Case Law Details
DG Anti Profiteering Vs Paarth Infrabuild Pvt. Ltd. (GSTAT)
A complaint was filed alleging profiteering in respect of construction services supplied in a housing project in Lucknow. It was claimed that the developer had not passed on the benefit of Input Tax Credit (ITC) to the complainant by way of commensurate reduction in price, in violation of Section 171 of the CGST Act, 2017.
The complaint was examined by the Standing Committee and referred to the Director General of Anti-Profiteering (DGAP) for detailed investigation. An initial report dated 11.10.2022 was submitted by the DGAP and examined by the Competition Commission of India (CCI), the erstwhile Authority. By order dated 21.03.2024, the CCI remanded the matter to the DGAP for re-investigation in terms of the Delhi High Court judgment in Reckitt Benckiser India Pvt. Ltd. v. Union of India.
Pursuant to the remand, the DGAP conducted a detailed investigation covering the period from 01.07.2017 to 10.11.2022, the date of project completion. A notice was issued to the developer seeking its response on whether the ITC benefit had been passed on and, if not, to determine the quantum suo motu. The developer submitted a reply along with supporting documents, which were examined.
In its report dated 30.10.2024, the DGAP concluded that the developer had contravened Section 171 of the CGST Act, 2017 by indulging in profiteering. The DGAP computed the ratio of credit availed to purchase value of goods and services during the pre-GST and post-GST periods.
During the pre-GST period (up to June 2017), total credit availed (Central Excise Duty, Service Tax, and VAT) was Rs. 10,83,19,727 against a purchase value of Rs. 92,65,63,510, resulting in a ratio of 11.69%. During the post-GST period (01.07.2017 to 10.11.2022), ITC of Rs. 6,09,17,327 was availed against a purchase value of Rs. 35,55,51,695, resulting in a ratio of 17.13%.
The increase of 5.44% indicated additional ITC benefit in the post-GST period. Based on this difference, the DGAP computed total savings on account of additional ITC at Rs. 1,93,42,012. After considering total saleable area, total sold area, and net sold area, the profiteered amount was calculated at Rs. 1,69,70,528. GST at 12% was added, resulting in a total profiteered amount of Rs. 1,90,06,991.
During investigation, the developer stated that ITC benefit of Rs. 41,41,538 had already been passed on to 55 home-buyers. The DGAP verified this claim through vouchers issued to buyers and adjusted it against the computed profiteered amount. After adjustment, the profiteered amount was reduced to Rs. 1,70,87,844.
Before the Tribunal, notice was issued to the developer to respond to the DGAP’s report. In written submissions, the developer stated that it had passed on GST benefit amounting to Rs. 2,02,53,991 to eligible home-buyers and annexed details. In an additional submission, it accepted the findings of the DGAP’s report dated 30.10.2024 and stated that the entire benefit as determined had been passed on. Beneficiaries, including the complainant, acknowledged receipt of the benefit.
The Authorised Representative of the DGAP confirmed that passing of ITC benefit amounting to Rs. 2,02,53,991 was verified based on documents submitted by the developer.
After hearing both sides and examining the record, the Tribunal observed that the developer had passed on ITC benefits of Rs. 2,02,53,991 against the computed profiteered amount of Rs. 1,70,87,844. It held that the developer had complied with Section 171 of the CGST Act, 2017. Accordingly, the DGAP’s report was accepted.
Regarding interest under Rule 133(3)(b) of the CGST Rules, 2017, the developer undertook to calculate the applicable interest within two months and ensure payment to home-buyers. The Tribunal directed submission of a compliance report regarding payment of interest to the concerned Jurisdictional Commissioners within two months, with a copy to the DGAP.
On penalty, the Tribunal held that since the profiteered amount had already been passed on to eligible home-buyers, the developer was not liable to pay penalty under Section 171 of the CGST Act, 2017.
The order was pronounced in open court.
FULL TEXT OF THE JUDGMENT/ORDER OF GSTAT
1. Shri Gaurav Pant, resident of MMS 24, Sector-A, Sitapur Road Scheme, Lucknow-21, made a complaint to the Standing Committee alleging profiteering in respect of construction service supplied by the M/s Paarth Intraguild Pvt. Ltd, 3rd Floor, Unit No. 302 & 303, Eldeco Corporate Tower, Gomti Nagar, Vibhuti Khand, Lucknow, Uttar Pradesh (hereinafter referred to as “Respondent”)
2. It was alleged that the Respondent did not pass on the benefit of Input Tax Credit to the Complainant by way of commensurate reduction relating to their Project “Paarth Aadyant Lucknow Phase-1″ situated at Gomti Nagar Extension, Shaheed Path, Lucknow-227016.
3. The application was examined by the Standing Committee and thereafter referred to the DGAP for carrying out a detailed investigation in the matter.
4. The DGAP submitted its report dated 11.10.2022 which was examined by Competition Commission of India (hereinafter referred to as “CCI”), the erstwhile Authority.
5. The CCI vide its order dated 21.03.2024 sent the matter back to the DGAP for re-investigation in terms of the Judgement passed by the Hon’ble High Court of Delhi in Reckitt Benckiser India Pvt. Ltd. v. Union of India (2024) 14 Centax 374 (Delhi).
6. Pursuant to above directions, the DGAP conducted detailed investigation.
7. Notice was issued to the Respondent calling upon his reply as to whether they admit that the benefit of Input Tax Credit had not been passed on to their customer by way of commensurate reduction in prices, if so suo-moto determine the quantum thereof.
8. Reply was submitted by the Respondent annexing therein certain documents which were duly considered by the DGAP during investigation.
9. The period of investigation in this matter is from 01.07.2017 to 10.11.2022, since the project was completed on 10.11.2022.
10. After conclusion of the investigation, the DGAP submitted its report dated 30.10.2024 concluding that the Respondent indulged in profiteering and has contravened the provision u/s 171 of the CGST Act, 2017. Further, an amount of Rs. 1,70,87,844/- was computed as profiteered amount.
11. The DGAP, in pursuance of the observation made by the Hon’ble High Court of Delhi in Reckitt Benckiser India Pvt. Ltd. v. Union of India (Supra) carried out the investigation and computed the ratio of ITC availed to purchase value of goods and services during the pre-GST and post-GST period. The details are tabulated in following manner: –
| Particulars | Pre-GST Period (upto June 2017) |
Post-GST Period (01.07.2017 to 10.11.2022) (Amount in Rs.) |
| Credit of Central Excise Duty and Service Tax availed (A) | 8,23,31,948 | – |
| Credit of VAT availed (B) | 2,59,87,779 | – |
| ITC of GST availed (C) | – | 6,09,17,327 |
| Total Credit availed (D=A+B+C) | 10,83,19,727 | 6,09,17,327 |
| Purchase Value of Goods and Services (Excluding Taxes and Duties) (E) | 92,65,63,510 | 35,55,51,695 |
| Ratio of Credit Availed to Purchase Value (in %) (F=D*100 /E) | 11.69 | 17.13 |
12. On the basis of above computation, it was observed that the Respondent was benefitted from additional Input Tax Credit during post-GST period.
13. Further, the DGAP on the basis of the difference of the ratio of credit availed to purchase value, computed the profiteered amount on the basis of total saving on account of additional ITC benefit, net sold area in sq. ft. as Rs. 1,69,70,528/-. The said calculation is tabulated as under: –
| Particulars | Post-GST (Amount in Rs.) | |
| Period | A | 01.07.2017 to
10.11.2022 |
| Ratio of Credit availed to Purchase Value as per Table — A above (%) | B | 11.69/17.13 |
| Increase in Input Tax Credit availed post- GST (%) | C | 5.44 |
| Purchase Value of Goods and Services (Excluding Taxes and Duties) during Post-GST period | D | 35,55,51,695 |
| Total Savings on account of additional ITC benefit | E=D*C/100 | 1,93,42,012 |
| Total Saleable Area (in Sq. Ft.) | F | 6,72,270.11 |
| Total Savings Per Sq. Ft. | G=E/F | 28.77 |
| Total Sold Area (in Sq. Ft.) till the date of Completion Certificate | H | 6,42,508.21 |
| Area (in Sq. Ft.) pertaining to 29 buyers from whom tax was not collected | I | 52,639.33 |
| Net Sold Area (in Sq. Ft.) | J | 5,89,868.88 |
| Profiteered Amount | K=G*J | 1,69,70,528 |
14. The DGAP added GST @ 12% on the aforesaid profiteered amount. Resultantly the net amount of profiteering arrived at Rs. 1,90,06,991/-.
15. The Respondent during the investigation, informed the DGAP that he has passed on ITC benefit to his 55 home-buyers to the tune of Rs. 41,41,538/-. The DGAP, on the basis of the document submitted by the Respondent made verification of such claim. It was observed by the DGAP on the basis of the voucher issued by the Respondent to the home-buyers, ITC benefit of Rs. 41,41,538/- was verified and thus adjusted against the profiteered amount. Therefore, the profiteered amount reduced to Rs. 1,70,87,844/-.
16. Under the proceedings before this Tribunal, notice was issued to the Respondent calling upon his written submission against the report of the DGAP.
17. The Respondent filed his written submission stating therein that he has passed on the GST benefit in respect of construction services amounting to Rs. 2,02,53,991/- to eligible home-buyers. The details of such home-buyers were also annexed.
18. Further, an additional written submission was also submitted by the Respondent wherein it was stated that the findings recorded by the DGAP in its report dated 30.10.2024 were accepted. It was also stated that the entire benefit as determined by the DGAP in its report has been passed to eligible home-buyers. The consumers who have received the benefit including the Complainant as acknowledge receipt of benefit.
19. Nutan, Additional Assistant Director/Authorised Representative of the DGAP submitted that the passing of the ITC benefit to the home-buyers to the tune of Rs. 2,02,53,991/-is verified on the basis of the document submitted by the Respondent.
20. After hearing the Authorised Representative of the DGAP as well the Learned Chartered Accountant of the Respondent and on perusal of the record placed before us, we find that since the Respondent has passed on the benefit of the ITC to its home-buyers to the tune of Rs. 2,02,53,991/- against the computed profiteered amount of Rs. Rs. 1,70,87,844/-, thus the Respondent has complied with the Provisions of Section 171 of CGST Act, 2017. In view of the above, the report of the DGAP is deserved to be accepted.
21. Accordingly, the report of the DGAP is accepted.
22. So far as the liability to pay interest under Rule 133(3)(b) of the CGST Rules, 2017, is concerned, the Learned Chartered Accountant appearing on behalf of the Respondent submitted that the Respondent will calculate the quantum of interest within a period of 2 months and would ensure that interest is paid to the home-buyers, as applicable, accordingly.
23. So far as the liability to pay penalty is concerned, since the Respondent has already passed on the profiteered amount to the eligible home-buyers, therefore, the Respondent is not liable to pay any amount of penalty as per Section 171 of CGST Act, 2017.
24. The Respondent is directed to submit the compliance report about the payment of interest to the concerned Jurisdictional Commissioners within 2 months from today.
25. The copy of the compliance report be also made available to the DGAP for necessary action, if any.
26. Order pronounced in open court today.
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