for the projects The Camellias' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Accordingly, notice be issued to him. 69. The concerned jurisdictional CGST/SGST Commissioner is directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each homebuyer as per Annexure- 1, 2 3 attached with this Order along with interest @18%, if not paid already. In this regard an advertisement of appropriate size to be visible to the public may also be published in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder (Respondent) - M/s DLF Ltd., Project- The Camellias', The Crest' and The Ultima' Location- Haryana and amount of profiteering so that the concerned homebuyers can claim the benefit of ITC if not passed on. Homebuyers may also be informed that the detailed NAA Order is available on Authority's website www.naa.gov.in. Contact details of concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement. 70. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of this order to this Authority and the DGAP within a period of 4 months from the date of re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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