TMI Blog2022 (8) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Rules, 2017 from the date such amount was profiteered by the Respondent up till the date such amount is passed on. returned to the respective recipient of supply) within a period of three months of the date of receipt of this Order, if not already passed on. This Authority lands that the Respondent has denied the benefit of ITC to the buyers of his flats/customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the period from 01.07.2017 to 31.3.2019, and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 31.03.2019 when the Respondent had committed the above violation. Hence, the said penalty under Section 171 (3A) cannot be imposed on the Respondent retrospectively. This Order having been passed today falls within the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all supporting documents. Vide the said notice; the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1 during the period 12.11.2020 to 13.11.2020. However. the Respondent did not avail of this opportunity. iii. The period covered by the current investigation was from 01.07.2017 to 30.09.2020. iv. The time limit to complete the investigation was 14.04,2021. v. In response to the notice dated 05.11.2020, the Respondent submitted his reply vide letters and e-mails dated 13.11.2020, 19.11.2020, 21,12.2020. 15.01.2021, 01.02.2021 12.02.2021 26.02.2021, 02.03.2021 and 25.03.2021. Vide the aforementioned letters, the Respondent submitted the following documents/information: a. Brief Profile of the Respondent. b. Copies of GSTR-1 returns for the period July, 2017 to September. 2020. c. Copies of GSTR-3B returns for the period July, 2017 to September, 2020. d. Copies of GSTR-9 returns for the FY 2017-18. e. Tran-I and Tran-2 for the period July, 2017 to December, 2017, f. Electron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No. 1 after considering the benefit of ITC which was duly mentioned in the Allotment Card. i. In respect of 2 villas, the Respondent stated that the prices had been agreed considering the benefit of ITC as duly mentioned in the Allotment Card and in respect of 3 villas the Respondent had passed on the benefit of ITC of Rs. 3,04,830 /-. j. The Respondent stated that he had opted for new scheme issued vide Notification No. 03/2019-Central Tax (Rate) dated 29.03/019. In terms of this Notification the Respondent was required to pay Tax/GST a 5% without taking/availing the benefit of Input Tax Credit. k. The details of Units booked in different periods along with corresponding area, were as belows:- S.No. Details for the Project Units Built-up Area A. Number of Units booked as on 30.06.2017 114 2,14394 B. Number of Units booked from 01.07.2017 to 30.09.2020 before completion of certificate/occupation certificate 2 4,066 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act, 2017 reads as (b) construction of a complex, building civil structure or a part thereof including a complex or building intended for sale to a buyer. wholly or partly, except where the entire consideration had been received after issuance of completion certificate, where required, by the competent authority or after his first occupation, whichever was earlier, Thus, the ITC pertaining to the residential units which was under construction but not sold was provisional input tax credit which might be required to be reversed by the Respondent. if such units remain unsold at the time of issue of the completion certificate. in terms of Section 17(2) Section 17(3) of the CGST Act. 2017. which read as under: Section 17 (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempted supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Section 17 (3) The value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or services or both supplied by him. Hence, the investigation was not limited to complained product/service only and was being done for all the impacted goods/ services. Therefore, law prescribed that benefit of reduction in rate of tax or benefit of increase in ITC should result in commensurate reduction in prices of any supply and accordingly, the DGAP was justified in examining all the supplies made by the Respondent beyond the application tiled by the Applicant No. 1. As regards contention that the unit of the Applicant was cancelled, it was submitted that profiteering calculation against the Applicant No 1 unit had not been computed. xii. The contention of the Respondent that absence of any prescribed method/formula for calculation of profiteering and following a method on case-to-case was arbitrary and thus, the investigation was liable to be set aside was incorrect. In this regard, it was submitted by the DGAP that the Methodology and Procedure had been notified by the Authority vide his Notification dated 28.03,2018 under Rule 126 of the CGST Rules, 2017. The main contours of the Procedure and Methodology for passing on the benefits of reduction in the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sector otherwise it would result in denial of the benefit to the eligible recipients. Further, applying the same mathematical methodology of FMCG Sector to a supplier of a cinema sector would in fact lead to erosion of justice in the name of uniformity. xiii. As regards the allegation of profiteering, it was observed by the DCIAP that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services (CENVAT credit of Central Excise duty was not available) in respect of the units for the Project Eldeco County sold by him. Moreover, the Respondent was paving VAT under Uttar Pradesh VAT Scheme. wherein his were required to discharge his output VAT liability on deemed 10% value addition to the purchase value of the inputs and the Respondent was not charging such VAT from the home buyers. Therefore, there was no direct relation between the turnover reported in the VAT returns for the period April, 2016 to June, 2017. filed by the Respondent and the actual consideration collected by him from the home buyers. Further. post-GST, the Respondent could avail ITC of GST paid on all the inputs and input serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring because the Respondent opted for new scheme issued vide Notification 03/2019-Central Tax (Rate) dated 29.03.2019. In terms of this Notification the Respondent was required to pay GST @ 5% without taking/ availing the benefit of Input Tax Credit. Thus., the Respondent was not eligible to avail the ITC w.e.f. 01.04.2019. Since, there was no benefit of ITC to the Respondent w.e.f. 01.04.2019 profiteering on account of additional ITC benefit cannot be attributed after 01.04.2019. xv. The Respondent stated that the prices quoted to the two post GST customers were inclusive of the benefit of ITC under GST Laws. The final allotment certificate and agreement mentioned that Basic cost after input credit discount . In order to examine this aspect, the final allotment certificate and agreement in respect of two buyers who had booked flats in the post GST period were required to be scrutinized. However, on scrutiny it was observed that the Respondent had submitted the final allotment certificate and agreement in respect of 2 home buyers only. Every page of the final allotment certificate and agreement was signed by these 2 home buyers. On Scrutiny of the final allotment certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,77,983 11. Commensurate demand price J = H+I 2,77,94,504 12. Excess Collection of Demand or Profiteering Amount K=G-J 3,48,979 xvii. From the Table- B' above. it was dear that the additional ITC of 1.24% of the turnover should have resulted in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on to the recipients. xviii. It was evident from the above calculation explained in Table- B on the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the Applicants in respect of the flats sold by the Respondent during the period 01.07.2017 to 31.03.2019. the benefit of ITC that needed to be passed on by the Respondent to the buyers of flats came to Rs. 3,48,979/- which included 12% GST on the base-amount of Rs. 3,11,589/, The flat homebuyer and unit no. wise break-up of this amount w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 21,138 2,5128,110 3,48,979 3,04,088 xix. From the above Table- C , it was observed that the benefit claimed to have been passed on by the Respondent was higher than the commensurate benefit, in respect of 3 Home buyers (Sr. 1 of above Table-C) by an amount of Rs. 2,47,641/- and that no benefit has been passed on by the Respondent to 8 Home buyers (Sr. 2 of above Table-C) by an amount of Rs. 2,92,532/-. However, this excess benefit claimed to have been passed on to some recipients, could not be offset against the additional benefit required to he passed on to other home buyers who did not receive the commensurate benefit as each recipient/home buyer was entitled to commensurate benefit. The excess amount paid to any recipient could only be adjusted against any future benefit that might accrue to such recipients. xx. On the basis of the details of outward supplies of the construction service submitted by the Respondent, it was observed that the service had been supplied in the State of Uttar Pradesh only. 3. Therefore, the DGAP has concluded that,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- i. That while Section 171 prescribed for passing on the benefit of ITC by way of commensurate reduction in prices, there is no methodology prescribed to measure the benefits. ii. That, to buy peace of mind and to conduct his business smoothly, he had decided to pass on the benefit computed by the DGAP to eligible customers. iii. That he had issued and distributed cheques of Rs. 2,92,532/-, profiteering. as computed by the DGAP in his Report, to respective customers. Copies of cheques, communication to customers and proof of receipt of cheque by customers have been attached with the submissions. iv. Thai these submissions were made without prejudice to his submissions that there was no profiteering, and this must be considered as admission of profiteering on his part. 6. Copy of the submissions elated 30.03.2022 filed by the Respondent was supplied to the DGAP for clarifications under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications dated 11.05.2022 vide which it was clarified that the details of bank account statement for the period of 05.07.2021 to 25.08.2021 in respect of the Respondent submissions vide e-mails dated 21.04.2022 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP has called for several documents from the Respondent and based on the documents so received, the above said Report has been prepared by concluding that the Respondent has profiteering amount to the tune of Rs. 3,48,979/- and the same needed to be allocated amongst II buyers. The Authority finds that the Project Eldeco County at Jhansi has 117 flats and it is reported that out of these 117 units, consideration for 101 units was received in the pre-GST era. 10. The Respondent has contended that while Section 171 prescribed for passing on the benefit of ITC by way of commensurate reduction in prices. there is no methodology prescribed to measure the benefits. However. he has decided to pass on the benefit computed by the DGAP to the eligible customers and that he has issued and distributed cheques of Rs. 2,92,532/- as computed by the DGAP in his Report to respective customers. In this regard the Authority finds that it is clear from the plain reading, of the Section 171 (1) of the CGST Act, 2017 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 ordered by the Central and the State Governments or a regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir respective GST Acts, is to pass on the above benefits to the common buyers who bear the burden of lax and who are unorganised, voiceless and vulnerable. It is abundantly clear from the above narration of the facts and the law that no elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of tax reduction and computation of the profiteered amount. The Respondent cannot deny the benefit of tax reduction to his customers on the above ground and enrich himself at the expense of his buyers as Section 171 provides clear cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount, Therefore, the Authority finds that the above contention of the Respondent cannot be accepted. 11. For the reasons discussed hereinabove, the Authority does not find any merits in the prayers/contentions made by the Respondent and therefore concurs with the conclusions drawn by the DGAP in its report dated 31.01.2021 and the Authority finds that the benefit of additional Input Tax Credit of 1.24 % of the turnover has accrued to the Respondent for the project Eldeco County . This benefit was required to be passed on to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of the said Section 171 (3A) shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 31.03.2019 when the Respondent had committed the above violation. Hence, the said penalty under Section 171 (3A) cannot be imposed on the Respondent retrospectively. 14. The concerned jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order, It may be ensured that the benefit Of ITC as determined by the Authority as per the Annexure 'A of this Order be passed on along with interest 18%, as prescribed, to each homebuyer/customer, if not already passed on. In this regard an advertisement may also be published in a minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. M/s Eldeco County Limited and amount of profiteering Rs. 3,48,979/- so that the homebuyers/customers can claim the benefit of ITC which has not been passed on to them. Homebuyers/customers may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge) ANNEXURE-A LIST OF HOME BUYERS OF THE PROJECT 'ELDECO COUNTY' S. No. Customer Name Unit Number Amount of ITC to be passed on (in Rs.) 1. Smt. Rekha Gupta Saph-38 2,593 2. Smt. Meenu Gupta Saph-14 2,500 3. Mr. Shoham Rusia Cor-4 9,613 4. Mr. Rahui Sarwaria Cor-5 15,519 5. Arjun Singh Saph-04 16,666 6. Bedri Parsad Saph-05 51,088 7. Akhilashwar Kumar Saph-06 19,822 8. Prabha Pandey Top-01 34,842 9. Ghun Shyam Archana Maurya ..... X X X X Extracts X X X X X X X X Extracts X X X X
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