TMI Blog2022 (6) TMI 1126X X X X Extracts X X X X X X X X Extracts X X X X ..... it was 11.76% for the Project Jeevan Ananda'. This confirms that post-GST, the Respondent has benefited from additional ITC to the tune of 11.76% (11.76% - 0%) of his turnover, and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit availed by the Respondent which needs to be passed on to all the recipients of supply including the Applicant No. 1 as Rs. 1,85,70,263/-. The Authority finds that the Respondent has profiteered by an amount of Rs. 1,85,70,263/- during the period of investigation i.e. 01.07.2017 to 30.09.2020. This amount of Rs. 1,85,70,263/- includes the amount relating to the Applicant No. 1 amounting to Rs. 1,27,892/-. The above amount that has been profiteered by the Respondent from the recipients of supply in the Project 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 refund payment and per the provisions of Rule 133 (3) (b) of the CGST Rules 2017. The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP's Report or the methodology adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lat no. 605 of Block No. A-3 in the project Jeevan Ananda , situated at Plot Bhubaneswar, Mouja Aiginia, Khandagiri, Bhubaneswar, Khurda District. Applicant No. 1 has alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in prices and charged GST @12% on the demand raised post-GST. Applicant No. 1 had further alleged that he was allotted an under-construction flat on 18.08.2011 and had paid 90% of the consideration under the erstwhile Service Tax regime and the balance consideration was due to be paid under the GST regime. Further, the Applicant submitted the following documents along with his application in APAF-1:- a. Copy of Allotment Letter dated 18.08.2011 along with Brochure of the project. b. Copies of letters dated 19.11.2019, 20.02.2020 17.06.2020 written by the Applicant requesting the Respondent to recalculate the basic price considering benefit of ITC in the GST regime. c. Copy of Aadhar Card. d. Copy of Demand Letter dated 13.01.2020. e. Copy of Reply dated 24.12.2019 given by the Respondent wherein it was stated that the cost of flats was exclusive of taxes and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25.11.2019. xiv. Copy of RERA Registration Certificate dated 30.08.2018 along with all project progress reports submitted to RERA up to September 2020. xv. List of home buyers commercial shop buyers in the project Jeevan Ananda . xvi. The approved cost of the project Jeevan Ananda . xvii. Pro-rated computation of benefits. e. That in response to the Notice dated 09.11.2020 and subsequent reminders, Respondent replied vide above-said letters/e-mails and the same were summed up as follows: - i. The Respondent had successfully developed two projects in Bengaluru, Karnataka (Jeevan Anand Phase I and Jeevan Anand Phase II). These projects were completed way back in 2007 and 2014, respectively. At present, the Respondent had only one ongoing project, namely Jeevan Ananda located at Bhubaneswar, which was commenced in the year 2011. ii. The project was registered under Odisha Real Estate (Regulation and Development) Rules 2017 with registration no. MP/19/2018/00170. iii. The Respondent had obtained the parcel of land for the development of the project on a long-term lease contract executed with the Government of Odisha on 7.11.2007 for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y it from the home buyers post implementation of GST. The GST rate was 18%, hence, the effective rate of GST charged by the Respondent was 12% after availing of the 1/3rd abatement. vii. The Respondent completed the Project in November- 2019 and received Occupancy Certificate No. 27896/BDA, Bhubaneshwar dated 25.11.2019 from the Bhubaneshwar Development Authority. viii. He was eligible to claim credit of Service Tax paid on input services, but he was not eligible to take any credit of VAT paid on the 'goods' purchased/used in the Project. However, in the present GST regime, there was no restriction on availing ITC of GST paid on goods used in the project, and to that extent, there might be an ITC benefit. Break-up of the goods and services procured in the GST regime was given in Table A' below:- Table-'A' Period Value of inward goods GST paid on inward goods ITC availed inward goods Value of inward services GST paid on inward services ITC availed inward services Total ITC availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th and Sh. Yogesh Khandelwal visited the DGAP on behalf of Applicant No. 1 and availed the said opportunity on 19.01.2021 by inspecting the non-confidential documents/reply furnished by the Respondent. h. That the reference received from the Standing Committee on Anti-profiteering, various replies of the Respondent, and the documents/evidence on record had been carefully scrutinized. The main issues for determination are: (I) Whether there was the 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 such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. i. That the Respondent, vide e-mail dated 21.12.2020, submitted copies of demand letters, payment receipts, and sale agreement for the sale of flat no. 605 Block No. A-3, Type-B to Applicant No. 1, measuring 1259 square feet, at a base price of Rs. 36,50,000/-. The schedule of payment was furnished in Table- B' below. Table- B' (Amount in Rs.) S.No. Due Date Payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as services were concerned. The input or input service-wise availability or non-availability of ITC before and post-implementation of GST had not been examined. Further, there should be no extra liability on the Respondent on account of the increase in the rate in GST compared to Service Tax as the supplier of input services was now also enjoying ITC on all the purchases made by him resulting in a reduction in prices of the materials purchased by him which should pass on to the Respondent. k. 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 ITC of some taxes was not being allowed in the erstwhile tax regime. For example, the ITC of Central Sales Tax, which was being collected and appropriated by the States, was not admissible. Similarly, in the case of construction service, while the ITC of Service Tax was available, the ITC of Central Excise Duty paid on inputs was not available to the service provider. 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 servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST. However, in the present case, all the 240 residential units and 3 commercial shops had been sold before 2013 whereas Occupancy Certificate was obtained much later in November 2019. Therefore, there was no unsold unit at the time of receipt of the Occupancy Certificate. m. That as regards the allegation of profiteering, it was observed that before 01.07.2017, i.e., before the GST was introduced, Respondent claimed that he was eligible to avail CENVAT credit of Service Tax paid on Services but no credit was available in respect of the Central Excise Duty and VAT paid on the inputs. However, post-GST, the Respondent could avail ITC of GST paid on all the inputs and the input services including the sub-contracts. From the information submitted by the Respondent for the period April 2016 to September 2020, the details of the ITCs availed by him, his turnover from the subject project Jeevan Ananda , the ratios of ITC to turnovers, during the pre-GST (April 2016 to June 2017) and post-GST (July 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with 1/3rd abatement for land value) on construction service, vide Notification No.11/2017-Central Tax (Rate), dated 28.06.2017. Accordingly, based on the figures contained in Table 'C above, the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price, and the excess realization (profiteering) during the post-GST period, was tabulated in Table- 'D' below:- Table- 'D' (Amount in Rs.) S.No. Particulars Post- GST 1 Period A 01.07.2017 to 30.09.2020 2 Output GST Rate (%) B 12.00 3 The ratio of CENVAT credit/ ITC to Total Turnover as per table - 'C' above (%) C 11.76% 4 Increase in ITC availed post-GST (%) D= 11.76% less 0.00% 11.76% 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the benefit of additional ITC to the tune of 11.76% of the turnover had accrued to the Respondent post-GST and the same was required to be passed on by him to the respective recipients. On this account, the Respondent had realized an additional amount to the tune of Rs. 1,27,892/- from the Applicant. Further, the investigation reveals that the Respondent was required to pass on the additional benefit of ITC amounting to Rs. 1,84,42,371 /- to 183 other recipients who were not Applicants in the present proceedings. These recipients were identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit No. allotted to such recipients. Therefore, this additional amount of Rs. 1,84,42,371/- was required to be returned to such eligible recipients. As observed earlier, the Respondent had supplied construction services in the State of Odisha only. t. That the present investigation covered the period from 01.07.2017 to 30.09.2020. Profiteering, if any, for the period post-September 2020, had not been examined as the exact quantum of ITC that would be available to the Respondent in the future cannot be determined at this stage, when the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the computation (of benefit arising out of ITC) had been made by the DGAP based on ITC actually availed in the pre-GST and post-GST regime. It was submitted that the provisions of Section 171 applied only in two situations prescribed therein, one of which was that there might be a benefit of ITC arising out of the introduction of GST. In this connection, it was further submitted that even if the Respondent inadvertently had not availed credit of services in the erstwhile regime, the same cannot be considered for determining the benefit of ITC (for Section 171) because of the following reasons: i. Section 171 intends to pass on the benefit of reduction in the cost of provision of service (or production of goods) due to the introduction of GST. ii. The credit of input tax which was available in the erstwhile regime and was also available in the GST regime cannot (by any stretch of imagination) be regarded as giving rise to a benefit of ITC due to the introduction of GST. Services were fully creditable (for construction services) in the erstwhile as well as in the GST regime and therefore, the benefit of ITC cannot arise on account of services. iii. While it mig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total ITC availed ITC covered u/s 171 for goods services 2017-18 8,30,700 99,28,261 16,54,710 82,73,551 1,07,58,961 91,04,251 2018-19 34,860 83,52,856 13,92,143 69,60,713 83,87,716 69,95,573 2019-20 4,79,119 14,64,084 2,44,014 12,20,070 19,43,203 16,99,189 2020-21 4,324 9,28,180 1,54,697 7,73,483 9,32,504 7,77,807 Total 13,49,003 2,06,73,381 34,45,564 1,72,27,818 2,20,22,384 1,85,76,821 Accordingly, the Respondent has re-computed the alleged profiteering as below: S.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (and not a finding). h. That the investigation by the DGAP failed to provide any reason as to why it had only considered the period between April 2016 to June 2017 as the pre-GST period to compute the percentage of benefit arising out of ITC. It was an accepted fact that the Respondent had commenced his project in the year 2011 and most of the work related to the project was executed before the introduction of GST. Therefore, it was prudent to consider the aggregate of ITC available to the Respondent on the entire project (since inception) and compare the same with the aggregate turnover (since 2011). Further, it was also possible that the Respondent might not have received any revenue during the aforesaid period for any reason (one of the prominent features of the construction industry was that the project was stalled for a long period on account of legal disputes), in which case the mathematical formula applied by the DGAP was bound to fail. i. In addition to the above the Respondent submitted that the report of DGAP was biased on the following counts: i. DGAP failed to recognize and consider submissions made by the Respondent regarding the cost incurred by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on the quantum of turnover during the said period. For instance, if the last installment (which was due in the GST regime) was increased to 50% (from the existing 10%) the ratio of ITC to turnover would severely get affected and the profiteering might also be determined as a negative figure (mathematically). In such a situation, while the DGAP might state that there was no profiteering by the Respondent, but the fact would remained that the Respondent had started availing certain credits (which were not available in the erstwhile period) due to the introduction of GST and therefore, the benefit of ITC does exist. n. To determine the quantum of profiteering, it was essential that the element of credit (in the pre and post-GST regimes) must not be compared with the turnover. The benefit of ITC should be determined only as a function of ITC alone. One of the manners in which this could be achieved was that the DGAP might examine the procurements made by the Respondent described as under: i. Examine the entire procurement made by the Respondent in the post-GST regime; ii. Compute the credit that would otherwise been available to the Respondent if GST was not imple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of India. Ignoring the increased cost of production and/or cost of supply would compel the Respondent to suffer loss and thereby, infringe the fundamental rights guaranteed under Article 19 (1) (g). Hence such an interpretation must necessarily be eschewed by this Authority. s. If the increase in cost was not considered/ allowed in the formulation of price fixation under Section 171 of the CGST Act, it would directly offend the fundamental right to carry on business. Further, if the increase in cost was not incorporated, it would amount to price control, which was unsustainable in law. Reliance in this regard could be placed on the order dated 01 June 2012 of the Hon'ble High Court of Delhi in Indraprastha Gas Limited Vs Petroleum and Natural Gas Regulatory Board in W.P. No. 2034 of 2012 , wherein it was as under: Prices were generally governed/ regulated by market forces. Price fixation/regulation/control was essentially a clog on the freedom of trade and commerce conferred the status of a fundamental right. However, wherever the circumstances so justify, the same had been treated as a reasonable restriction. However, such restriction on fundamental right had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulates that the above benefit was to be passed on only on the ITC which was availed on account of the purchase of goods. For computing the benefit of ITC, the CENVAT/ITC availed during the pre-GST period had to be compared with ITC availed post-GST implementation and hence these computations had to be made based on overall figures of ITC and turnovers, which have been furnished by the Respondent himself, through his Tax Returns and ITC registers. As per CGST Act, no bifurcation of the ITC was permissible on account of the goods and services purchased nor were separate records of the same required to be maintained. Therefore, the above claim of the Respondent was not tenable. b. The methodology adopted by the DGAP was correct and strictly as per the law enshrined in Section 171 of the CGST Act. c. Further in the Report dated 28.01.2021, the increase in ITC as a percentage of total taxable turnover availed by the Respondent post-GST had been quantified. The input or input service-wise availability or non-availability of ITC before and post-implementation of GST had not been examined. Further, there should be no extra liability on the Respondent on account of the increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It does not mean that if the period was larger than the availment of ITC would increase or decrease but it only gives a ratio that represents the period for comparison. It was a standard practice at DGAP to take the pre-GST period from 01.04.2016 to 30.06.2017 and had been followed in all cases. These cases had also been upheld by NM. h. The Respondent had charged escalation cost from the homebuyers which was evident from the payment schedule provided in the Project brochure wherein it was inter-alia mentioned that: 4th installment (10% of basic price plus escalations): On completion of Project at the time of taking possession. Accordingly, an amount of Rs. 5,10,720/- including GST had been appropriated from the homebuyers towards the Escalation Charges by the Respondent as was evident from Table-'B' in Para 12 of DGAP Report dated 28.01.2021. i. That the main contours of the Procedure and Methodology for passing on the benefits of reduction in the rate of tax and the benefit of ITC were enshrined in Section 171 (1) of the CGST Act, 2017 itself which states that 'Any reduction in rate of tax on any supply of goods or services or the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hodology Procedure had been delegated to the N.A.A.(hereinafter referred to as Authority) under Rule 126 of the above Rules as per the provisions of Section 164 of the above Act as such power was generally and widely available to all the judicial, quasi-judicial and statutory authorities to carry out his functions and duties and hence no special favour had been shown to the Authority while granting such power. The Authority had only been allowed to determine the methodology and not to 'prescribe it' which it had to do keeping in view the facts of an individual case. Since the functions and powers to be exercised by the N.A.A. had been approved by competent bodies, the same was legal and binding on the Respondent. m. That profiteering was not a tax as had been interpreted by the Respondent but it was a benefit that had accrued to him on account of additional ITC which he needed to pass on to the eligible customers. The CGST Act and the Rules provide for elaborate machinery in the form of NM, DGAP, and the field tax authorities of the Central and the State Governments to enforce the anti- profiteering measures. Thus, the case law referred by the Respondent in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... precious tax revenue made from the kitty of the Central and the State Governments and required to be passed on to the end consumers who bear the burden of the tax. q. The legal requirement under Section 171 is abundantly clear that in the event of a benefit of ITC or a reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could obviously be in money terms only. so that the final price payable by a consumer gets reduced. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the consumers under the GST regime. Moreover, it was also clear that the said Section 171 simply does not provide a supplier of any goods or services or any other means of passing on the benefit of ITC or reduction in the rate of tax to the consumers. Thus, the legal position was unambiguous and could be summed up as follows: r. A supplier of goods or services must pass on the benefit of ITC or reduction in the rate of tax to the recipients by way of reducing the prices thereof paid by the recipients, and the law does not offer a supplier of goods and services and flexibility t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects/BBSR/2019-20 dated.13.01.2020, showed the total cost of Flat, Escalation Cost 12% of basic price. Covered Parking, also the interest charged for Covered Parking, etc. of Flat. 6. Copy of the above clarifications dated 31.03.2021 under Rule 133 (2A) of the CGST Rules, 2017 filed by the DGAP were supplied to the Respondent for filing his rejoinder/submissions. The Respondent has filed his rejoinder/submissions dated 10.06.2021 vide which he has reiterated his earlier submissions and has inter-alia stated:- a. That the DGAP had wrongly stated that the Respondent had misconstrued Para 13 of the Report dated 28 January 2021, where DGAP stated that the Respondent had not considered all non-creditable taxes embedded in the cost of the project such as Swachh Bharat Cess ( SBC ) and Value Added Tax ( VAT ), which was now available in the GST regime. b. That the Respondent had procured goods and services for execution of the project and he was fully eligible to claim credit of Service Tax paid on input services in the pre-GST regime. In the GST regime also, there was no restriction on availing ITC of GST paid on services used in the project. Therefore, in as much as credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax on input service was 15% whereas under GST it had become 18% and therefore, suppliers were eligible for higher ITC. However, higher ITC does not mean higher benefit as the supplier was also paying higher taxes. Hence any additional ITC on this count was neutralized with incremental tax payment. iii. It ignores the difference between eligibility and the availment of credit. If any supplier had inadvertently missed taking tax credit in the pre-GST regime resulting in a lower quantum of ITC, he cannot be punished in the GST regime with profiteering. Similarly, who had taken higher tax credit, albeit ineligible credit, cannot be rewarded in the GST regime. A bare comparison of tax credits availed in pre-GST with ITC availed in the GST regime would result in awarding dishonest suppliers and penalizing honest suppliers who inadvertently missed taking eligible credit. It would also result in perpetuating loss as the suppliers have suffered a loss on account of their failure to take the eligible credit in past and were again subjected to pejorative anti-profiteering proceedings as the quantum of ITC in the GST regime would be higher. f. That the DGAP wrongly state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the parent statute provides for the power of sub-delegation. The Respondent has placed reliance on the judgment of the Hon'ble Supreme Court in Barium Chemicals Ltd. Ors. v Respondent Law Board Ors. [AIR 1967 SC 295] in this regard. k. That, while admitting that cost of inputs and input services might be a factor for determination of price, wrongly stated that same was independent of output GST. GST was charged ad valorem and therefore dependent on price and price was dependent on the cost. Thus, the denial of cost adjustment in price was nothing but violative of Article 19 (1)(g) of the Constitution. In as much as cost escalation was concerned, the same had been clarified in para 4.10 above that he had not charged any escalation cost after 2013. 7. The DGAP has also filed his clarifications dated 12.07.2021 on the submissions dated 15.05.2021 filed by Applicant No. 1 and had clarified that the replies of the Applicant No. 1 in these paras were aligned with DGAP's clarification submitted vide letter of even no. dated 31.03.2021. In the present case, there was a cost escalation clause in the agreement entered by the Respondent with the home buyers and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he remained eligible to take ITC of the GST paid on the input services, therefore, there was no benefit of ITC as much as services were concerned. In respect of the above contention of the Respondent, it is relevant to mention here that Section 171 (1) of the CGST Act, 2017 provides 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 to the recipient by way of commensurate reduction in prices. It is clear from the plain reading of the above provision that it mentions reduction in the rate of tax or benefit of ITC which means that if any reduction in the rate of tax is effected by the Central or the State Governments or if a registered supplier avails the benefit of additional ITC, the same has 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, several taxes and duties which were being levied under the State Acts have been subsumed in the GST under the CGST and State GST Act, 2017 on which ITC is now available to the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Respondent has argued that in the absence of a 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 and no action might be taken under Section 171 of the CGST Act read with Rule 126 of the CGST Rules till the mechanism or guidelines were framed for determining the benefit accrued to a consumer on the benefit of ITC. In the absence of the same, there was a lack of transparency and the results could vary from case to case. He has further contended that there was no definition of profiteering provided for under the CGST Act. To support his claim, the Respondent has relied upon the case of Commissioner, Central Excise and Customs, Kerala versus Larsen and Toubro Limited (2016) 1 SCC 170. The Authority finds that, the above contention of the Respondent is without substance as the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and ITC or for computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that any reduction in rate of tax on any supply of goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 period with the ITC available to him in the post-GST period w.e.f. 01.07.2017. Similarly, the benefit of tax reduction would depend upon the pre-rate reduction price of the product and the quantum of reduction in the rate of tax from the date of its notification. Computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product or unit to unit or service to service and hence no fixed mathematical methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a buyer. Similarly, computation of the profiteered amount is also a mathematical exercise that can be done by any person who has elementary knowledge of accounts and mathematics as per the Explanation attached to Section 171. However, to further explain the legislative intent behind the above provision, this Authority has been authorized to determine the 'Procedure and Methodology' which has been done by it vide its Notification da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITC and computation of the profiteered amount. This Authority is under no obligation to provide the same to the Respondent. The Respondent cannot deny the benefit of ITC to his customers on the above ground and enrich himself at the expense of his buyers as Section 171 provides a clear-cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount. Therefore, the Authority finds that the above plea of the Respondent cannot be accepted. Further, concerning the case i.e. Commissioner, Central Excise and Customs, Kerala versus Larsen and Toubro Limited (2016) 1 SCC 170, it is mentioned that the methodology for calculation of benefit of additional ITC has been duly provided under Section 171 of the Act. Hence, the law settled in the cases relied upon by the Respondent is not applicable in the present case. 14. The Respondent has also averred that he had availed ITC of Rs. 13,49,003/- on the goods which were not available in the erstwhile VAT regime, and therefore the benefit of additional ITC arising out of an increase in ITC to the Respondent, which needed to be passed on to the homebuyer was Rs. 13,49,003/- and he is in the process of issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases made by him resulting in a reduction in prices of the materials purchased by him, which should be passed on to the Respondent. Hence, the above contention of the Respondent being incorrect cannot be accepted. 16. The Respondent has further contended that the period between April 2016 to June 2017 considered for computing the percentage of benefit arising out of ITC was without any basis and arbitrary. About the above contention of the Respondent, this Authority finds that the law does not provide for any specific period of investigation and that to arrive at an appropriate assessment of the percentage of ITC availed by the Respondent just before the GST, an adequate period needs to be considered. During the period considered for computation of benefit there was no variation in the rate of tax on services and before that, there were several changes in the rate of Service Tax as well as changes in the conditions for eligibility of availing of CENVAT Credit of Service Tax and Excise Duty including the rate of abatement, etc. which could have resulted in a distorted picture of CENVAT. Thus, the aforesaid period was taken to calculate the average ratio of ITC availed with turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as the number and amount of installments is always fixed in the beginning of the project. The mathematical calculation of additional benefit of ITC is a practice based on the actual figures of the CENVAT/ITC and turnover taken from the Statutory Returns and the data supplied by the Respondent. Hence, the above contention made by the Respondent is based on assumption and cannot be accepted. 19, The Respondent has further argued that while determining the amount of profiteering under section 171 of the CGST Act, direct or indirect increase in cost of production and/or cost of supply must also be considered to protect the fundamental right to carry business as enshrined under Article 19 (1) (g) of the Constitution of India. Ignoring the increased cost of production and/or cost of supply would compel the Respondent to suffer loss and thereby, infringe the fundamental rights guaranteed under Article 19 (1) (g). In this connection, it would be correct to point out that there is no question of increase in cost as the Respondent has already build the escalation in his prices. Neither the DGAP nor this Authority has acted in any way as a price controller or regulator as it doesn' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of his projects since 2013. Hence he has passed on the benefit of additional ITC to his homebuyers by not charging the Escalation Charges from them. In this regard, this Authority finds that the above contention of the Respondent is not true. The Respondent has charged the Escalation Cost from his customers and the same is evident from the Report of the DGAP and the submissions dated 15.05.2021 of Applicant No. 1. The demand letter dated 13.01.2020 issued by the Respondent to the Applicant No. 1 demanding Escalation Cost contradicts the submissions of Respondent that the no Escalation Cost has been demanded after 2013. Hence, the contention of the Respondent being incorrect cannot be accepted. 22. It is clear from a plain reading of Section 171 (1) cited above that it deals with two situations:- one relating to the passing on the benefit of reduction in the rate of tax and the second about 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 whether there was any benefit of ITC with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of the CGST Rules 2017. 26. The details of the amount of benefit of ITC to be passed on by way of refund along with interest @18% to the recipients of supply i.e. homebuyers is as below:- '* :-No amount is indicated in the DGAP's report dated 28.01.2021 (Annexure-10). 27. We also order the profiteered amount of Rs. 1,85,70,263/- along with the interest @ 18% from the date of receiving of such amount from each homebuyer/shop buyer till the date of passing the benefit of ITC by way of refund shall be paid/passed on by the Respondent within a period of 3 months from the date receipt of this Order failing which it shall be recovered as per the provisions of the CGST Act, 2017. 28. It is also evident from the above narration of facts that the Respondent has denied the benefit of ITC to his home buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of above Act. That Section 171 (3A) of the CGST Act, 2017 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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