9911796707
TMI Blog2020 (4) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... Noida, Uttar Pradesh and had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price of the shop. The above application was examined by the Standing Committee on Anti-profiteering, in its meeting held on 11.03.2019, the minutes of which were received by the DGAP on 27.03.2019, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, it was decided by the DGAP to initiate an investigation and collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. I in respect Of the construction service supplied by the Respondent. 2. Thereafter, the DGAP had issued Notice to the Respondent on 08.04.2019 under Rule 129 (3) of the above Rules, calling upon him to reply as to whether he admitted 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 supporting documents. The Respondent vide the said Notice, was also g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the project "U Faria' (i) List of home buyers in the project "U Faria" (j) Copy of Project Report submitted to the RERA (k) TRAN-I Statements for the period from July, 2017 to December, 2017. (l) Details of applicable tax rates, pre-GST and post-GST. 5. The DGAP after examining the above application, various replies of the Respondent and the documents/evidence on record has stated that the main issues for determination were whether there were benefits of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and if so, whether the Respondent has passed on such benefits to the recipients by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017. 6. The DGAP has also informed that the Respondent has submitted a copy of the Project Report of the "U Faria" project and the payment schedule for the purchase of shops. The Respondent, vide his letter dated 29.05.2019 and subsequent letter, submitted copies of the demand letters issued to the Applicant No. 1. The details of the payment plan of the Applicant No. 1 to the Respondent are furnished in Table-A bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Act, 2017, which read as under:- "Section 17 (2) Where the goods or services or both were 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 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 may be prescribed and shall include supplies on which the recipient was liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule Il, sale of building. ' Therefore, the DGAP has claimed that the ITC pertaining to the unsold units would not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling prices of his shops to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-CST. 8. The DGAP has also reported that the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the post-GST period from July, 2017 to March, 2019, it was 2.58% which clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 1.74% [2.58% (-) 0.84%] of the turnover. 11. The DGAP has also observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate was 12% for commercial shops. Accordingly, on the basis of the figures contained in Table- 'B' above, the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base prices and the excess realization (profiteering) during the post-GST period, has been tabulated in Table-'C' below by the DGAP: Table-C (Amount in Rs) Sr.No. Particulars Post GST Period 1 Period A 01.07.2017 to 31.03.2019 2. Output CST rate (%) B 12 3 Ratio of CENVAT credit/ ITC to Total turnover as er Table - 'B' above % C 0.84%/2.58% 4. Increase in ITC availed post-GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent has realized an additional amount to the tune of Rs. 37,107/- (including GST) from the Applicant No. 1 which included both the profiteered amount @1.74% of the basic price and GST on the said profiteered amount. The DGAP has also contended that the Respondent has realized an additional amount of Rs. 24,41,276/-, as has been mentioned in Annexure-14, which included both the profiteered amount @1.74% of the basic prices and the GST on the said profiteered amount, from 177 other recipients who were not Applicants in the present proceedings. These recipients were identifiable as the Respondent has provided their names and addresses along with unit nos. allotted to them. Therefore, this additional amount of Rs.24,41,276/- was required to be returned to such eligible recipients. The DGAP has also intimated that the present investigation has covered the period from 01.07.2017 to 31.03.2019 and profiteering, if any, for the period post March, 2019, has not been examined as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage, when the construction of the project was yet to be completed. 15. The above Report furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to give the necessary discount and had resorted to profiteering was absolutely incorrect, illegal and beyond the provisions of law. (vi) That while computing the ratio of ITC post-GST, the amount of Rs. 3,31,56,773/- of ITC of GST availed had been considered. The Respondent has submitted that instead of "ITC availed" value of "ITC Utilized" i.e. Rs. 1,60,62,170/- should be considered for the purpose Of computation of profiteering. The Respondent vide his e-mail/letter dated 20.09.2019 has also requested that for the purposes of calculation of profiteering value of the 'ITC availed post-GST' should be taken as Rs. 1.6 Crore (ITC utilized) instead of Rs. 3.31 Crore (ITC availed). He has also enclosed copy of calculation sheet after considering ITC of Rs.1,60,62,170/- instead of Rs.3,31,56,773/- as evidence. He has claimed that in view of the fresh calculation, the amount of profiteering was liable to be reduced to Rs. 5,83,986/- only. (vii) That no hearing was granted in the matter by the Deputy Commissioner, DGAP, New Delhi. It was informed to the Respondent that there was no such provision of granting hearing. He has also enclosed copy of the e-mail requesting for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The DGAP has also averred that the legal requirement under Section 171 (1) was that in the event of benefit of ITC or reduction in the rate of tax, there must be commensurate reduction in prices of the goods or services. In other words, every recipient of goods or service has to get the due benefit from the supplier and hence, this benefit has to be calculated for each and every recipient/customer irrespective of date of booking. Such reduction could obviously only be in absolute terms so that the final price payable by a consumer must get reduced. In the instant case, the Respondent was required to pass on the benefit of ITC to each and every recipient/buyer by way of commensurate reduction in prices of the service supplied by the Respondent. The DGAP has also stated that since the above project of the Respondent was started in pre-GST regime and has continued in the post-GST period, it would attract the provisions of Section 171 of the CGST Act, 2017. The DGAP has therefore asserted that in the instant case, the provisions of the said Section would also apply to the contracts entered after 01.07.2017. Accordingly, the Respondent was required to pass on the benefit Of ITC to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P has thus stated that it appeared to be an afterthought which has nothing to do with his findings submitted to this Authority vide Report dated 24.09.2019. 24. The DGAP has also contended that the sample credit notes submitted by the Respondent were issued by the Respondent on 26.11.2019 only after receipt of his Report dated 24.09.2019. Hence, it appeared to be an afterthought. The DGAP has also mentioned that the period of the present investigation was from 01.07.2017 to 31.03.2019 and therefore, the credit notes issued in November 2019 or any action initiated by the Respondent after the investigation period had nothing to do with the Report dated 24.09.2019. 25. The Respondent in his submissions dated 15.01.2020 has stated that he has already passed on ITC benefit of Rs. 9,61,130/- to his customers. He has also enclosed copies of the credit notes as proof of passing on the ITC benefit. 26. The Respondent has further submitted that the Deputy Commissioner, State GST, Gautam Buddh Nagar, has already blocked his ITC of Rs. 1,77,50,478/- on 28.03.2019. He has enclosed copy of the Electronic Credit Ledger as evidence. He has also claimed that the above amount of ITC was still lyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him as the Respondent was silent on this issue in his submission dated 15.01.2020. 29. The Respondent in his submissions dated 14.02.2020 has reiterated his earlier contentions and further added that the assertion made by DGAP that the credit 'was' available or 'is' available to the Respondent was absolutely erroneous when it has been blocked during the very period. The whole formula of profiteering was based on the availability of ITC. Once the ITC itself was not available how it could be used for computation. He has also argued that when it was known during the investigation that the ITC has been blocked by the Department, it could not have been referred as the ITC benefit. It appeared to be a misleading statement. He has also stated that the Electronic Credit Ledger was made available to the DGAP even before, however the said fact was completely ignored by him. The Respondent has also claimed that he had sent various letters to the State GST office requesting to unblock the ITC and provide him the reasons for such blocking. However, no written communication was received from the State GST authorities. The Respondent has also stated that once the ITC of Rs. was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des an amount of Rs. 37,107/- which is required to be passed on to the Applicant No. I. The details of the benefit to be passed on to the 178 shop buyers have been given by the DGAP vide Annexure-14 attached with his Report dated 24.09.2019. During the course of the present proceedings before this Authority the 31.Respondent has vehemently argued that the Deputy Commissioner SGST, Gautam Budh Nagar, Uttar Pradesh has temporarily blocked ITC of Rs. 1,77,50,478/- on 28.03.2019 which the Respondent was not allowed to utilise. He has also attached copy of his Electronic Credit Register as Annexue-2 with his submissions dated 15.01.2020. He has also argued that the above amount has been taken into consideration by the DGAP while computing ratio of ITC to turnover vide Table-B for the post-GST period which could not have been done as the above amount of ITC was not available to him. He has therefore, stated that the profiteered amount calculated by the DGAP, after taking in to account the above amount of ITC, should be computed again by excluding it from the ITC considered for computation of ratio of ITC to turnover, during the period from 01.07.2017 to 31.03.2019. 32. The DGAP in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the above credit notes have not been verified by him. In view of the above Report of the DGAP the claim made by the Respondent that he has passed on the benefit of ITC by issuing credit notes also needs to be verified. 35. Based on the above findings, the Report dated 24.09.2019 furnished by the DGAP cannot be accepted and the DGAP is directed to further investigate the present case under Rule 133 (4) of the CGST Rules, 2017 on the following issues:- (i) Whether the ITC amounting to Rs. 1,77,50,478/- has been blocked by the State GST authorities on 28.03.2019? (ii) Whether the above amount of ITC should be taken in to account while computing the profiteered amount during the period from 01.07.2017 to 31.03.2019? (iii) Whether the Respondent has passed on the benefit of Rs. 9,61,130/- as ITC benefit to the shop buyers during the period from 01.07.2017 to 31.03.2019? (iv) Whether the Respondent has passed on an amount of Rs. 95,205/- as ITC benefit to the Applicant No. I? 36. It is also ordered that the DGAP shall submit fresh Report after detailed investigation as per Rule 129 (6) of the above Rules, 2017 within a period of 3 months from the date of passing of this ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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