TMI Blog2022 (7) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... of GST @ 12%/ 8% on the base price) as is evident from the above Report dated 28 08.2020. Hence, the Authority holds that the provisions of Section 171 (1) of the CGAT Act, 2017 have been contravened by the Respondent. The Respondent has realized an additional amount of Rs.34,418/- each from Applicant no, 1, 2 3. Rs.36,120/- from the Applicant no. 4. Rs.27,510/- each from Applicant no. 5, 7, 8, 9. 10, 11. 12,15. Rs.36.120/from the Applicant no. 6, Rs.48,029/- from the Applicant no. 13, Rs.70.068/from the Applicant no. 14. and Rs.71,868/-from the Applicant no. 16 and an additional amount of Rs.2,80,46,934/- from 772 flat buyers other than the above Applicants. The details of the amount of benefit of ITC passed on - These buyers are identifiable as per the documents placed on record. Therefore, the Respondent is directed to pass on an amount of Rs.34,418/- each to Applicant No. 1, 2 3, Rs.36,120/- to the Applicant No. 4, Rs.27.510/- each to Applicant No. 5, 7, 8. 9, 10. 11. 12.15, Rs.36,120/to the Applicant No, 6, Rs.48,029/- to the Applicant No. 13. Rs.70.068/- to the Applicant No. 14, and Rs.71,868/- to the Applicant No. 16 and Rs.2,80,46,934/- to the other 772 home buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee on Anti-profiteering. under Rule 128 of the Rules 2017, wherein it prima facie observed that Section 171 Of the Central Goods and Services Tax Act, 2017 had been contravened. 2. The DGAP had issued a Notice dated 12.09.2018 under Rule 129 of the CGST Rules 2017, calling upon the Respondent to reply as to whether he admitted that the benefit of input tax credit had not been passed on to the Applicant No. 1 and Applicant No, 2 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. 3. Later on, 14 (fourteen) more applications filed by Sh. Rohit Choudhary (application dated 18.07.2018), Sh. Narendra Pal Singh (application dated 21.10.2018), Sh. Gaurav Kumar Singla (application dated 20.09.2018), Ms Neelu Jain (application dated 20.09.2018). Sh. Arvind Mahto (application dated 20.09.2018), Sh, Sidharth Shanker Rai (Application dated 21.09.2018), Sh. Deepak Murthy (application dated 2109.2018), Sh. Pradeep Rawat (application dated 2209.2018), Ms. Sonal Kansai (application dated 29.092018), Sh. Rahul Sharma (application dated 03.102018). Ms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the profiteering in respect of the remaining 12 units should be calculated when the consideration was received in the post-GST period. by taking into account the proportionate ITC in respect of these 12 units. It was also noted that since the construction service was being provided by the Respondent under affordable housing, which was exempted from the Service Tax in terms of Notification No. 25/2012 ST dated 20.06.2012 as amended vide Notification No. 09/2016-ST dated 01.03.2016, the Respondent was not eligible to avail Cenvat Credit on Service Tax and Central Excise Duty paid on input services, inputs. and capital goods. Moreover. as the Respondent was paying VAT @ 1% under the Haryana VAT composition Scheme, hence he was not eligible for availing of Credit of VAT paid on inputs. whereas, in the post-GST period, the Respondent was eligible to avail of Input Tax Credit (ITC) on GST paid on inputs. capital goods and input services including those paid by sub contractors. Consequently. the Respondent had benefited from additional ITC @ 7.13% of the turnover during the period from 01.07.2017 to 31.08.2018 (i.e. the investigation period), Which amounted to the tune of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed his replies vide letters/e-mails dated 15.01.2020. 04.02.2020, 06.02.2020, 26.02.2020. 0203.2020, and 03.03.2020 wherein he has provided the following documents/information: i. List of home-buyers. ii. Month-wise details of Demand Raised. iii. Reconciliation of demands with GST returns. iv. Copies of GSTR from July 2017 to November 2019. v. Summary of ITC availed which was not available earlier. vi. Details of tax paid on purchases of Cement. Steel. and other items in pre-GST and post-GST period. vii. Details of Contractor and taxes paid to them in pre-GST and post-GST period. viii. Details of GST benefits passed on to the Home-buyers through Credit Notes. ix. Copies of invoices of Cement, Steel, and Contractors in pre-GST and post-GST periods. 10. The issues raised by Respondent were summed up by the DGAP as given below:- (a) The Respondent received O.C. for the project on 04.12.2019. (b) The Respondent opted for the 1% GST scheme as provided vide Notification No. 03/2019 central Tax (Rate) dated 29.03.2019 and he has taken the Input Tax Credit up to January 2019 only and in the month of February and March 2019 has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of all the items of goods and services which he was getting in the pre-GST and Post-GST periods along With the rate of taxes that he was paying in the Pre-GST and Post-GST periods. The summary of the maximum ITC benefit that he was not getting earlier and which he was getting now is reproduced hereunder:- Therefore. even if he was required to pass on the benefit. the maximum amount would have been Rs. 2,19,63.251/- as calculated above. (e) The Respondent furnished a table explaining the ITC benefit which was not available earlier and has now become available in the GST regime. Particular Amount in Rs. Total Amount of ITC Claimed by the company during the period 1 st July to 31 st August 2018 4,77,91,565.00 Total Amount of Excess GST paid to the supplier in Post GST Regime (which is not a benefit to be passed). It is the extra amount that has been paid to the supplies. 2,58,28,314.00 Total Amount if ITC benefit which was not available to the Respondent earlier and which has been now been available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the home-buyers and the details Of the credit notes issued by the Respondent to his homebuyers as evidence Of the passage of ITC benefit d) That the Respondent has obtained the Occupancy Certificate for the Project on 04.12.2019. 12. The DGAP has also reported that as per the Respondent's submissions that under the same registration there were two projects in the period covered under investigation and in light of Notification No. 03/2019-CentraI Tax (Rate) dated 29.03.2019 he had opted for the 1% GST scheme for affordable housing. The second project Zara Awas-2 had been registered With RERA on 01.04.2019. So. the second project was outside the purview of Anti-profiteering provisions as it was launched not only after the introduction of GST but also there is no benefit of Input Tax Credit in this project. 13. The DGAP has reported that para 5 of Schedule-III of the Central Goods and Services Tax Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) reads as Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of budding Further. clause (b) of Paragraph 5 of Schedule II of the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this Authority that he was a law-abiding citizen and has passed on the benefit to his home-buyers even in the absence of the DGAP's report and to substantiate his claim. he submitted sample copies of invoices raised to his customers, wherein no GST was Charged in the 7th installment as raised from his home-buyers, The sample invoices were found to be in order; however the DGAP could not incorporate them as the period covered under the impugned Report of DGAP covered the period only up to August 2018. 15. The DGAP has further reported that in the pre-GST era, since the service of construction of affordable housing, provided by the Respondent, was exempt from Service Tax, as per Notification No. 25/2012-ST dated 20.06.2012, as amended by Notification No. 9/2016-ST dated 01.03.2016, he was not eligible to avail credit of Central Excise Duty paid on inputs/capital goods or Service Tax paid on input services. Further. since the Respondent was paying VAT under Haryana VAT Composition Scheme @ 1%, he was not eligible to avail credit of VAT paid on inputs, whereas in the post-GST period, he was eligible to avail input tax credit of GST paid on inputs and input services including o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 6.55% of the turnover should have resulted in a commensurate reduction in the base price as well as cum-tax-prices. Therefore. in terms of Section 171 of the Central Goods and Services Tax Act, 2017, the benefit of the aforesaid additional input tax credit that has accrued to the Respondent, is required to be passed on to the recipients. 19. The DGAP has further submitted that the Respondent during the course of hearing before this Authority, vide submission dated 25.07.2019 had stated that he had passed on the benefit of input tax credit to the home-buyers by way of issuing Credit Notes and not charging GST from his customers in their last demand raised in October 2019. He submitted details of Credit Notes to the tune of Rs. 1,95,09,694/-, issued to 797 home-buyers. However, on perusal of the data, the DGAP has noticed that out of these 797 home-buyers. 9 buyers have cancelled their booking, and hence they had been excluded. also, no details of benefit passed on to 16 Other home-buyers could be found. Accordingly, the total quantum of benefit passed on to the home-buyers was found to be Rs.1,88,56,367/- to 772 home-buyers. The benefit so passed on in the form of credit notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the profiteering calculation. Those units where the booking was done in the pre-GST period or demands were raised in the post-GST period but they have been consequently cancelled and have been excluded from the calculation of profiteering. The Respondent had provided a list of such units and demands raised from them. Therefore, the above computation of profiteering was with respect to those fiats only where demands had been raised or payments had been received in the post-GST period, and which were not cancelled as of 31.03.2019. If the input tax credit in respect of the unsold flats from whom no consideration has been received is taken into account to calculate profiteering in respect of the flats where payments have been received post GST, the input tax credit as a percentage of turnover would be distorted and erroneous. 23. In view of the above discussion, the DGAP has concluded the benefit of additional input tax credit to the tune of 6.55% of the turnover, accrued to the Respondent post-GST, and the same was required to be passed on to the Applicants and Other recipients during the period 1.07.2017 to 31.03.2019. Such ITC amounted to Rs.4,74,88,840/-. On verification it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary, the prices of inputs and services have increased while the prices Of works contact remained unchanged since the Pre-GST period. In respect of the benefit of ITC though the (d) the only benefit that accrued to him was on account of Excise Duty/ Works Contract Tax/ Service Tax for which he was not eligible for the credit but which has now been made available to him Post-GST. (e) based on his estimation. he had passed on the benefit to his homebuyer customers and he agrees to pass the balance credit, if any, based on actual working in line with Section 171 of the CGST Act. (f) the DGAP computation was much more than the actual benefit that had accrued to him since it has been worked out on basis of the proportionate demands raised by him, That the methodology adopted by DGAP is arbitrary as it completely ignores the actual working of goods and services utilized by him in the Pre-GST and Post-GST periods. (g) the DGAP in his Report dated 28 th August 2020 has improperly and baselessly computed the profiteered amount. completely ignoring his submissions without considering the details of actual rates of tax of various items/ inputs provided by him. Based on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DGAP has ignored the fact that the tax on inputs used for construction and services of the contractor under works contract also increased when GST was introduced as is evident from the table below:- Input Excise Duty VAT(CST)/Service Tax/WCT GST % increase Steel 12.50% 5%(VAT)2%(CST) 18% 3% Cement 12.50% 5%(VAT)2%(CST) 28% 60% Construction Services - 5.25%(WCT) 18% 242% Other Items - 5% Approx. 18/28% 400% (k) the DGAP ought to have considered the following data while making the computation:- (I) therefore, accordingly the maximum amount that he could have been required to pass on as ITC benefit works out to be Rs. 2,19.63,251/-, as calculated above. based on the understanding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The submissions of Applicant No. 1, Applicant No. 2, and the Respondent were forwarded to the DGAP to file his clarifications under Rule 133(2A) of the CGST Rules 2017. Accordingly, the DGAP vide his supplementary Report dated 18.11.2020 has filed his clarifications on the issues raised by the above Applicants and Respondent as follows:- (i). With respect to the submission of Applicant No. 2, the DGAP has clarified that the benefit of ITC on construction service is not available to the Respondent after the date of OC. However, he may avail ITC on Goods and Services required for his maintenance service. The computation of profiteering is limited to the issuance of the Completion/ Occupation Certificate and therefore the contention of the Applicant appears to be incorrect. (ii). The DGP has further stated that the Respondent opted for the scheme, which was available to him as per the provisions of GST law and there is no provision in Section 171 of the CGST Act, 2017 to issue such directions to any registered person. Hence, it appears that the contention of the Applicant no. 2 is not as per Section 171 of the CGST Act, 2017. (iii). With respect to the submission d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as available to the Respondent for provisioning of output service before implementation of GST whereas Input Tax Credit was available for all goods and services to the Respondent post-GST implementation, so the additional benefit of Input Tax Credit available to the Respondent has to be passed on to the Home-buyers. (d). on the Respondent's contentions that ITC of VAT in the pre-GST period should be allowed, the DGAP has submitted that the Notice of initiation of Investigation under Rule 129 of CGST Rules, 2017 was issued on 12.09.2018 and in response. the Respondent informed that there was no VAT input credit availed by him and the raw material was purchased against 'Form-C'. However, he did not submit any VAT details or returns in this regard. After the issuance of the Investigation report dated 27.02.2019 the Respondent vide letter dated 17.05.2019 submitted that as per the Government of Haryana VAT policy, no VAT was charged from homebuyers. The Respondent had categorically submitted that he had opted for the Composition Scheme of 1% VAT in Haryana VAT for his project and these facts were also reported in the Report dated 28.08.2020 under Rule 133(4) of CGST Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard, he has quoted the judgment of the Hon'ble Supreme Court in the case of S.P. Sampath Kumar v. Union of India. (1987) 1 SCC 124 and Madras Bar Association v. Union of India. (2014) 10 SCC 1 wherein it has been observed that matters requiring decision making on substantive questions of law and its interpretation must necessarily be adjudicated upon by judicial members. Further, the Madras High Court has recently. in its Order dated 20.09.2019 in the case of Revenue Bar Association V. union of India, W.P. Nos. 21147,21148 and 14919 of 2018. has struck down Sections 109 (3) and 109 (9) of the Central Goods and Service Tax Act, 2017 which prescribed that the GST Appellate Tribunal shall consist of one judicial member and two Technical Members. Given the above, it is humbly submitted that the composition of this Authority is bad in law and unsustainable. (b). he has also claimed that Section 171 of the CGST Act is ultra vires of Article 246A of the Constitution of India. Article 246A according to which the GST is being levied under the CGST Act only provides for legislation concerning goods and services tax on supply of goods or services or both therefore. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the rule-making power under Section 164 of the CGST Act has been conferred only on the Central Government and the said provision does not empower the Central Government Ito further delegate the same to any other person/authority. Further, Section 171 of the CGST Act also does not authorize any rules to be framed by this Authority or DGAP. Section 171 (3) of the CGST Act stipulates that the NAA shall exercise such powers and discharge such functions as may be prescribed in the CGST Rules. Given this, the CGST Rules themselves should have indicated the methodology and manner for the determination of profiteering. In the absence of any such authority under the CGST Act, Rule of the CGST Rules cannot sub-delegate the power to determine the methodology and procedure for the determination of profiteering under Section 171 of the CGST Act Insofar as Rule 126 of the CGST Rules empowers the NAA to sub-delegate to itself the powers to determine the methodology and procedure for determination of profiteering under Section 171 of the CGST Act, the same is beyond the scope of Section 171 read with Section 164 of the CGST Act Therefore, Rule 126 of the CGST Rules is unconstitutional for bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is not the intent of the legislation. It is well settled that the right to reasonable profit is a part of the right to trade and any methodology prescribed under Section 171 of the CGST Act cannot be dehors a reasonable profit that may be earned or costs incurred by an enterprise. He has also submitted that the term 'profiteering' has been defined in Black's Law Dictionary, which was relied upon by the Hon'ble Supreme Court in the case of Islamic Academy of Education v. the State of Karnataka, (2003) 6 SCC 697,774 as taking advantage of unusual or exceptional circumstances to make excessive profits . He has contended that the DGAP has acted in a narrow and arbitrary manner by ignoring the relevant considerations hence the DGAP's report is liable to be set aside. (f). he has also contended that the DGAP has erred in including the amount of excess GST collected on the alleged profiteering amount collected from the customers in the total amount of alleged profiteering liability and without prejudice to the submission that the provisions of Section 171 of the CGST Act have not been contravened. it is submitted that any amount of GST collected by him has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST benefit to his customers (h). he has further claimed that Section 171 of the CGST Act, 2017 provided that any reduction in the rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices and section 171(2) provided that this authority was required to examine whether ITC availed by the registered person or reduction in the rate of tax has actually resulted in a commensurate reduction in the price, however, the above Act was silent on the modus operandi to be adopted for the computation of the benefit, the methodology to be adopted and timing of passing on the said benefit The legislature intended to provide rules concerning the computation of benefit accruing on account of transitioning into the GST regime however. there was no mechanism in place to compute the commensurate reduction in prices as there was no methodology for determining the meaning of the term commensurate reduction in prices , Further. the CGST Act did not provide any time frame within which such commensurate reduction in prices was to be passed on and Rule 122 to 137 of the above Rues also did not provide any methodolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal amount to the customers based on the actual amount of benefit for which complete details were provided to DGAP. He has also referred to the Press Release No. F. No. 296/07/2017-CX.9 dated 15 June 2017 which reads as below:- (a). Central Excise duty is payable on most construction material @12.5%. It is higher in the case of cement. In addition, VAT is also payable on construction material from @12.5% to 14.5% in most States. In addition, construction material also presently suffers Entry Tax levied by the States. Input Tax Credit of the above taxes is not currently allowed for payment of Service Tax. The credit of these taxes is also not available for payment of VAT on construction of flats etc. under the composition scheme. Thus. there is cascading of input taxes on constructed flats, etc, (b). as a result; the incidence of Central Excise duty, VAT, Entry/ Tax, etc. on construction material is also currently borne by the builders, which they pass on to the customers as part of the price charged from them. This is not Visible to the customer as it forms a part of the cost of the flat. (c). this will change under GST. Under GST, full input credit would be availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts on the transition to the GST in respect of the taxes which were not available as credit under the pre-GST regime however, the taxes paid on services were available as credit even under the erstwhile regime and the price was accordingly determined hence, such taxes should not be considered for computing the benefit. Any increase in the rate of tax could not be considered for the computation of profiteering. The supplies in respect of which the credit was available even under the erstwhile regime, any incremental increase in the credit due to an increase in the rate of tax could not be considered as part of the benefit. He submitted that the ratio of CENVAT ITC to turnover considered by the DGAP had completely ignored the above fact and hence it should not be accepted. The methodology adopted by the DGAP to determine the profiteered amount for the period up to 31.03.2019 without taking into account the increase in the rate of tax was incorrect and if the above increase in the rate of tax was considered the ratio of benefit would be reduced to 2.85 % as opposed to 6.55%. (j). he has further submitted that as per Section 171 (1) of the CGST Act 2017: 'Any reduction in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customers. Therefore. there will be a double toss to the Respondent, which was never the intent of the legislature. Therefore. the computation done by DGAP based on an absurd formula. When actual figures are available, cannot be accepted. He has requested to check the actual working of benefit as the project has already been completed and all the details are available with DGAP. 32. The above said submissions dated 06.02.2021 of the Respondent were forwarded to the DGAP for clarifications on the following issues; (i). the total ITC available to the Respondent from July 2017 to Jan. 2019 has been shown as Rs.4,77,91,565/- in para 13 (viii) of the DGAP report dated 28.08.2020; whereas in Table A of his report, the same amount has been Shown as total ITC for the period July 2017 to March 2019. Whether the Respondent had availed ITC for the month of Feb. 2019 and March 2019 ? (ii). whether the Respondent has reversed the credit in respect of 27 units that were booked after he has opted for the 1% GST scheme w.e.f. 01,04.2019 is mentioned in para 27 of the report dated 28.08.2020 ? 33. Accordingly the DGAP vide his supplementary Report dated 16.02.2021 and 18.04 2021 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt by way of commensurate reduction in prices In other words, every recipient of goods or services has to get the benefit from the supplier, and hence, this benefit has to be calculated for each product supplied- Further, he has stated that the legislature had delegated the task of prescribing the powers and functions of the Authority to the Central Government as per Section 171 of the CGST Act, 2017 read with Section 2(87) of the Act. on the recommendation of the GST Council, which is a Constitutional Federal body created under the 101 st Amendment of the Constitution Which has formulated and notified Rules 127 and 133 which prescribe the functions and powers of the Authority. Both the above Rules have been framed under Section 164 of the CGST Act, 2017 which also has the sanction of the Parliament and the State Legislatures. It shows that the delegated power to prescribe powers and functions given under Section 171 (3) has been duly exercised by the Central Government by formulating the above Rules, on the recommendation of the GST Council. Therefore, this Authority may exercise such powers as have been prescribed under the CGST Rules, 2017. Since the functions and powers to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer is entitled to receive the benefit of tax reduction on each product purchased by him. The word commensurate mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product based on the tax reduction as well as the existing base price (price without GST) of the product The computation of commensurate reduction in prices is purely a mathematical exercise that is based upon the above parameters, hence it would vary from product to product, hence no fixed mathematical methodology can be prescribed to determine the amount of benefit that a supplier is required to pass on to a recipient the profiteered amount. However, to give further clarifications and to elaborate upon this legislative intent behind the law. this Authority has been empowered to determine/expand the Procedure and Methodology in detail. He has further stated that one formula which fits all cannot be set While determining such a Methodology and Procedure as the facts of each case are different. In one real estate project, the date of start and completion of the project, price of the house / commercial unit. mode o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt delegation is excessive Since the functions and powers to be exercised by this Authority have been approved by competent bodies. the same is legal and binding on the Respondent (g). On the contention of the Respondent made at para 31 (e) supra, the DGAP has submitted that the contentions of the Respondent made in the said para are incorrect. He has also stated that the provisions of Section 171 are abundantly clear, complete, and concise in this regard and hence there is no ambiguity in their interpretation and there is no requirement for one-to-one identification of procurement of Goods and Services. Further, on the contention of the Respondent that Profiteering' has not been defined in the CGST Act or the Rules therefore. he has Cited the definitions of Profiteering from the Black's Law Dictionary in his support. the DGAP has submitted that the word profiteered has been duly defined in the Explanation attached to Section 171 of the above Act as under:- Explanation : For the purposes of this section, the expression profiteered shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is silent on the modus operandi to be adopted for the computation of commensurate benefit. the methodology to be adopted and timing of passing on the said benefit, the DGAP has submitted that there is no need to define the word 'commensurate' as its literal meaning carries the essence of the law. as has been given in Section 171 of the CGST Act, 2017 Rules made there under. (k). On the contention of the Respondent made at para 31 (i) supra, the DGAP has submitted that the methodology adopted by DGAP is correct and strictly as per the law enshrined in Section 171 of the CGST Act The methodology has been consistently adopted by DGAP and upheld by this Authority in all similar cases. The DGAP has further stated that to quantify the benefit of the input tax credit, it is necessary to quantify the credits available to the Respondent in the pre-GST regime and also the credits available in the GST regime. In the erstwhile pre-GST regime, various taxes and cesses were being levied by the Central Government and the State Governments, which got subsumed in the GST. Out of these taxes. the input tax credit (ITC) of some taxes was not being allowed in the erstwhile tax regime, F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively had alleged that the Respondent was not passing on the benefit of ITC to them on the purchase of flats in the Zara Avaas Project being executed by the Respondent in Gurugram, Haryana. These complaints were examined by the Haryana State Screening Committee on Anti-profiteering in its meeting held on 20.06.2018 and were referred to the Standing Committee on Anti-Profiteering. These complaints were examined by the Standing Committee on Anti-Profiteering in its meeting held on 07.08.2018 08.08.2018 and forwarded to the DGAP recommending a detailed investigation, who vide his investigation Report dated 27.02.2019 furnished to this Authority had stated that the Respondent had obtained the additional benefit of ITC to the extent of 7.13% of the taxable turnover, which he had not passed on to his buyers and he had thus profiteered an amount of RE (inclusive of GST) in violation of the provisions of Section 171 of the CGST Act, 2017. However, due to the objections raised by the Respondent on the above-said Report of the DGAP as well as the discrepancies found in the Report. the DGAP was directed to reinvestigate the above complaint under Rule 133 (4) Of the above Rules vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Respondent has already passed on ITC benefit of Rs.1,88,56,367/- by way of Credit Notes. Consequently, the DGAP vide his Report dated 28.08.2020, has observed that the Respondent has realized an additional amount to the tune of Rs. 34,418/- each from Applicant no. 1, 2 3, Rs, 36,120/- from Applicant no. 4, Rs. 27,510/- each from Applicant no. 5. 7, 8. 9. 10, 11, 12,15. Rs. 36,120/-from Applicant no. 6, Rs. 48,029/from Applicant no. 13, Rs. 70,068/- from Applicant no. 14, and Rs. 71,868/from Applicant no, 16 and an amount of Rs.2,80,46,938/- from 772 other recipients who are not Applicants in the present proceedings. This has been detailed in Table B and paragraph 23 above, 39. Therefore, the DGAP has computed the ratio of CENVAT as a percentage of the turnover for the pre-GST period and compared it with the ratio of ITC to the turnover for the post-GST period, and then computed the percentage of the benefit of additional ITC which the Respondent is required to pass on to the flat buyers. The above ratios have been computed by the DGAP based on the data/details provided by the Respondent and have been duly verified from his Service Tax and GST Returns filed by the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails benefit of additional ITC as a result of coming in to force of the GST 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. Further, the computation of the profiteered amount is an easy mathematical exercise that can be done by any person who has knowledge of accounts. 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 dated 28.03.2018 under Rule 126 of the CGST Rules, 2017 in consonance with the provisions made under Section 171 (1) of the CGST Act 2017, which is very clear in its intent, therefore, the contention of the Respondent is distractive and baseless. 42. The Respondent quoting the judgment of the Hon'ble Supreme Court in the case of S.P. Sampath Kumar V. Union of India, (1987) 1 SCC 124. and Madras Bar Association v. union of India, (2014) 10 SCC 1 and the Hon'ble Madras High Court&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Constitution. He can also fix his prices and profit margins in respect of the supplies made by him, Further, under the provisions of Section 171 of the CGST Act 2017, this Authority has been mandated to ensure that both the benefits of tax reduction and ITC, which are the sacrifices of precious tax revenue made from the kitty of the Central and the State Governments, are passed on to the end consumers who bear the burden of the tax The intent of this provision is the welfare of consumers, who are voiceless, unorganized. and vulnerable. This Authority is charged with the responsibility of ensuring that both the above benefits are passed on to the general public as per the provisions of Section 171 read with Rule 127 and 133 of the CGST Rules, 2017 It is therefore clear that this Authority has not violated Article 246A and Article 19 (1) (g) of the Constitution hence the contention of the Respondent is incorrect and not acceptable. 44. The Respondent has contended that Section 164 of the CGST Act 2017 does not empower the Central Government to further delegate the powers to any other person/authority and also Section 171 of the CGST Act does not authorize any rules to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is based on the tax rates on various goods/services which goes into the construction. is untenable, as the profiteering is not only dependent upon these goods/services alone. The profiteering would also include the additional consideration, which flows to the Respondent on account of tax structures due to implementation of GST. As such, the said calculation of the Respondent is rejected. Further as per the Table-C, the Respondent has passed on the ITC benefit of Rs.1,88,56,367/- only to home buyers for the period from 25.01.2018 to March 2019, The DGAP has correctly computed the additional benefit of ITC which was required to be passed on by the Respondent to his home buyers but he has failed to pass on the total additional benefit to the eligible home buyers. Therefore the claim of the Respondent that he has not contravened the provisions of section 171 of the CGST Act 2017 is not sustainable. 46. The Respondent has contended that before 01.01,2020 there were no substantive provisions authorizing the levy of penalty for violation of Section 171 of the CGST Act. In this regard. vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Respondent is not acceptable. 49. It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 6.55% of the turnover during the period from 01.07.2017 to 31.03.2019 amounting Rs.4,74,88,840/- It has been verified by the DGAP that the Respondent has already passed on benefit amounting to Rs.1,88,56,367/- to 772 homebuyers. Hence. the Authority finds that. the profiteered amount required to be returned/passed on by the Respondent is Rs, 2,86,32,474 (inclusive of GST @ 12%/ 8% on the base price) as is evident from the above Report dated 28 08.2020. Hence, the Authority holds that the provisions of Section 171 (1) of the CGAT Act, 2017 have been contravened by the Respondent. The Respondent has realized an additional amount of Rs.34,418/- each from Applicant no, 1, 2 3. Rs.36,120/- from the Applicant no. 4. Rs.27,510/- each from Applicant no. 5, 7, 8, 9. 10, 11. 12,15. Rs.36.120/from the Applicant no. 6, Rs.48,029/- from the Applicant no. 13, Rs.70.068/from the Applicant no. 14. and Rs.71,868/-from the Applicant no. 16 and an additional amount of Rs.2,80,46,934/- from 772 flat buyers other than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara Aavaas , Location- Gurugram, Haryana and amount of profiteering so that the concerned homebuyers) including those mentioned in Annexure-B) 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 naa.gov.in. Contact details of concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement. A report in compliance of this Order shall be submitted to this Authority and the DGAP by the Commissioners CGST/SGST within a period of 4 months from the date of receipt of this Order. 52. The Hon'ble Supreme Court in MA. no. 21/2022 in MA no. 665/2021 in Suo Moto writ Petition (C) No. 3 of 2020 vide its Order dated 10.01.2022 directed that:- (i), The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. (ii). Consequently. the balance period or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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