TMI Blog2023 (12) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied to the Applicant No. 1. He had procured the material from the other manufacturers locally and had supplied the same and installed the lifts. Hence the above claim of the Applicant is not correct. The above Applicant has also claimed that the Respondent had increased the base price in the post GST period and had profiteered an amount of Rs. 2,93,502/-. However, perusal of the initial agreement dated 04.07.2015 executed in the pre GST period and the Quotation Nos. QT41092_R4 dated 04.07.2015, QT52365 R1 dated 3.05.2015 and QT52268 R2 dated 30.05.2015, shows that the base price for the installation of both the lifts was Rs. 23,06,499/- and the total tax applicable was Rs. 2,93,502/- and hence the total price was Rs. 26,00,000/-. Therefore, the total pre-GST tax was 12.72% - there is no question of the Respondent having profiteered and hence both the above allegations of the Applicant No. 1 are incorrect and untenable. Perusal of Rule 128 (1) shows that the Standing Committee on Anti-profiteering is only required to examine the accuracy and adequacy of the evidence submitted by the Complainant and if it is prima facie satisfied that the benefit of ITC or tax reduction ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015 on the Respondent amounting to Rs. 26,00,000/-. The agreement included the cost of lift, lift materials and transportation from Daman to Mumbai Railway Staff Quarters including all direct and indirect taxes like Central Excise Duty, VAT, Service Tax, Octroi. ii. The Respondent had delivered the material only after GST became applicable and he had charged a new rate for the supply as per the new agreement which was to be executed in due course with all the input credits on Excise, VAT, Octroi, Service Tax on all the components which he had used and received the credit from his vendors. Since GST was only applicable, the Applicant No. 1 had claimed exemption of the on Excise, VAT, Octroi, Service Tax. The Applicant No. 1 had also claimed credit of Excise Duty, VAT, Octroi, Service Tax on the materials purchased by the Respondent from his vendors. iii. The said Application was initially examined by the State Screening Committee on Anti-profiteering, Maharashtra and upon being satisfied that the Respondent had prima facia contravened the provisions of Section 171 of the CGST Act, 2017, forwarded the same with its recommendations, to the Standing Committee on Anti-profiteeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract value for the payment of Service Tax in terms of Rule 2A (i) (c) of Service Tax (Determination of Value) Rules 2006. b) He was eligible to take credit for VAT paid for discharge of VAT. The Respondent was eligible to take CENVAT Credit for Service Tax paid on input services. The Respondent was not eligible to take credit of Excise Duty paid on purchase of the components. The Respondent had accordingly tried to focus on maximum possible procurement from vendors located in exempted zones or small scale vendors below threshold limits so that the Excise Duty cost was not incurred on those components. c) Octroi was not applicable for procurement and dispatches within local limits. On procurement side, wherever components required storage and could not be dispatched directly to site without storing in his godown, The Respondent had arranged for storage in non-Octroi zone. Therefore, on procurement he never suffered any Octroi. Accordingly, he had tried to optimize contract wise supplies in a manner that would minimize Octroi cost and as would be apparent from his financial statements the Octroi cost as percentage of revenue ranges between 1.40% to 1.60%. d) The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the works contractor could claim credit only if he was availing benefit of Notification No. 26/2012 in Service Tax era. Since he was not availing abatement under the said Notification No. 26/2012 but was following methodology of claiming deduction of VAT paid value from total contract value for the payment of Service Tax in terms of Rule 2A(i)(c) of Service Tax (Determination of Value) Rules 2006, he was not entitled to claim the credit of Central Excise Duty on inventory lying in stock as on 30th June, 2017. He had enclosed a copy of note prepared at the time of implementation of GST analysing eligibility of credit for inventory lying in stock as on 30th June, 2017 which would highlight reasons for non-availability of CENVAT credit on inventory lying in stock as on 30th June, 2017. He had also enclosed copies of Screenshots of TRAN-1 filed by him. It clearly showed that he had not availed any credit in TRAN-1 on account of goods lying in inventory as on 30th June, 2017. The Respondent claims made under TRAN-1 were also audited by the GST Department. It was thus clear that input credit for Excise Duty on the components purchased for contracts of the Applicant No. 1 was not av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted 3 years back. As against old contract price of Rs. 11,53,249/- per unit plus taxes, new contract was signed at the price of Rs. 11,01,695/- per unit plus taxes. This would really mean that he offered an estimated 12.50% reduction in justified price apart from not levying penalty on default of old contract whereas normally he would have forfeited as penalty at least Rs. 2,50,000/- if not the entire advance of Rs. 5,20,000/- paid by him. In hindsight, had he levied penalty of Rs. 2,50,000/- and then quoted further lower price to that extent on new contract this matter would not had arisen. It was only the matter of form of negotiation where penalty was waived instead of charging penalty and reducing price of new contract which had enabled M/s Danish Electrical Sales Pvt. Ltd. to lodge this complaint. The complaint was frivolous in substance not only on this count but also on the basis of above stated facts. i) The Respondent further submitted that he challenges the very validity of these proceedings on two counts. First it was submitted that such an enquiry was beyond the purview of CGST Act in as much as, on facts works contract entered post implementation of GST could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price. Whereas the agreement entered after implementation of GST the QT shows that the base price for the entire job for installation of 2 lifts was Rs. 22,03,390/- and total applicable GST was 18% i.e. Rs. 3,96,610/-. Thus from the perusal of quotation/agreement submitted by the Respondent it was found that there was no reduction of tax after implementation of GST. The pre-GST tax rate as calculated above shows that the tax (Vat + Service Tax) was 12.72% of the base price whereas the applicable GST rate, after implementation of GST was 18% during the relevant period. Thus Applicant's allegation that the Respondent had profiteered an amount of Rs. 1,41,244/- due to reduction of tax during GST era, was not correct and not based on fact. xiii. The Applicant No. 1 alleged that the Respondent was required to pay Excise Duty on installation of lift during the pre GST era which was not correct. During the pre-GST era Excise Duty had to be paid on the manufacture of goods. Whereas in this case the Respondent was not engaged in the manufacture of lift, hence he was not required to pay any Central Excise Duty on the installation of lift. The Respondent had procured the material fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments. On scrutiny of the documents submitted by the Applicant No. 1 alongwith his complaint one letter of the Respondent dated 08.06.2017 written to the Applicant No. 1 had been found wherein the Respondent had mentioned that GST was going to be implemented from 01.07.2017 and the material was ready with him since long but due to noncompliance of payment and non-readiness of the site and store room from the Applicant's side he was unable to dispatch and if the Applicant No. 1 made payment of material ready for shipment by 30.06.2017 he would save any increase in GST levies. This further confirmed the Respondent's claim that he had procured material in pre GST era. xvii. The Applicant No. 1 also alleged that the Respondent had not passed on the benefit of Octroi as the same was not applicable after implementation of GST. He also submitted that due to abolition of Octroi, after implementation of GST, the Respondent got additional benefit 5.5% of base value. In this context the Respondent submitted that cost of Octroi on his product was around 1.4% to 1.6% of the base price, during the GST period. In support he had also submitted financial details during pre-GST era. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2018 was signed between the Applicant No. 1 and the Respondent. xxii. Moreover, it was also observed that the Respondent had supplied the material and installation of the lift at base price of Rs. 22,03,390/- as per the 2nd agreement, whereas the base price was fixed for Rs. 23,06,499/- as per the 1st agreement. xxiii. The Investigation conducted by the DGAP revealed that: (I) During the post GST era the Respondent could not avail the additional benefit of ITC, as the Respondent had purchased most of the material during the pre GST era. During pre GST era no CENVAT Credit was admissible on inputs used for providing work contract services. The Respondent also could not avail transitional credit in respect of inputs lying in stock as on 30.06.2017. (ii) The Respondent had entered into a fresh agreement dated 18.05.2018, with the Applicant No. 1 for erection and commissioning of two lifts at the base price of Rs. 22,03,390/- plus GST. The advance paid by the Applicant No. 1 was adjusted towards the new amount payable as per the fresh contract dated 18.05,2018. The work was executed thereafter from 29.06.2018 to 29.07.2020 and also the remaining payment was received dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce overall there was a reduction in taxes from 30.72% to 18% which should reflect in the overall pricing. vi. That the Respondent's claim of price hike of 5% per annum was unjustified and unacceptable as the price might increase or decrease due to various factors. vii. That the Respondent had not availed transitional credit in respect of inputs lying in stock as on 30/06/2017 was the failure on the part of the Respondent due to which the Applicant should not incur losses. 5. Clarifications were sought from the DGAP on the above submissions of the Applicant No. 1 under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications dated 25.05.2022 vide which the DGAP had submitted that as per submission of the Respondent dated 14.04.2022, he was registered under work contract and design manufacture supply and erection activities was part of work contract service. The DGAP further stated that the DGAP's investigation report might be referred for further clarifications. 6. The above said clarification of the DGAP dated 25.05.2022, was forwarded by NM vide its Order dated 27.05.2022, to the Applicant No. 1, inviting his submissions, if any. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as executed in the post GST period the base price of both the lifts was Rs. 22,03,390/- which shows that the Respondent had reduced his base price in the post GST period inspite of the fact the rate of tax in the post GST period had been increased to 18%. Therefore, there is no question of the Respondent having profiteered and hence both the above allegations of the Applicant No. 1 are incorrect and untenable. iii. The Applicant No. 1 has also stated that the Respondent had claimed credit of Excise Duty on the manufactured components of lifts, the benefit of which he was required to pass on to him. In this regard, the Commission finds that the Respondent had not manufactured the lifts, hence he was not required to pay any Central Excise Duty on the same. The Respondent had procured the material from other manufactures locally who were liable to pay the Central Excise Duty on which no ITC was available in the pre GST period. Accordingly, the Respondent has neither paid Central Excise Duty nor got any ITC on the same at the time of purchasing the material for the lifts in the pre GST period It is also revealed from the documents submitted by the Respondent that he has also not ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment of the agreed price nor handed over the site to the Respondent and hence the above agreement could not be executed by the Respondent. It is also apparent from the record that the above Applicant had entered in to a fresh agreement dated 18.05.2018 with the Respondent. In case the above agreements were not executed by the Respondent as per their terms the above Applicant is at liberty to take appropriate legal action against the Respondent, however, the same does not fall under the purview of Section 171 of the above Act and hence no action can be taken by the Commission in respect of this claim. It has also been found from the material placed before the Commission that during the pre-GST era the rate of tax (VAT + Service Tax) was 12.72% whereas in post-GST period it was 18%. Therefore, it is clear that the pre GST rate of tax was not reduced from 30.72% to 18% in the post GST era. Rather the rate of tax in the pre GST era was 12.72% which was increased to 18% and hence there was no reduction in the rate of tax. Therefore, the Respondent was not required to reduce his prices in the post GST period. However, the Respondent had infact reduced the base price of the lifts fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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