TMI Blog2022 (8) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding Rs 74.713/- of the Applicant No. 1). The Respondent has claimed that he had already passed on a substantial amount of GST ITC per the requirements of Section 171 of the CGST Act. 2017 to the homebuyers. The Respondent had submitted that he had passed on the benefit of Rs. 87,75,787/- to 114 homebuyers/customers The Respondent has also claimed that he has passed on excess ITC benefit of Rs. 17,25,108/- to 83 buyers/customers. The DGAP has responded to such claims as tabulated at Table D above and found that Respondent has not passed commensurate benefit to all homebuyers/customers. The Authority determines that the Respondent has profiteered an amount of Rs. 74,60,399/-. Therefore, given the above facts, the Authority under Rule 133(3)(a) of the CGST Rules orders that the Respondent shall reduce the prices to be realized from the buyers of the flats/customers commensurate with the benefit of ITC received by him. The details of the recipients and benefit which is required to be passed on to each recipient/homebuyer (including Applicant No. 1) along with the details of the unit are contained in the Annexure A to this order The Authority directs that the profiteered amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his Investigation Report dated 27.10.2020. has inter-alia, submitted as under:- 2.1 The aforesaid application was examined by the Standing Committee on Anti-Profiteering, in its meeting held on 06.12.2019. the minutes of which were received by the DGAP on 20.12.2019, wherein, it was decided by the Standing Committee on Anti-Profiteering to forward the application to the DGAP to conduct a detailed investigation in the matter Accordingly, the DGAP had initiated an investigation to collect necessary evidence to determine whether the benefit of ITC had been passed on by the Respondent to his customers in respect of construction service supplied by the Respondent. The period of investigation covered by the DGAP in the instant case is from 01.07.2017 to 30.11.2019. 2.2 After receiving the reference from the Standing Committee on Anti-Profiteering, a Notice was issued to the Respondent on 28.12.2019, under Rule 129 of the Rules, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to his customers by way of commensurate reduction in price and if so, to suo motto determine the quantum thereof and indicate the same in his rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for calculating the quantum of benefit: - Benefit of Transitional stock carried forward in Tran-1 Form. Saving of taxes on Goods/ Services to be purchased in GST regime for completion of the project. Benefit on account of reduction in prices after negotiation with contractors. (b) He had estimated the additional benefit which shall accrue to him in ESCALA project based on the above factors, Accordingly, he had passed on the benefit on the basis of the area to the eligible customers of Project Escala by way of commensurate reduction in prices due to expected additional ITC accrued to the Respondent under the GST regime. (c) The below table summarises the saleable area and number of units in the project Escala undertaken by the Respondent. Project Name Launch Period Saleable Area (in sq.ft.) Number of Units ESCALA Pre-GST regime 2.89,390 152-Residential (d) The details of units booked under the project ESCALA in various periods were mentioned below: ESCA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Anti-Profiteering amount. (h) In absence of specified procedure and mechanism of calculation of profiteering, the proceedings were arbitrary and liable to be dropped. (i) Without prejudice to the above, the investigation cannot go beyond the application submitted by the Applicant No. 1 vide application dated 19.11.2019. (j) the present project Escala was not registered under RERA. The said project was launched in November. 2013 2.6 Vide the aforementioned letters, the Respondent submitted the following documents/information: (a) Copies of GSTR-1 returns for the period July, 2017 to November. 2019. (b) Copies of GSTR-3B returns for the period July, 2017 to November, 2019. (c) Tran-1 and Tran-2 for the period July. 2017 to December, 2017 (d) Electronic Credit Ledger for the period July. 2017 to November, 2017. (e) Copies of VAT returns (including all annexures) ST-3 returns for the period April. 2016 to June. 2017. (f) Copies of all demand letters issued and sale agreement made with the Applicant. (g) Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset it was observed that the Applicant No 1 in his letter dated 03 08.2020 had alleged about unauthorized payment of profiteered amount in his Bank account by the Respondent so that the proceedings of investigation of profiteering were dropped It had further been alleged that the Respondent had taken higher amount of tax from him but lesser amount had been deposited to the government. In this context it was seen that despite the payment made to the Account of the Applicant No. 1, the proceedings had not been dropped, hence. this issue needed no further deliberation. With respect to the second issue of collecting higher amount of tax and making leaser payment to the Government account, it is submitted that the issue related to lesser payment of tax was not going to affect the profiteering and the DGAP was not the proper Authority to look into this aspect. 2.11 The Respondent vide letter dated 05.03.2020 submitted copy of demand letters issued to the Applicant No. 1. The details of schedule of payment in installment plan was furnished in table-A below:- Table A Sr.No. Linked Stages Description ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the said Acts, the amount of credit shall be restricted to so much of the input tax as was attributable to the said taxable supplies including zero-rated supplies . Section 17 (3) The value of exempt supply under sub -section (2) shall be such as might be prescribed and shall include supplies on which the recipient was liable to pay lax on reverse charge basis. transactions in securities. sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building .. Therefore, the ITC pertaining to the unsold units might not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST. 2.13 Regarding the Respondent's concern ver.t. the approach of comparison of ITC to turnover ratio of pre-GST end post-GST period, it was submitted that there was a direct relation of ITC availed with that of output tax to be paid, as the use of ITC was only towards making payment of his output liability and no refund of unutilized ITC shall be allowed under Section 54 (3) of the CGST Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. To give further clarifications and to elaborate upon the legislative intent behind the law, the Authority had been empowered to determine/expand the procedure and methodology in detail, However, one formula which fits all cannot be set while determining such a 'Methodology and Procedure as the facts of each case were different in one real estate project, date of start and completion of the project, price of the house/commercial unit. mode of payment of price. stage of completion of the project. timing of purchase on inputs, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realized before and after the GST implementation would always be different than the other project and hence the amount of benefit of additional ITC to be passed on in respect of ne project would not be similar to another project. Issuance of Occupancy Certificate/Completion Certificate would also affect the amount of benefit of ITC as no such benefit would be available once the above certificates were issued. Therefore. no set parameters could be fixed for determining methodology to compute the benefit of additional ITC which would be required to be passed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the details of the ITCs availed by them, his turnover from the project ESCALA , the ratios of ITCs to turnovers, during the pre-GST (April, 2016 to June. 2017) and post-GST (July, 2017 to November, 2019) periods, were furnished in table-B below. Table- B (Amount in Rs.) Sr.No. Particulars Total (Pre-GST) April, 2016 to June, 2017 Taxable Turnover (June, 2017 to November, 2019) 1. CENVAT of Service Tax Paid on Input Services used for flats (A) 1,72,54,099 - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) - 3. Total CENVAT/Input Tax Credit Available (C)= (A+B) 1,72,54,099 - 4. Input Tax Credit of GST Availed (D) - 3,58,45.059 5. Turnover for Flats as per Home Buyers List (E) 35,15,02,632 57,42,30,237 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Increase in ITC availed post-GST (%) D=4.44% less 3.28% 1.16% 5. Analysis of Increase in Input Tax Credit 6. Base Price raised during July, 2017 to September, 2019 (Rs.) E 57,42,30,237 7. GST raised over Base Price (Rs.) F=E*B 6,89,07,828 8. Total Demand raised G=E+F 64,31.37,866 9. Recalibrated Base Price H=E*(1-D) or 98.84% of E 56,75,69,166 10. GST @ 12% I = H*B 6,81,08,300 11. Commensurate demand price J = H+I 63,56,77,466 12. Excess Collection of Demand or Profiteering Amount K=G-J 74,60,399 2.20 From table ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profiteering Amt. as per Annex-19 Benefit passed on by the Respondent Difference A B C D E F G H=F-G 1. Applicant 1 1638 57,50,705 74,713 72,858 1,855 2. Other Buyers 83 1,45,461 36,52,25,504 47,45,010 64,70,118 -17,25,108 3. Other Buyers 26 50,198 20,30,75,480 26,38,356 22,32,811 4,05,545 4. Other Buyers 4 8,630 1,78,568 2,320 0 2,320 Total 114 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- as mentioned at Sr.No.1, 3 4 of the Table-D which included both the profiteered amount @ 1.16% of the base price and GST on the said profiteered amount from the 30 other flat owners and the Applicant No. 1. The Applicant No. 1 and 113 other recipients are identifiable as per the documents provided by the Respondent, giving the names and addresses along with unit nos. allotted to such recipients. As observed earlier, the Respondent had supplied construction services in the State of Haryana only. 2.26 As aforementioned, the present investigation covers the period from 01.07.2017 to 30.11.2019, however, the Respondent received Occupation Certificate in the month of October, 2018 and therefore investigation with respect to unsold units would not form the part of profiteering. 3. The above Investigation Report was received by this Authority from the DGAP on 28.10.2020 and was considered in its sitting held on 03.11.2020 and Notice dated 05.11,2020 was issued to the Respondent and the Applicant No. 1 directing them to explain why the Report dated 27.10.2020 furnished by the DGAP should not be accepted and liability of the Respondent should not be fixed for violating the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided in the GST regime. In such a case, the quantum of input Tax Credit will be proportionately higher in the initial period as compared to the turnover. Accordingly, the ratio of Input Tax Credit to turnover will not reflect the correct position of benefit accrued to the developer. 5.1.4 The additional Input Tax Credit in the hands of the Respondent in terms of Section 171 of the CGST Act shall reflect such Input Tax Credit on goods or services which was not available earlier. However, the above approach for calculating the additional benefit accrued to him considered the change in rate of tax on input goods and services whose credit was available earlier also and has not considered the lax cost which was earlier blocked in the hands of the Respondent Hence, the above approach of comparison of ITC to turnover ratio for pre GST and post GST period is not a correct approach. 5.2 The investigation cannot go beyond and the application submitted by the Applicant no. 1 5.21 The investigation cannot go beyond the application submitted by the Applicant No 1. 5.2.2 Chapter XV of the CGST Rules contains rules regarding Anti-Profiteering provisions. Rule 126 provides tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neering India Limited vs. Commissioner of Customs, Mumbai reported at 2006 (201) ELT 513 (S.C.) wherein the Hon'ble Supreme Court held that the department cannot travel beyond the show cause notice. The extract of the relevant portion of the judgment is provided below for quick reference. 16. Learned counsel for the Revenue tried to raise some of the submissions which were not allowed to be raised by the Tribunal before us, as well. We agree with the Tribunal that the revenue could not be allowed to raise these submissions for the first time in the second appeal before the Tribunal. Neither adjudicating authority nor the appellant authority had denied the facility of the project import to the respondent on any of these grounds. These grounds did not find mention in the show cause notice as well. The Department cannot be travel beyond the show cause notice. Even in the grounds of appeals these points have not been taken. (Emphasis Supplied) 5.2.9 Similarly, In the case of Reckitt Colman of India Ltd vs. Collector of Central Excise, reported at 1996 (88) E.L.T. 641 (S.C.) it was held by the Hon'ble Supreme Court that the Revenue authorities cannot make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of investigation deserves to be disregarded. 5.2 12 Accordingly, in the light of the aforementioned discussion, it was contended that the Report should be restricted to the Applicant No. 1 who has filed the application to concerned committee. 6. The Respondent's above submissions were forwarded to the DGAP to file his clarifications under Rule 133(2A) of the CGST Rules, 2017 The DGAP furnished his clarifications dated 15.02 2021, which are summarised as follow:- 6.1 Comparison of ratio of Input Tax Credit to turnover for re-GST period and GST period is not the correct mechanism for calculation of Anti-Profiteering amount. 6.1.1 Section 171 refers to Input Tax Credit, whereas prior to introduction of GST the credit taken against inputs or services was called CENVAT or VAT. Goods Service tax subsumed all indirect taxes and accordingly the nomenclature of different types of credits was changed to Input Tax Credit. However, the nature and functionality of credit taken on inputs/services continues to remain the same. Although Section 121 refers to benefit of Input Tax Credit, to arrive at the benefit which accrued to the Respondent in terms of credit ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority constituted under any law for the time being in force, to examine whether Input Tax Credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him Therefore, the above Section has already given powers to the Authority to expand the scope of the investigation to all the supplies made by a registered person. This Section empowers the Authority to examine if the benefit of the Input Tax Credits and reduced tax rates have been passed by him or not. Since, the Section doesn't mention about any particular recipient it implies that all the supplies made by a registered person to all his recipients need to be examined from the perspective of passing on the benefits to each buyer. Therefore. all the supplies are required to be investigated because there is a single GST return for all the supplies made by a particular registered person. and there is also a single credit entry in the ITC ledger of the registered person. It is not possible to earmark a portion of the total ITC to a particular product/SKU being supplied by a registered person, which can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable in this matter as reasons cited in above pares, 7. Since, the quorum of the Authority of minimum three Members, as provided under Rule 134 was not available till 23.02.2022, the matter was not decided. With the joining of two new Technical Members in February 2022, the quorum of the Authority was restored from 23.2.2022, and a copy of the above clarifications dated 04.03.2021 was supplied to the Respondent to file his re-joinder. rf any. and personal hearing was scheduled to be held on 23.03.2022 However, the Respondent, vide his email dated 23.03.2022, had requested for adjournment of his personal hearing due to some medical issues. Hence, personal hearing was rescheduled to be held be on 29.04 2022 by the Authority. However, vide Email dated 29,04.2022, the Respondent had filed his written submissions dated 06.04.2022 and further stated that he did not want any personal hearing. In the matter. The Applicant No 1, vide his Email dated 28.04.2022, also submitted that he had nothing more to add to his submissions made earlier. However, the Applicant No. 1 had requested for the submissions made by the Respondent vide his Email dated 29.04.2022. Consequently, this Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that he had passed on the benefit of Rs. 87,75,787/- to 110 homebuyers who had already booked their fiats up to 30.11.2019. The period of investigation covers the period from 01.07.2017 to 30.11.2019, however, the Respondent had received Occupancy Certificate (OC) in October, 2018, and therefore, investigation with respect to unsold units did not form the part of profiteering as calculated by the DGAP. 9. In view of the above facts, the Authority finds that the benefit of additional Input Tax Credit of 1.16% of the turnover has accrued to the Respondent for the project M3M Escala . This benefit was required to be passed on to the recipients. Thus, Section 171 of the CGST, 2017 has been contravened by the Respondent, inasmuch as the additional benefit of ITC @ 1.16% of the base price received by the Respondent during the period 01.07.2017 to 30.11.2019, was required to be passed on by the Respondent to 114 recipients including the Applicant no. 1. These recipients are identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit no allotted to such recipients. 10. The Applicant No. 1 vide his letter dated 26,11.2020. has clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not To assist this Authority while making such examination, an investigating agency designated as the DGAP has been created under Rule 129 of the CGST Rules, 2017 to conduct detailed investigation and submit Report to this Authority under Rule 129 (6) to determine whether the above benefits have been passed or not in terms of Section 171 (1) and Rule 133 (1) of the above Rules Under Rule 129 (2) the DGAP has mandate to conduct investigation and collect necessary evidence to determine whether these benefits have been passed on, Further, the Government of India, Ministry of Finance, Department of Revenue. Central Board of Indirect Taxes and Customs vide its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34 th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a. Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices, in terms of Section 171 of the Central Goods and Services Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U. P. Sales Services vs Mis Vrandvaneshwaree Automotive Pvt Ltd. and Shri Rishi Gupta vs M/s Flipkart Internet Pvt. Ltd. are not relevant to the present case. as the facts of each case are different and consumer welfare is the center of Section 171 Further, the above relied upon case was a case of Nil profiteering, so the Authority did not find merit to extend the scope of investigation beyond one product The objective of Section 171 of the CGST Act, 2017 is to ensure that the benefit of ITC and rate reduction is passed on to each beneficiary. In the present case, it is found that the Respondent has not passed on the benefit of ITC to the all the flat/buyers in his project namely M3M Escala'. Therefore, profiteering cannot be limited to the Applicant No 1 only. 11.5 The Respondent has also contended that there is no provision under the Central Goods and Services Tax Act, 2017 and the Rules made thereunder, that enables the DGAP to suo-moto assume jurisdiction. The Authority finds that it is a creation of the Statute, namely the GGST Act, 2017. The powers, functions and duties of the Authority flow from the parent statute itself. The parent Section 171 of the Act, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as claimed that he had already passed on a substantial amount of GST ITC per the requirements of Section 171 of the CGST Act. 2017 to the homebuyers. The Respondent had submitted that he had passed on the benefit of Rs. 87,75,787/- to 114 homebuyers/customers The Respondent has also claimed that he has passed on excess ITC benefit of Rs. 17,25,108/- to 83 buyers/customers. The DGAP has responded to such claims as tabulated at Table D above and found that Respondent has not passed commensurate benefit to all homebuyers/customers. The provision of law mentioned herein above provide that benefit of the ITC needs to be provided to each and every supply in the commensurate manner. As such, the excess of the ITC benefit provided to same of the homebuyers/customers cannot be offset against others to whom less ITC benefit has been provided or no benefit have been provided at all The details of all eligible homebuyers/customers and the amount of the benefit to be passed on to each of them is enclosed as the Annexure-A to this Order. 13. From the above discussions. the Authority determines that the Respondent has profiteered an amount of Rs. 74,60,399/-. Therefore, given the above facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t- M3M Escala . Location- Gurugram. Haryana and amount of profiteering Rs. 74,60,399/- so that the Applicant No. 1 along with Non-Applicant homebuyers/customers can claim the benefit of ITC which has not been passed on to them. Homebuyers/customers may also be informed that the detailed NAA. Order is available on Authority's website www.naa.gov.in. Contact details of concerned Jurisdictional Commissioner CGST/SGST for compliance of this Authority's order may also be advertised through the said advertisement. 16. Further, this Authority as per Rule 136 of the CGST Rules 2017 directs the concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the compliance of this order to the Authority and the DGAP within a period of 4 months from the date of this order. 17. Further, the Hon'ble Supreme Court, vide its Order dated 23.03.2020 in Suo Moto Writ Petition (C) No. 03/2020 while taking suo-moto cognizance of the situation arising on account of the Covid-19 pandemic. has extended the period of limitation prescribed under the general law of limitation or any other special laws (both Central and State) including those prescribed under Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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