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TMI Blog2023 (12) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... erut Road, Ghaziabad on the introduction of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017. 2. The DGAP vide his Report dated 20.04.2023 had inter-alia submitted the following: - i. On receipt of the reference from the NAA on 02.11.2022, a Notice under Rule 129 of the Rules was issued to Respondent calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo motu determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all documents in support of his reply. ii. The period covered by the current investigation was from 01.07.2017 to 31.10.2022. iii. The DGAP issued the Notice dated 10.11.2022 and subsequent reminders to the Respondent. The replies of Respondent to DGAP are summed up as follows: - a) The Respondent, having GSTIN: 09AADCD9607N1Z4, carries on the business of construction of flats and commercial shops as approved by Awas Bandhu, Dept. of Housing & Urban Planning Govt. of U.P Lucknow. The project was named "Diya Greencity" which was situated at Khasra No. 1097M & 1098, V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns. The DGAP found that the Respondent had availed ITC of Rs. 1,15,34,080/- on VAT in the F.Y. 2016-17 and 2017-18 i.e. upto June-2017. Post-GST, the Respondent was entitled to avail ITC of GST paid on all the inputs and the input services including the sub-contracts. The Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement on value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. From the information submitted by the Respondent for the period April, 2016 to July, 2022, DGAP had calculated the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to October, 2022) periods, as is shown in Table - 'A' below: Table-'A' (Amount in Rs.) S. No. Particulars April, 2016 to June, 2017 (Pre-GST) Total Post GST July, 2017 to October, 2022 (1) (2) (3) (4) 1 CENVAT of Service Tax Paid on Input Services as per ST-3 return (A) - - 2 ITC of VAT Paid on Purchase of Inputs (B) 1,15,34,080 - 3 Input Tax Credit of GST Availed (C) - 20,23,87,878 4 Total CENVAT/ITC Availed (D)= (A+B) or (C) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.04.2023 sent to DGAP has submitted that he had charged GST from only 650 home buyers at the time of possession of flats and also GST rate charged from the above 650 home buyers was less than the effective rate of GST. Respondent claimed that eventually he had passed on Rs. 3,81,70,416/- of ITC benefits to the home buyers. To verify the claim of the Respondent DGAP sent emails to all 642 home buyers. Replies from only 102 Homebuyers have been received; out of 102 homebuyers, 23 denied that benefit of GST/Input Tax Credit was received by them, 64 have confirmed that GST discount had been received; and 15 were not sure whether the GST discount has been received by them or not. Hence, DGAP did not accept the contention of Respondent that benefit to all the homebuyers had been passed on. A summary of benefit of ITC required to be passed on and the ITC benefit claimed to have been passed on to the home buyers, has been furnished by DGAP which is shown in Table- 'C' below:- Table-'C' (Amount in Rs.) Sr. No. Category of Homebuyers No. of Units Area (in Sqf) Amount Received Post GST Profiteering Amt. as per Annex- Confirmation received from homebuyers in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the recipient by way of commensurate reduction in prices", was contravened by the Respondent. 3. The above report was considered by the Commission and a copy of the investigation report dated 19.04.2023 was provided to the Respondent vide Notice dated 10.08.2023 to file his consolidated written submissions in respect of the above report of the DGAP. The Respondent vide letter dated 11.10.2023 filed his written submissions which are summarized as follows: - i. That the methodology adopted to compute and determine the anti-profiteering by the respected Authority was illegal and was arbitrary as the same was unconstitutional. The Respondent alleged that as per the provisions of Section 171 (3) read with Rule 126 of CGST Rules 2017 the methodology for computation of profiteering for transfer of commensurate benefit to the consumers was required to be prescribed but no such methodology had yet been prescribed under the law and the un- prescribed methodology as adopted by the Authority was being used uniformly to all the tax payers ignoring the different and distinct facts in each case. Also the present methodology adopted by the Authority was against the natural justice as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that there was neither change in the rate of tax nor there were any benefits of any additional ITC. iii. Submission with respect to complaint filed by the customer Smt. Sudha The Respondent had informed that the Applicant No. 1 Smt. Sudha was reluctant to purchase the flat and wished to get her money back with compensation. The Respondent had informed that he had settled the dispute with complainant and consequently both the parties had mutually agreed to execute a settlement deed dated 24.06.2023 whereby she had agreed to withdraw all the complaints which she had filed with all the Govt. agencies at consideration price of 27,50,000/- (Rupees twenty-seven lakh fifty thousand only). A copy of settlement deed was also provided alongwith his submissions. Accordingly the Respondent argued that the question of passing of the benefit of ITC to complainant did not arise and therefore the observation of the DGAP for passing of commensurate benefit of ITC of Rs. 66,680/- to complainant Smt. Sudha might be treated as null and void. iv. The amount of additional benefit of ITC as determined by the DGAP needed revision in view of under noted facts and evidences not considered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rule 133(2A) of the CGST Rules, 2017. DGAP vide his letter dated 16.11.2023 had filed the clarifications as under : - i. (Reply of Para 1) DGAP submitted that the methodology adopted by them in the Report was in line with the legal principles and this methodology of DGAP had been consistent throughout in all reports involving allegation of profiteering. DGAP further submitted that the case of Samsung India Electronics Pvt. Ltd. vs. Union of India & Ors., cited by the Respondent was not relevant in the present matter. ii. (Reply of Para 2) DGAP submitted that the averment made by the Respondent regarding non-applicability of anti-profiteering provisions on the customers who have book flats post-GST period was incorrect. DGAP submitted that the Respondent had benefitted from additional ITC only after the introduction of the GST. This additional benefit of ITC pertains to the entire project or in other words relates to each flat/unit of the project of the Respondent. Hence all unit/flat buyers were eligible to get his due benefit of ITC from the Respondent irrespective of his bookings made in pre-GST or post-GST period. Whatever was the negotiated price, the benefit of addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 6) With regard to the imposition of penalty under Rule 133(3)(d) of the CGST Rules 2017 on the Respondent, the DGAP has clarified that no clarification from DGAP was warranted as the applicability of the penalty would arise only after the final order was passed by the Commission. 5. The Commission has carefully considered the investigation report submitted by the DGAP; the submissions received from the Respondent and the clarifications received under Rule 133(2A) of the CGST Rules, 2017 from the DGAP. The Commission finds that the matter needs to be sent back to DGAP under Rule 133(4) of the CGST Rules, 2017 for re-investigation on the following issues: i. Whether Smt. Sudha has received the benefit of ITC due to the settlement made by her with the Respondent as a consequence of which she has withdrawn her complaint? ii. Whether some of the flats constructed by the Respondent fell under the 'Affordable Housing Scheme' and whether GST was to be charged on those flats @ 8%? iii. To consider the claim of the Respondent regarding cancellation of flats/units in the project and calculate the profiteering accordingly. iv. Verification of the 'passing on of I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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