TMI Blog2022 (5) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 0.00%. whereas, during the post-GST period (July-2017 to March-2019), it was 1.85%. This confirms that in the post-GST period, the Respondent has been benefited from additional ITC to the tune of 1.85% [1.85% - 0.00%] of his turnover and the same was required to be passed on by him to the eligible flat buyers, including the Applicant No. 1. The amount of profiteering computed by the DGAP is hereby accepted as correct. The said profiteered amount is to be passed on to the said home buyers along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the home buyers commensurate with the benefit of ITC received by him. Penalty - HELD THAT:- The provisions of Section 171 (3A) of the CGST Act, 2017 have been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the DGAP that:- (i) A Notice under Rule 129 of the Rules was issued on 09.11.2020, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to his customers 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 Notice as well as furnish all supporting documents. Vide the said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1 during the period 30.11.2020 to 01.12.2020. However, the Respondent did not avail of this opportunity. (ii) The period covered by the current investigation was from 01.07.2017 to 30.09.2020. (iii) In response to Notice dated 09.11.2020, the Respondent submitted his reply vide letters and e-mails dated 05.01.2021, 01.02.2021, 08.03.2021 and 10.03.2021. The submissions of the Respondent inter alga, has been summed up as follows: - a. The Booking, Payment and Sale Deed were executed/made between the Applicant No. 1 and the Respondent in post-GST regime period only. There should be no question of Anti-profiteering or pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of ITC Rs. 303905/- SGST. (v) Vide Notice dated 09.11.2020, the Respondent was informed that if any information/documents were provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was required to be furnished. However, the Respondent did not submit any such information or summary. (vi) Vide e-mail dated 15.03.2021, the Applicant No. 1 was afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 16.03.2021 or 17.03.2021. The Applicant No. 1 vide e-mail dated 15.03.2021 requested he was unable to visit due to Covid pandemic and requested to forward the documents at any branch of DGAP's office at Vadodara, Gujarat. 4. The DGAP in it's Report dated 25.03.2021 has further stated that:- (i) The subject Application, various replies of the Respondent/Applicant No. 1 and the documents/evidences on record had been carefully examined. The main issues for determination were: - a. Whether there was benefit of reduction in rate of tax or ITC on the supply of Construction Service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Applicant No. 1 as the flat was purchased after the introduction of GST was incorrect. The additional amount of benefit accrued to a supplier on account of reduction in rate of tax or benefit of ITC could not be denied to a recipient on the grounds that he had purchased the flat after the introduction of GST as these benefits had arisen due to the policy of the State/Government. (iv) The contention of the Respondent that he had reversed the unutilized credit of Rs. 6,07,810/- subsequently i.e. after 01.04.2019 had no bearing on the fact that such credit was available to him upto 31.03.2019 and the homebuyers were eligible to get the benefit of additional ITC. (v) Prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services but the Respondent had not availed any credit of Service Tax (CENVAT credit of Central Excise duty was not available) in respect of the units for the project Venice Bungalows sold by him. Moreover, the Respondent had neither claimed nor was eligible for any credit of VAT paid on inputs. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for new scheme launched vide Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019. In terms of this Notification the Respondent was required to pay GST @ 5% without taking/availing the benefit of ITC. Thus, the Respondent was not eligible to avail ITC w.e.f. 01.04.2019. Since, there was no benefit of ITC to the Respondent w.e.f, 01.04.2019 profiteering on account of additional ITC benefit could not be attributed after 01.04.2019. (viii) The Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on Construction Service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate was 12% for flats. (ix) Accordingly, on the basis of the figures contained in table- 'A' above, the comparative figures of the ratios of ITC 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, has been furnished by the DGAP in Table-B below:- Table-B Sr.No. Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T on the base amount of Rs. 3,85,244/-. The flat Homebuyer and unit no. wise break-up of this amount has been given in Annex-9 to the DGAP's Report. This amount was inclusive of profiteered amount of Rs 72,520/- (including GST) in respect of Applicant No. 1. There were altogether 28 units in the project Venice Bungalows and from the report of the DGAP, it would emerge that 8 buyers are eligible for getting commensurate benefits. The details of commensurate benefit of ITC to be passed on by the Respondent to the Applicant No. 1 and others recipients have been furnished by the DGAP in the table below: - Sr.No. Name of Customer Customer Details Final profiteering (in rupees) A B C D 1. Jigar R Shah (Applicant No. 1) 02, Venice Bungalows, Opp Narayan Resicon, Beside Alok Residency, Near Khodiyar nagar 72,520 Cross Roads, New Kareli baug, Vadodara- 390018 72,520 2. Hemaben L Telwani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 to 31.03.2019, had not been passed on by him to the Applicant No. 1 and other 7 recipients. On this account, it appeared that the Respondent had realized an additional amount to the tune of Rs. 4,31,473/- which had not been passed on to the Applicant No. 1 and other recipients. These 8 recipients were identifiable as per the documents provided by the Respondent, giving the names along with unit numbers allotted to such recipients. 6. The DGAP further reported that the present investigation covered the period from 01.07.2017 to 31.03.2019. Profiteering, if any, for the period post March, 2019, had not been examined as the Respondent had opted for a new scheme issued vide Notification 03/2019-Central Tax (Rate) dated 29.03.2019. In terms of this Notification the Respondent was required to pay Tax/GST @ 5% without taking/availing the benefit of ITC. Thus, the Respondent was not eligible to avail the ITC w.e.f. 01.04.2019 and Section 171 of CGST Act, 2017 was not attracted from 01.04.2019. 7. Further the DGAP reported that Section 171 (1) of the CGST Act, 2017, requiring that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Pushpaben B Solanki (2) Pooja Bahal (3) Mahesh Kumar J Shah (4) Bela Pranay Vaidya had booked the units during the post GST period only and entire consideration towards sales was paid during the post- GST period against the agreed price. Only 3 buyers had booked units during Pre- GST period and from whom amount was received in advance under Pre-GST period and Post GST period both. d. That the entire transaction i.e. Booking, Payment and Sale Deed , all the three instances were entered into between the Applicant No. 1 and the Respondent in post GST regime period only. there should not be applicability of Anti-Profiteering or passing any benefit to the Applicant No 1. The sale price negotiated and decided between the Applicant No. 1 and the Respondent was based on the various factors like saleable area, floor rise, facing, location of the project and the payment terms etc. from time to time after considering the Input credit, if any available to the Respondent. e. That the provisions of Section 171 of the CGST Act, 2017 should be applicable to the long term/continuous contracts which were entered into between the buyer and the Respondent prior to implementation of GST. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further stated that he was ready to pay the profiteered amount determined in the DGAP's Report along with applicable interest by 15.04.2022 and would confirm the same to the Authority after consulting the builder. 12. The Respondent vide his email dated 14.04.2022 has submitted that he has returned the profiteered amount of Rs. 4,31,473/- along with interest @ 18% thereon amounting to Rs. 3,31,544/ to the respective homebuyers/customers as per the Report of the DGAP. The Respondent enclosed documentary evidence i.e. confirmation of receipt of cheque from all the recipients of benefit of ITC along with copies of cheques. The Respondent further stated that all the cheques had been cleared from the Bank as of 13.04.2022 except one recipient (Shri Satyam Kumar B Bhagat), which was pending for clearing. Copy of the Bank statement obtained from the Bank as of 13.04.2022 was also enclosed stating the cheque nos. and withdrawals in respect of 7 home buyers out of 8. Further, the Respondent vide his email dated 29.04.2022, has also submitted copy of the Bank statement obtained from the Bank as of 28.04.2022 stating the withdrawal by cheques in respect of the remaining 8th homebuyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Road Branch, Vadodara. The Applicant No. 1 also attached the copy of the cheque No. 000208 dated 04.04.2022 received from the Respondent along with copy of acknowledgement confirming the passing of the profiteered amount to him. 14. We have 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 clear from the plain reading of Section 171 (1) that, it deals with two situations:- one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period: hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. It is admitted fact that project was started in pre-GST period and several bookings/payments were made in the pre-GST period. The DGAP's Report reveals that CENVAT. as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the DGAP's Report. Further, the Applicant No. 1 has also confirmed the receipt of said benefit of ITC amounting to Rs. 72,520/- + Interest amount Rs. 58,2940 via cheque No. 000208 dated 04.04.2022 indicating that the Respondent has passed on the benefit of ITC to the said 8 homebuyers which was liable to be passed as per the DGAP's Report. 17. As per Rule 135 of the CGST Rules, 2017 Any order passed by the Authority under these rules shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount in accordance with the provisions of the !GST or CGST or the UTGST or the SGST Act of the respective States, as the case maybe . In view of the above, it is directed that the concerned Commissioner of GST (Centre or State) to carry out verification process of the Respondent's claim of passing of the determined ITC amount along with interest under the provision of Rule 136 of CGST Rules 2017 to all the home buyers other than the Applicant No. 1, as detailed above, and send the compliance of the verification. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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