TMI Blog2022 (8) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... profiteered an amount of Rs. 54,14,439/-. Interest - HELD THAT:- The 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 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 as determined shall be passed on/returned by the Respondent to the recipients of supply along with interest @18%., as prescribed under Rule 133(3)(b) of the CGST Rules, 2017, from the date such amount was profiteered by the Respondent up till the date such amount is passed on/retuned to the respective recipient of supply (if not already passed on) within a period of three Months from the date of this Order failing which it shall he recovered as per the provisions of the CGST Act, 2017. Penalty - HELD THAT:- The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) during the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. 1 in respect of construction service supplied by the Respondent. 2.2 On receipt of the reference from the Standing Committee on Anti-profiteering, a Nonce was issued to the Respondent on 07.12.2020. calling upon the Respondent to reply as to whether he admit that the benefit of ITC had not been passed on to the Applicant No. 1 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 the 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 15.12.2020 to 16.12.2020. However, the Respondent did not avail of this opportunity. 2.3 Vide e-mail dated 11.02.2021, the Applicant No. 1 was afforded-an opportunity to inspect the non-confidential documents/reply flan/shed by the Respondent on 10.02.2021 or 17.02.2021. The Applicant No. 1 vide e-mail dated 17.12.2021 stated that he was hospitalized due to heart problem and requested to share do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax benefit, if any, had been already considered in the price that was offered to him and after considering the same he agreed to buy the flat. f. Nothing stopped him at the time of buying the flat or entering into the Agreement in June, 2018 to ask further reliefs, if any, which was being sought by the frivolous complaint. filed with an intention to build pressure. g. The complainant was well aware that price of the flat was decided after considering the ITC benefit if any available to the builder and which he agreed while signing the Agreement and therefore, there was no question of any further additional benefit to be given which was already passed onto him in the agreed price. h. The complainant while entering into agreement was aware that GST was already in force since 11 months and GST applicable at that time i.e. 12% (after 1/3rd deduction from 18%) was payable separately on agreed price. The tax benefit if any by way of ITC was already passed on by way of appropriate reduction in the price that was offered. i. The project had travelled far from VAT Service Tax Regime to GST Regime of effective 12% rate with ITC and then to reduced rate at 5% without Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in business of Land Development which had four promoters and each promoter had his respective projects in the company wherein separate accounts was prepared from each promoter s group. Till April 2019 all the promoters had single GST number 27AAAC10598D1ZM (herein after referred to as Old number ). p. Prom April 2019 three new numbers were taken amongst which one 27AAACL0598D3ZK (herein after referred to as new number ) were of Mr. Rakesh Sanghvi (Promoter) which had Solitaire project in it. 2.6 Vide the aforementioned letters, the Respondent submitted the following document/information: (a) Brief Profile of the Respondent. (b) Copies or GSTR-1 returns for the period July, 2017 to August, 2020 for old GST number. (c) Copies of GSTR-3B returns for the period 2017 to August, 2020 for old or number. (d) GSTR-9 for old GST number for FY 2017-18. (e) Copies of GSTR-1 returns for the period April, 2019 to September, 2020 for new GST number. (f) Copies of GSTR-3B returns for the period April, 2019 to September, 2020 for new GST number. (g) TRAN-1 For the period July, 2017 to December, 2017. (h) Electronic Credit Ledger for the period Jul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, 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 ITC 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 exempt 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 of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April. 2016 to 31.03.2019, the details of the ITC availed by them, bib turnover from the project Sanghvi Solitaire and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017 and post-GST (July, 2017 to 31.03.2019) periods, was Furnished in table-A below. Table -A Sr.No. Particulars Total (Pre-GST) April, 2016 to June 2017 Turnover (July, 2017 to March, 2019) 1. CENVAT of Service Tax Paid on Input Services used for flats (A) 27,73,302 - 2. Input Tax Credit of VAT Paid on purchase of Inputs (B) - - 3. Total CENVAT/Input Tax Credit Available (C) (A+B) 27,73,302 - 4. Input Tax Credit of GST Availed (D) - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the post-GST period, was tabulated in table-B below :- Table-B Sr.No. Particulars 1. Period A July, 2017 to March, 2019 2. Output GST rate (%) B 12 3. Ratio of CENVAT Credit/ITC to Total Turnover as per table B above (%) C 6.86%/1.00% 4. Increase in ITC availed post-GST (%) D=6.86% less 1.00% 5.86% 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to March, 2019 (Rs.) E 8,24,96,944 7. GST raised over Base Price (Rs.) F=E*B 98,99,633 8. Total Demand raised G=E+F 9,23,96,577 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 17 buyers of flats including the Applicant comes to Rs. 54,14,439/- (Rupees Fifty Four Lakh Fourteen Thousand Four Hundred and Thirty Nine only) which included 12% GST had not been pasted on to the Applicant and other recipients. On this account, the Respondent had realized an additional amount to the tune of Rs. 10,36,481/- (including GST) from the Applicant which included both the profiteered amount @ 5.86% of the taxable amount (base price) and GST on the said profiteered amount. These recipients was identifiable as per the documents on record as the Respondent provided their names and addresses along with unit no. allotted to them. As observed earlier, the Respondent had supplied construction services in the State of Maharashtra only. 2.21 present investigation covets the period Prom 01.07.2017 to 31.03.2019. Profiteering, if any, for the period post March, 2019. had not been examined as the Respondent opted for a 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 Tax/GST @6% without taking availing the benefit of input Tax Credit. Thus, the Respondent was not eligible to av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... removal of cascading effect in the tax structure which was present before introduction of GST. and therefore. the customers would be benefited due to which the adequate safeguard provisions were introduced to cover any benefit that accrues due to change in tax legislature to the assessee should be passed on the customers. 4.4 The complainant who bought the flat in June 2018 which was much after the introduction of GST, and being completely aware, while finalising the price of the said flat that the adequate tax benefit, if any had been already considered in the price that was offered to him and after considering the same he agreed to buy the flat. 4.5 Nothing stopped him at the time of buying the flat or entering into the Agreement in June, 2018 to ask Further reliefs, if any, which was being sought by the frivolous complaint filed with an intention to build a pressure on him. 4.6 The complainant was well aware that price of the flat was decided after considering the ITC benefit if any available to the builder and which he agreed while signing the Agreement and therefore, there was no question of any further additional benefit to be given which was already passed onto him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence the construction cost had been escalated due to non-availability of ITC which was considered while fixing the Sale price, which in fact, should have been borne by the Purchaser as per the terms of the Agreement. The Respondent had not claimed the same but the complainant only with intention of extracting monies from the Respondent had tiled the said complaint. 4.12 In view of the above. he requested that complainant had not come with clean hands and therefore, the said complaint should not be entertained at his initiation itself and hence intention of levying profiteering liability penalty thereon should be dropped. Without prejudice to his above claim they submitted that 4.13 DGAP s report was erroneous in nature wherein ITC Figure as mentioned at SI. no. 4 of Table A mentioned in para 16 of Report and Total Saleable Area (in SQF) as mentioned at SI. no 6 of Table A mentioned in para 16 or Report was wrongly arrived. 4.14 Below mentioned was the calculation as per the mechanism i.e. formula laid down in table A B, with the correct figures duly highlighting them along with the detailed explanation why the revised figures should be accepted. Table A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97% less 0.92% 2.05% Consequently Charges 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to March, 2019 (Rs.) E 8,24,96,944 7. GST raised over Base Price (Rs.) F=E*B 98,99,633 8. Total Demand raised G=E+F 9,23,96,577 9. Recalibrated Base Price H=E*(1-D) or 94.14% of E 8,08,05,757 Consequently Charges 10. GST@12% I=H*B 96,96,691 Consequently Charges 11. Commensurate demand Price J=H+I 9,05,02,447 Consequently Charges 12. Excess Collection of Demand or Prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explained in details below 11. Final Net GST Credit Taken K=(H+I+J) 49,25,599 4.16 In relation to amount mentioned in SI No 4 in above Table C. the DGAP had erroneously missed to take into account figures which we had claimed in TRAN- I to the tune of Rs. 34,47,573 for project Sanghvi Solitaire which was duly mentioned by him in his submission dated 15 January 2021. The said amount would, however, increase the ITC amount and would be detrimental to him, in order to arrive at proper calculation. he had included the said amount in above reconciliation. 4.17 relation to amount mentioned in SI. No. 5 above in Table No C, the DGAP had erroneously missed to include GST credit of Rs. 53,198 in his calculation wherein the said credit belonged till 31st March 2019, however was missed by him to he claimed till 31st march 2019 return which was claimed by him in future returns. The said amount would, however, increase the ITC amount and would be detrimental to him, in order to arrive at proper calculation. he had included the said amount in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged with some fall back wherein he was not able to carry forward certain credits which were earlier allowed to be claimed like KKC, EC, SHEC. The said amount was duly carried forward in his last service tax returns but under GST Law the said credits were not allowed to us and hence the said loss should be allowed to reduce the ITC benefit received. The above was also reiterated by him in his submission dated 15th January 2021 to which no effect was given by DGAP. 4.21 In relation to various other factors which had been completely ignored by the DGAP for which he re-iterated his submission dated 15 January 2021 before DGAP that various other factors due to which cost had shoot up due to introduction of GST such as Steel, Bricks. Paint other Electrical goods used for finishing. and since in most of the goods GST rate was higher. he had to block his good amount of working capital which ultimately leads to increased borrowing cost. Further from April, 2019 i.e. Reduced rate without ITC, there was various condition embossed on builder which leads to increase in construction cost i.e. 80% of all Inputs 100% of Cement should be from GST registered dealer wherein all GST adds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or decrease inapplicable taxes, the profit or loss belong to the Applicant No.1 6. In respect of the above submissions dated 07.04.2021 filed by the Applicant No. 1 the DGAP has submitted that the issues raised by the Applicant No. 1 had already been dealt by the DGAP in its investigation report dated 23.02.2021. 7. Further, the DGAP also filed its clarifications dated 11.06.2021, under Rule 133(2A) of the CGST Rules, 2017, in respect of the Respondent s submissions dated 22.03.2021. The DGAP in its report has inter-alia stated as under:- 7.1 DGAP Report was erroneous in nature wherein ITC figure as mentioned at SI. No. 4 or table A mentioned in para 16 of Report and Total Saleable area (in SQF) as mentioned at SI. No. 6 of Table A mentioned in para 16 of Report was wrongly arrived. The above contention was wrong as figures of ITC had been taken from the figures reconciled with GST returns as submitted by the Respondent. The total saleable Area had been taken from RERA Registrations and sold area from Horne Buyers list as submitted by the Respondent. 7.2 The modified Table A and B submitted by the Respondent as per his own understanding. The actual table-A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. GST raised over Base Price (Rs.) F=E*B 98,99,633 8. Total Demand raised G=E+F 9,23,96,577 9. Recalibrated Base Price H=E*(1-D) or 94.14% of E 7,76,62,623 10. GST@12% I=H*B 93,19,515 11. Commensurate demand Price J=H+I 8,69,82,138 12. Excess Collection of Demand or Profiteering Amount K=G-J 54,14,439 7.3 The Respondent had submitted revised Table-C to arrive that net GST credit of Rs. 49,25,599/- in place of ITC of Rs. 1,03,72,468/ given in table A B of the DGAP report. The method adopted by the Respondent in Table C arriving at 'Final Net GST Credit Taken' was wrong as in DGAP Report relevant ITC was worked out by taking ITC of GST availed which had not been disputed by the Respondent. As per his own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated as under:- 8.1 He had challenged the methodology adopted by the DGAP in form of comparing ratios of ITC to turnover which was not at all the methodology suggested in any law, the only thing which was relevant in determining the profiteering amount was the word benefit. the only requirement of the law was to determine whether builder had benefited from change in tax regime and thereon whether the same had been passed on to the buyers or not. 8.2 Considering the proportionate methodology with reference to ITC and stage of. completion there was loss of ITC of approx. 6 lakhs, which should have been technically recovered from purchasers as per the agreements. which he had refrained from. 8.3 Moreover, he also emphasised on the date of agreement where it can be appreciated that buyer had entered into the agreement much after the implementation of GST and he was quite matured with the pries of flat vis a vis applicable tax. 8.4 DGAP in above extracted clarification had not accepted his ITC calculation by just stating that the amount which had been reversed pursuant to new regime on 01.04.2019 reversal for unsold flats on receipt of OC had not been considered since in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a conclusion that the Respondent has gained benefit of ITC on the supply of Construction services after the implementation of GST w.e.f. 01.07.2017 and the Respondent was required to passing such benefit to the homebuyers by way of commensurate reduction in prices in terms of Section 171 the CGST Act, 2017 during the period 01.07.2017 to 31.03.2019. The DGAP has concluded that, the benefit of additional Input Tax Credit of 5.86% of the turnover has accrued to the Respondent for the project Sanghvi Solitaire . This benefit was required to be passed on to the recipients. Thus. Section 171 of the CGST, 2017 has been contravened by the Respondent. in much as the additional benefit of ITC @ 5.86% of the base price received by the Respondent during the period 01.07.2017 to 31.03.2019. has not been passed on by the Respondent to 17 recipients including the Applicant no. 1. these recipients are identifiable as per the documents provided by the Respondent. The DGAP has calculated that an amount of benefit of ITC not passed on to the recipients or in other words, the prelittered amount as Rs. 54,14,439/- which includes 12% GST on the base profiteered amount of Rs. 48,34,321/-. The period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such credit. if any, would stand reflected in the accounts of the Respondent as credits earned in the pre GST regime (and also prior to 1.04.2016) and lying unutilised and carried forth in the GST regime after 1.07.2017. Likewise, the reversals of ITC, if any, made by the Respondent on account of opting for the Scheme under Notf. No. 3/2019 (CT)(Rate) w.e.f. 1.04.2019 and or on account oft. nits remaining unsold on date of issue of Occupation Certificate in October, 2019, are not from ITC taken during the period 1.07.2017 to 31.3.2019 alone, but, from the common pool of ITC lying in their books of account and attributable to both periods i.e. periods prior to 1.07.2017 (pre GST carried forward) as well as from 1.07.2017. Hence, the reversals of Rs.53,82,926+ Rs. 35,64,714=Rs. 89,47.640/- claimed to have been made by the Respondent. if actually made, do not pertain to reversals of ITC earned from 1.07.2017 onwards only. but. also include ITC earned prior to 1.07.2017 also. Hence the Authority finds that, the calculations made by the Respondent and stated at Table C above: do not in anyway affect the robustness of the Methodology adopted by the DGAP in calculating the profitee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Governments in the (merest of consumers irrespective of cost dynamics. in accordance with Section 171. Therefore, the only factor which has been considered is additional availability of lit in the post-GST period which was not available in the earlier regime, Further, the DG P in its investigation report dared 25.02.2021 has clearly mentioned that, although, the period of investigation in the present case is from 01.07.2017 to 30.10.2020. the profiteering has been calculated till 31.03.2019. i.e. till the date the Respondent was eligible to avail ITC on the GST paid by him. Hence, the Respondent s contention is not acceptable. 13. The Respondent has alto contended that various factors, that affect the cost of project, were completely ignored by the DGAP white calculating the amount of profiteering. This contention of the Respondent is not correct, as Section 171 of the CGST Act, 2017, only requires passing on the benefit of which the Respondent has additionally availed in the post GST period, exact amount of which is available from the GSTR-38 Returns filed by him, on the basis of which benefit to be passed on to the buyers has been computed. It has no connection with rise i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) of the CGST Rules, 2017 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 as determined shall be passed on/returned by the Respondent to the recipients of supply along with interest @18%., as prescribed under Rule 133(3)(b) of the CGST Rules, 2017, from the date such amount was profiteered by the Respondent up till the date such amount is passed on/retuned to the respective recipient of supply (if not already passed on) within a period of three Months from the date of this Order failing which it shall he recovered as per the provisions of the CGST Act, 2017. 17. For the. reasons mentioned hereinabove and in the given facts and circumstances and also stated position or law we find that the Respondent has denied the benefit of ITC to the buyers or his flats/customer/recipients in contravention of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngle GST registration. 20. 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. 21. 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 limitation or any other special laws (both Central and State) including those prescribed under Rule 133(1) of the CGST Rules, 2017, as is clear from the said Order which states as follows:- A period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. Further, the Hon ble Supreme Court, vide its subsequent order dated 10.01.2022 has extended the period(s) of limitation till 28.02.2022 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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