TMI Blog2022 (6) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... st-GST regime and there was no price history of the residential units sold in the pre-GST regime which could be compared with the Post-GST base price to establish whether there was any profiteering by the Respondent or not as the Respondent neither availed any ITC nor had any turnover in pre-GST regime on Residential dwelling units. The Authority finds and determines that the Respondent has profiteered by an amount of Rs. 42,21,321/- for the project `Signum 36' during the period of investigation i.e. 01.07.2017 to 30.06.2019. The above amount that has been profiteered by the Respondent from his shop buyers/ recipients of supply in the above mentioned 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 payment, in line with the provisions of Rule 133 (3) (b) of the GCST 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 buyers of the shops commensurate with the benefit of ITC received by him. Interest - HELD THAT:- The Respondent is also liable to pay interest as applicable on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 'The Serenas' of the Respondent was launched in the post-GST regime and there was no price history of the residential units sold in the pre-GST regime which could be compared with the post-GST base price to establish whether there was any profiteering by the Respondent or not. However, as per the heading 'Other Current Liabilities' under Note 6 of the Annual Financial Statement of the Respondent for the period 2016-17, it is observed that the Respondent has received an amount of Rs. 16,77,22,611/- as 'Security from Applicants(d)' which is explained as (d) During the Financial Year, the Company has launched Affordable Housing Project by the name style of SERENAS under the Affordable Housing Scheme by Haryana Urban Development Authority Limited. The flats shall be allotted to the applicants by way of a draw of lots which is yet to happen as on 31st March 2017 pending the same, the application money received has been shown as Security from Applicants. Given the above, it is clear that the Respondent has received the above mentioned 'Security Amount' in the pre-GST period and that it relates to the residential units of The Serenas'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was issued by the DGAP on 08.07.2019 to the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the recipients by way of commensurate reduction in price 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 documents in support of his reply. Further, the Respondent was allowed to inspect the non-confidential evidence/information which formed the bases of the said notice, during the period 15.07.2019 to 17.07.2019. The Respondent availed of the said opportunity on 22.07.2019 and inspected the documents. iii. Vide E-mail dated 18.02.2020, Applicant No. 1 was also allowed to inspect on 26.02.2020 or 27.02.2020 the non-confidential documents/reply furnished by the Respondent. However, the Applicant No. 1 did not avail of the said opportunity. iv. The period covered by the current investigation was from 01.07.2017 to 30.06.2019 and the time limit to complete the investigation was extended up to 02.03.2020 by this Authority, vide Order dated 12.12.2019, in terms of Rule 129 (6) of the CGST Rules, 2017. v. The Respondent had submitted to the DGAP that the dwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etail shops in the shopping complex named as Signum-36 within the Group Housing Project. The Respondent submitted that he had received a sum of Rs 4,49,25,897/- during the pre-GST regime as advance token money/underwrite money in respect of commercial units in the commercial complex Signum-36 in the Group Housing Project The Serenas before the start of any construction activities in the project. The Builder Buyer Agreement (BBA) in respect of Commercial Units sold was first executed on 03.11.2017 i.e. during the post GST period. Further, neither tax was levied/recovered under the provisions of Haryana Value Added Tax Act, 2003 nor had he availed any ITC since, there was no transfer of property in goods that had occurred in the pre-GST period consequently 'NIL' Return under the provision of HVAT Act, 2003 was filed. However, Service tax as applicable was payable on a 'receipt basis' and he was claiming credit in respect of service tax paid on various input services received by him, such as Legal, Architecture structure engineers relatable to the commercial units only. Therefore, the Respondent had both CENVAT Credit as well as Turnover in the pre-GST period w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Relevant ITC [(H)= (D)*(G)/(F)] 10,14,123 66,03,221 Ratio of Input Tax Credit Post-GST [(I)=(H)/(E)] 2.26% 5.26% ix. The DGAP has stated that the ITC as mentioned in the `Table A' above as a percentage of the turnover that was available to the Respondent during the pre-GST period (April 2016 to June 2017) was 2.26% whereas, during the post-GST period (July 2017 to June 2019), the percentage was 5.26%. It clearly confirmed that post-GST, the Respondent had benefited from additional input tax credit to the tune of 3.00% [5.26% (-) 2.26%] of the turnover. Accordingly, the profiteering had been examined by comparing the applicable tax rate and input tax credit available in the pre-GST period (April 2016 to June 2017) when Service Tax @4.50% was payable with the post-GST period (July 2017 to June 2019) when the effective GST rate was 12% (GST @18% along 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- B ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recipients. xi. DGAP has further stated that based on the aforesaid CENVAT/ITC availability in the pre and post-GST periods and the details of the amount raised/collected by the Respondent from the other shop buyers during the period 01.07.2017 to 30.06.2019, the Respondent had benefited by an additional amount of ITC of Rs. 42,21,321/- which included GST @12% on the base profiteered amount of Rs. 37,69,037/-. The buyer wise/ unit-wise break-up of that amount has been provided by the DGAP in Annexure-16 of his report. The DGAP has also submitted that the above-mentioned amount did not include any benefit of ITC to be passed on to Applicant No. 1 as the provisions of Section 171 of the CGST Act, 2017 were not attracted in the case of buyers of residential units, including the Applicant No.1. 3. The Authority after considering the various submissions made by the Respondent, Applicants the DGAP report, vide its Internal Order No. 28/2020 dated 27.11.2020, referred the matter back to the DGAP to reinvestigate the matter as per the provision of Rule 133(4) of CGST 2017. 4. Accordingly, the DGAP has carried out necessary re-investigation and on conclusion of the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed application form along with 5% amount of the total cost of the flat. The Applicant would be required to deposit additional 20% amount of the total cost of the flat at the time of allotment of flat. The balance 75% amount would be recovered in six equated six monthly instalments spread over three-year period. c) Scrutiny of all applications received, by the Respondent under overall monitoring of concerned District Town Planner (DTP) within 3 months from the last date of receipt of applications as indicated in the advertisement. d) On completion of scrutiny as above, the concerned Senior Town Planner shall fix the date of draw of lots. Simultaneously the ineligible applicants shall be so intimated and his 5% booking amount shall be refunded. No interest in such cases shall be paid. e) After fixation of date of draw of lot, advertisement to be issued informing date/time and venue of the draw of lot. f) The Allotment of flats shall be done through draw of lots in the presence of a committee consisting Deputy Commissioner or his representative, Senior Town Planner (Circle office), DTP and the representative of Respondent concerned. g) Only such appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o would then sign an agreement to confirm the services to be provided by the Respondent. At the time of receiving such application money, Respondent was not engaged in making or providing any services. Only after the draw of lots followed by signing of agreement, services could be provided. The application money was merely a security deposit given by the applicant to confirm his willingness to enter in an agreement with the Respondent, if successful in the draw of lots. Thus, amount received from applicants as application money/security deposit cannot be treated as consideration received towards supply of any service and accordingly the same cannot form part of the term Turnover for the purpose of Service Tax. v. The DGAP referred to various statutory provisions and concluded that the taxable event in GST was supply of goods of services or both. The term 'supply' was inclusive in nature which could be understood in terms of following parameters namely: - Supply of goods or services. Supply of anything other than goods or services does not attract GST. Supply should be made for a consideration. Supply should be made in the course or furtherance of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant saleable area (which was also not known at the time of application as flats were not allotted) would exceed the total saleable area of the impugned project as the project consists of only 1304 residential units. Therefore, while computing the relevant CENVAT/ITC, keeping saleable area to 1700 buyer as numerator and total saleable was of 1304 buyers as dominator would give inappropriate result and would be erroneous and non-comparable. vi. The DGAP has also stated that the in respect to Authority's another observation that there was a common ITC Ledger and other connected records for the residential and commercial units of 'The Serenas' and `Signum 36' and separate details were not available, it was submitted that Respondent had submitted details of turnover as well as invoice-wise CENVAT/Input Tax Credit vide his letter dated 02.03.2020. The summary was given in table-'C' below: Table-'C' S.No. Project Particular Turnover CENVAT/ITC Remark 1 'The Serenas' (Residen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.2017 First Builder Buyer Agreement entered b/w Respondent and the home buyer. viii. As per the DGAP Report, in the present case, the following events were the determining factors in furnishing the Report dated 19.03.2020: a. Allotment of dwelling unit was made on 20.07.2017. b. Builder Buyer Agreement containing the allotment terms was entered on 18.09.2017. c. Contract for construction of the project was executed on 31.08.2017. d. Neither there was any turnover (as security deposit cannot be termed as 'turnover') nor was any CENVAT Credit/ITC availed by the Respondent in pre-GST regime. e. In view of the above, it was construed that there was no price history of the residential units sold in pre-GST regime which could be compared with the Post-GST base price to establish whether there was any profiteering by the Respondent or not, as Respondent neither availed any ITC nor had any turnover in pre-GST regime on Residential dwelling units and the Report dated 19.03.2020 was furnished accordingly. ix. Further, it was reported with regard to the computation of profiteering in Commercial Project Signum-36 , as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od, for residential project also comes under the definition of Goods and Services as the same was received on the basis of agreed-supply of Goods/ Services in due course of time. 6. Supplementary report was sought from the DGAP on the above submissions of the Applicant No. 1 under Rule 133 (2A) of the CGST Rules, 2017. The DGAP has filed his supplementary report dated 24.03.2021 as under :- i. The contention of Applicant No.1 that, it had not been investigated that how much total GST had been collected from the customers, how much ITC had been availed and how much amount had been deposited to Govt. accounts , had already been replied in para 2.1 of DGAP Letter's of even No. 3700 dated 23.07.2020 which reads as under:- Vide Minutes of meeting dated 15.05.2019 (received in this office on 28.06.2019) the Standing Committee on Anti-profiteering referred an Application dated 12.04.2019 filed by the Applicant against M/s. Sternal Buildcon Pvt. Ltd. (GSTIN: 06AAOCS0457N1ZU) (Hereinafter referred to as the Noticee ) for the unit bought in the Noticee's project The Serenas The Applicant enclosed the copies of Allotment letter, Demand letter cum statement of Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover as well as invoice-wise CENVAT/Input Tax Credit vide their letter dated 02.03.2020 (Annex-12 to this office Report dated 19.03.2020). The Summary is given in Table below: Table S.No. Project Particular Turnover CENVAT/ITC Remark 1 'The Serenas' (Residential) 01.04.2016 to 30.06.2017 (Pre-GST) Nil Nil Cross checked with ST-3/VAT Returns and Assessment Order. 2 01.07.2017 to 30.06.2019 (Post-GST) 1,64,77,88,150 15,32,01,400 Reconciled with GSTR-3B 3 `Signum-36' (Commercial) 01.04.2016 to 30.06.2017 (Pre-GST) 4,49,25,897 28,62,077 Reconciled with ST-3 return 4 01.07.2017 to 30.06.2019 (Post-GST) 12,56,34,568 69,06,757 Reconciled with GSTR-3B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the draw of lots, which was held in post-GST period. Whereas, the impugned project The Serenas consists of only 1,304 residential units available for draw of lots rest un-successful buyers were to be refunded all the security deposit, without any interest. The question that now arises is that whether the security deposit of Rs. 16,77,22,611/- received as application money, as on 31.03.2017 for participation of draw of lot to be held on 20.07.2017 (post-GST) is to fall under the definition of services in the pre-GST regime? For clarity, reference is made to Section 668 of the Finance Act, 1994 which reads as: 66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen percent on the value of services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. The definition of term 'Service' has been engrafted under Section 65B (44) of Finance Act, 1994 as any activity carried out for another for a consideration . The relevant extract of the said definition has been reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he phrase 'consideration' has not been defined in the Act. What is, therefore, the meaning of 'consideration'? As per Explanation (a) to section 67 of the Act consideration includes any amount that is payable for the taxable services provided or to be provided. Since this definition is inclusive it will not be out of place to refer to the definition of 'consideration' as given in section 2 (d) of the Indian Contract Act, 1872 as follows: When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise In simple terms, consideration means everything received or recoverable in return for a provision of service which includes monetary payment and any consideration of non-monetary nature or deferred consideration as well as recharges between establishments located in a non-taxable territory on one hand and taxable territory on the other hand. 8.6 Rule 6 of Service Tax Valuation Rules which deals with specific situation where certain commission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g such application money. Noticee was obliged to conduct draw of lots, to select successful applicants who will then sign an agreement to confirm the services to be provided by the Noticee. At the time of receiving such application money, Noticee was not engaged in making or providing any services. Only after the draw of lots followed by signing of agreement, services can be provided. The application money is merely a security deposit given by the applicant to confirm his willingness to enter in an agreement with the Noticee, if successful in the draw of lots. Thus, amount received from applicants as application money/security deposit cannot be treated as consideration received towards supply of any service and accordingly the same cannot form part of the term Turnover . 7. Reference is also made to the provisions of Section 2(112) of the Central Goods and Services Tax Act, 2017 which defines the term Turnover as: (112) turnover in State' or 'turnover in Union territory' means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply should be made in the course or furtherance of business. 4. Supply should be made by a taxable person. 5. Supply should be a taxable supply. Besides above parameters, GST Laws have provided certain exceptions to the requirement of supply being made for consideration and in the course of furtherance of business. Therefore, it is important to find whether the security deposit (application money) taken from the prospective buyers on account of application against allotment of flat, if any, constitute consideration vis a vis any supply under the provisions of CGST Act. Section 2(31) defines the term consideration as above which is inclusive and the consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition, it is clear that there should be a close nexus between the payment and supply and thus any payment/exchange/barter etc. would be treated as consideration for supply and liable to GST. However, any deposit given in respect of the prospective supply shall not be considered as payment made for such supply unless the suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 171 should not be fixed. The Respondent was directed to file written submissions which have been filed on 16.02.2021 in which the Respondent has requested to conclude the proceeding on the basis of comprehensive written submission filed by it on 28.09.2020. 11. On perusal of the records and the Reports of the DGAP, the Authority finds that the Anti-profiteering provisions do not apply to the project The Serenas , since the draw for the selection of the allottees, the allotments, the Builder-Buyer agreements, and construction activities were executed in the GST period only. The Respondent entered into an agreement with the Contractor for the construction of Residential Units on 31.08.2017 after which construction activities started on 10.091017. Further the Respondent held the draw on 20.07.2017. Post draw, the first Builder-Buyer agreement was entered into on 18.09.2017. Therefore, the Residential project The Serenas was launched in the post-GST regime and there was no price history of the residential units sold in the pre-GST regime which could be compared with the Post-GST base price to establish whether there was any profiteering by the Respondent or not as the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion therein as supported by Tables 'C' and 'D' therein. 15. With regards to the computation of profiteering in Commercial Project Signum-36 , the Authority has examined Annexure 16 of the DGAP Report dated 19.03.2020 and finds that the shops/units in the commercial complex were assigned to the various buyers prior to 1.07.2017 and demands of varying amounts were made from such buyers and consideration received. Such amounts have been correctly considered as turnover by the DGAP in his Reports and profiteered amount has been correctly determined therein. The Authority finds no reason to disagree with such calculation of profiteered amount or the method of calculation adopted by the DGAP as has been detailed at paragraph 2 (viii) to 2 (xi) above and Tables 'A' and 'B' therein. 16. The Authority finds that, though there was a single license on the same piece of land for the residential as well as the commercial area under Affordable Residential Housing Policy, as per the details in the DGAP's Report dated 30.12.2020, the Respondent had submitted details of turnover as well as invoice-wise CENVAT/Input Tax Credit vide his letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the shop buyers/ recipients of supply. The DGAP has calculated the amount of ITC benefit to be passed on to all the shop buyers/ recipients of supply as Rs. 42,21,321/- for the project 'Signum 36'. 19. In view of the above discussions, the Authority finds and determines that the Respondent has profiteered by an amount of Rs. 42,21,321/- for the project `Signum 36' during the period of investigation i.e. 01.07.2017 to 30.06.2019. The above amount that has been profiteered by the Respondent from his shop buyers/ recipients of supply in the above mentioned 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 payment, in line with the provisions of Rule 133 (3) (b) of the GCST Rules 2017. 20. 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 buyers of the shops commensurate with the benefit of ITC received by him as has been detailed above. 21. The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 42,21,321/-, for the project ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Sternal Buildcon Pvt. Ltd., Project-`Signum 36', Location- Sector 17, Sohna, Gurugram-122002, Haryana and amount of profiteering of Rs. 42,21,321/- so that the concerned recipients of supply/shop buyers can claim the benefit of ITC if not passed on. Such recipients of supply/shop buyers 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. 26. 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 receipt of this Order. 27. Further, the Hon'ble Supreme Court, vide its Order dated 23.03.2020 in Suo Moto Writ Petition (C) no. 3/2020 , while taking suo-moto cognizance of the situation arising on account of Covid-19 pandemic, has extended the period of limitation prescribed under general law of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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