Shri Hardev Singh Vs M/s Ocean Seven Buildtech Pvt. Ltd. (National Anti-Profiteering Authority)
As per the payment schedule, buyers had to pay 5% of the total amount at the time of booking, i.e. at the time of submission of the application for allotment and the first draw for allotment was held on 31.03.2017 during the pre-GST period. Therefore, the Respondent had received the booking amount on or before 31.03.2017 which constitutes the pre-GST Turnover of the Respondent. It is further observed from the documents placed on record that the calculation of profiteering prepared by the DGAP is based on the fact that the ITC availed by the Respondent during pre-GST period, i.e. upto 30.06.2017, was zero and the value of Turnover for pre-GST period was positive hence, the ratio of ITC/Turnover comes out as zero. Further, we observe from the DGAP’s Report that the ratio of ITC/Turnover for post-GST period (July, ’17 to August, ’18) comes out as 3.71%. Therefore, in the context of the findings of the DGAP, which have been carefully considered the fact that the Respondent has accepted the findings of the Investigation Report and passed on the ITC benefit to his recipients, the Authority finds no reason to disagree with the investigation conducted and the consequent Report of the DGAP.
Therefore, this Authority, under Rule 133(3)(a) of the CGST Rules, 2017, orders that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The Respondent’s Annexures dated 15.04.2019 and 03.05.2019, which comprise of the details of payments made through various modes have been taken on record. As per this Annexure the Respondent has paid to the Applicant No. 1 to 4 and 716 other home buyers the entire profiteered amount through credit notes and letters to this effect have been sent to all these home buyers as has been shown in the Annexures. Needless to mention that all such refunds/adjustments shall be made, incorporating the interest @ 18% from the date of the receipt of the amount by the Respondent from the buyers till the date the due amount is refunded/adjusted within a period of three months from the date of this order. Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondents. In case this benefit is not passed on the Applicants or any other buyer shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 of the above Act against the Respondents. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future.
It is evident from the above that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled his consumers/buyers to pay more GST than that they were required to pay and therefore, he is liable for imposition of penalty. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171(3A) of the above Act read with rule 133(3)(d) of the CGST Rules, 2017 should not be imposed on him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. This Report dated 21.02.2019, has been received from the Applicant No. 5 i.e. the Director General of Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the present case are that the Haryana State Screening Committee on Anti-profiteering, vide the minutes of its meeting held on 20.06.2018 had referred 03 applications filed by the Applicant No. 1, 2 & 3, to the Standing Committee on Anti-profiteering, under Rule 128 of the CGST Rules, 2017, alleging profiteering by the Respondent in respect of supply of flats in the “Expressway Towers” project of the Respondent in Gurugram, under the Affordable Housing Policy, 2013, (AHP), issued by the Government of Haryana on 19.08.2013.
2. Another application was filed by the Applicant No. 4 before the Standing Committee on Anti-profiteering, alleging profiteering by the Respondent in respect of supply of the flat in the project mentioned above. All the Applicants had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in the prices post implementation of GST w.e.f. 01.07.2017 and had charged GST on the full amount of instalments. To establish their allegation, all the four Applicants had also submitted copies of the demand letters issued to them by the Respondent in the context of supply of flats during the pre-GST and post-GST periods, and also a copy of the AHP and the Office Order-cum-Public Notice dated 17.07.2014 of the Government of Haryana on the matter.
3. The applications filed by the Applicant No. 1, 2 & 3 were examined by the Standing Committee on Anti-profiteering, in its meetings held on 07.08.2018 & 08.08.2018 whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. The minutes of the above meetings of the Standing Committee were received by the DGAP on 30.08.2018.
4. Further, the application of Applicant No. 4, which had been received later, was also examined by the Standing Committee on Anti-profiteering, in its meeting held on 13.12.2018 whereby it was decided to forward the same for detailed investigation to the DGAP with the request to club the fourth application with the previous three applications. Minutes of this meeting of the Standing Committee on Anti-Profiteering were received by the DGAP on 07.01.2019.
5. The DGAP, on receipt of the first of the above four references from the Standing Committee on Anti-profiteering, issued a notice to the Respondent under Rule 129 of the CGST Rules, 2017 on 10.09.2018 (Annexure-4), calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on by him to the above Applicants by way of commensurate reduction in prices and if not passed on, to suo moto determine the quantum thereof and pass on the benefit and indicate the same in his reply to the notice as well as to furnish all supporting documents in the case. The Respondent was given an opportunity to inspect the non-confidential evidence/information furnished by the Applicants during the period 17.09.2018 to 19.09.2018. However the Respondent did not avail of the said opportunity. As regards the application received vide the second of the two references of the Standing Committee on Anti-Profiteering by the DGAP, the proceedings emanating out of both the references were clubbed by the DGAP. The Applicant No. 4 was made a co-applicant by the DGAP in the present proceedings vide his letter dated 22.01.2019 as the investigation in the matter was already underway.
6. The period covered by the DGAP under the current investigation is from 01.07.2017 to 31.08.2018. The time limit to complete the investigation was extended by this Authority upto 29.01.2019 vide its order dated 30.11.2018, in terms of Rule 129 (6) of the CGST Rules, 2017 for a period of two months. Further extension of time of 1 month upto 28.02.2019 was allowed to the DGAP to complete the investigation vide order dated 29.01.2019. The Investigation Report of the DGAP was received on 21.02.2019.
7. Vide his Report the DGAP has stated that in response to his notice dated 10.09.2018 and subsequent reminder dated 27.09.2018, the Respondent had submitted his responses vide letters dated 19.09.2018, 24.09.2018, 04.10.2018, 12.10.2018, 29.10.2018, 01.11.2018, 02.11.2018, 17.11.2018, 27.11.2018, 06.12.2018, 20.12.2018, 28.12.2018, 10.01.2019 and 21.01.2019. The averments made by the Respondent, vide his above letters, were summed up by the DGAP as below:-
(a) That “Expressway Towers”, Sector-109 was his first construction project which was under the AHP, for which he had received environmental clearance on 30.11.2017 and permission to start construction activity was given on 05.02.2018. Earlier, he was involved in land development projects only. Due to this fact, there had been no requirement of VAT and Service Tax registration in this case, as he was not within the ambit of these tax regimes.
(b) That since no VAT or Service Tax was applicable to AHP, he had not charged the same from his clients and he had got registered under GST in August, 2017.
(c) That the Applicant No. 1 had paid only application money (5% of the cost) and the subsequent instalment (20% of the cost) before GST and that the Applicant No. 1 had not paid the instalments demanded by the Respondent in November, 2017 and May, 2018. Since he had not paid any instalment post-GST, no GST was paid by him. The Applicant No. 2 & 3 had paid instalments post-GST with GST @12%, as per Government of India Notification, which was later reduced to 8%, w.e.f. 25.01.2018. The same had been adjusted in the demand letters issued in May, 2018.
(d) That the Respondent had submitted that due to non-availability of permission to start construction activity prior to 05.02.2018, he had not raised demands on all the home buyers, but the same were issued to only those home buyers who had asked for the demand letters.
(e) That the Respondent had assured that he would definitely pass on ITC benefit to all his customers when the last demand would be raised. By then, he would be aware of the details of the benefit of ITC to be passed on to his clients as his project would be close to completion/ possession.
8. In his Report, the DGAP has further stated that vide his aforementioned letters, the Respondent had submitted the following documents/information:
(a) Copies of GSTR-1 returns for the period August, 2017 to August, 2018.
(b) Copies of GSTR-3B returns for the period August, 2017 to August, 2018.
(c) Copies of all demand letters issued in the name of the above Applicants.
(d) Tax rates- pre-GST and post-GST.
(e) Copy of Balance Sheet for FY 2016-17& FY 2017-18.
(f) Copy of Electronic Credit Ledger for the period 01.08.2017 to 31.08.2018.
(g) ITC register for the period September, 2017 to August, 2018.
(h) Details of turnover and ITC for the project “Expressway Towers”.
(i) List of home buyers in the project “Expressway Towers”.
(j) Copy of Project Report of RERA.
(k) Reconciliation of turnover reported in GSTR-3B with the list of home buyer.
(l) Details of unsold flats.
9. The DGAP has also stated in the Report that the Respondent had submitted that the financial data/information supplied by him was to be treated as confidential, in terms of Rule 130 of the CGST Rules, 2017. The above Applicants were given an opportunity to inspect the non-confidential documents submitted by the Respondent on 07.02.2019 or 08.02.2019, vide email dated 31.01.2019 by the DGAP. The Applicant No. 2 availed of the said opportunity and inspected the documents on 07.02.2019.
10. The DGAP has further stated that the above applications, the various replies of the Respondent and the documents/evidence on record were carefully examined by him and he had found that the main issue that needed to be examined was whether the Respondent had got any benefit of reduction in the rate of tax or on account of ITC in the course of supply of construction service by him after implementation of GST w.e.f. 01.07.2017 and if so, whether the Respondent had passed on such benefit to the recipients in terms of Section 171 of the CGST Act, 2017. The Respondent, vide letter dated 04.10.2018, had submitted the project report of the project “Expressway Towers” wherein payment schedule for the purchase of flats at the basic sale price of 4,000/- per sq. ft. for carpet area and 500 per sq. ft. for balcony area, was enclosed. The details of payment schedule have been furnished in Table-A’ below:
Table- A
