Pawan Kumar Vs S3 Buildwell LLP (National Anti-Profiteering Authority)
Provisions of Section 171 of the CGST Act, 2017 are aimed at ensuring that the recipients get the commensurate benefit, in the form of reduction in prices, in case of any tax rate reduction and/or incremental benefit of ITC which has become available to them due to sacrifice of revenue by the State and the Central Govt. from their own tax pool to provide accommodation to the vulnerable section of society under the Affordable Housing Scheme. The method of interpretation of this provision has been given in the text of Section 171 of the CGST Act, 2017 itself. We also observe that the said provision clearly links profiteering to be a function of each supply of goods or services or both and hence, profiteering needs to be computed at the level of each tax invoice. From a plain reading of Section 171 of the Act ibid, it is very clear that the total quantum of profiteering by a registered person is the sum total of all the benefits that stood denied to each of the recipients/consumers individually. Therefore, the Respondent is under legal obligation to pass on the benefit of ITC to his buyers and he cannot be allowed to appropriate the same.
We also observe that the DGAP after estimating the profiteered amount as Rs. 2,69,77,6611- has noted that the Respondent had claimed to have passed on the benefit of Rs. 2,22,85,6261-. If the benefit claimed to have been passed on by the Respondent is accepted and taken into account, the DGAP has computed the profiteering to be Rs. 75,27,297/- only for 85 homebuyers and Rs. 9,67,826/- for 27 commercial shops. However, the Applicant No. 1 vide his letter dated 25.06.2019 has refuted the claim by the Respondent that the ITC benefit has been passed on as he has not passed on any benefit to him. Instead the above Applicant has claimed that extra amount was charged for maintenance and other purposes. This was endorsed by the other homebuyers who had appeared during the hearing. Moreover, the claim of the Respondent has not been verified by the DGAP nor he has produced any documentary proof of ITC benefit passed on by the Respondent. The DGAP in his Report has clearly stated ‘Benefit claimed to have been passed on’ under column-G of Table-F of his Report dated 04.06.2019. The Respondent has also not produced any document to show that the benefit of ITC has been passed on to the homebuyers. It is also not clear from the DGAP’s Report as to whether the benefit of ITC has been passed on through credit notes or cheques. Therefore, the Report of the DGAP relating to the claim made by the Respondent that he had passed on the benefit of ITC in some cases cannot be accepted since no evidence been adduced before this Authority.
The Authority based on the facts discussed above and based on the various parameters as discussed in the Table-B above determines the additional benefit of the ITC ratio as 4.77%. Based on this ratio, taking into consideration, the turnover of the post-GST period, the profiteered amount for the period 01.07.2017 to 24.01.2018 is determined as Rs, 1,03,06,413f- for residential flats and commercial shops which includes 12% GST on base profiteered amount of Rs. 92,02,154/-. For the period 25.01.2018 to 31.12.2018, the profiteered amount is determined as Rs, 1,66,71,248/- which includes 12% GST on the commercial shops and 8% GST on residential flats on the base profiteered amount of Rs. 1,54,04,296/-. Therefore, the total benefit of ITC to be passed on during the period 01.07.2017 to 31.12.2018, comes to Rs. 2669,77,6611- which includes GST@ 12% or 8% as applicable on the base amount of Rs. 2,46,06,450/-. Accordingly, the above amounts shall be paid to the above Applicants and the other eligible house buyers by the Respondent along with interest 18% from the date from which these amounts were realised from them till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which they shall be recovered by the concerned Commissioner COST / SGST and paid to the eligible house buyers.
From the above discussions it is clear that the Respondent has profiteered by an amount of Rs. 2,69,77,661/- during the period of investigation. Therefore, in view of the above facts, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017, orders that the Respondent shall reduce/refund 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. As far as the final computation of the additional ITC that will be available to the Respondent is concerned, the same could not be determined at the time of investigation by the DGAP, as the construction of the project was yet to be completed. However during the course of proceedings, the Respondent has submitted that he has received occupation certificate on 09.01.2019 and there was no inventory of unsold units left on the date of issue of occupation certificate. As the present investigation has been conducted only up to 31.12.2018, therefore, we order that any additional benefit of ITC, which may accrue to the Respondent subsequently, shall also be passed on by him to all the eligible buyers. In case this additional benefit is not passed on to the Applicants No. 1 to 71 or to other eligible buyers, they shall be at liberty to approach the Haryana State Level Screening Committee for initiating fresh proceedings under the provisions of Section 171 of the above Act against the Respondent. The concerned jurisdictional CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC was passed on to the eligible house buyers in future.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. Sh. Pawan Kumar, Applicant No. 1, Sh. Anil Kumar, Applicant No. 2, Sh, Sailesh Dikshit, Applicant No. 34, Sh. Prem Kumar Dubey, Applicant No. 42, Sh, Ankush Raghav, Applicant No. 43, Sh. Hemant Kumar on behalf of Ms.Geeta Devi, Applicant No. 44, Sh. Shyam Kumar, Applicant No. 45, Sh. Ritesh Kumar, Applicant No. 65, Sh. Deepak Bisla, Applicant No. 66, Sh. Hem Vats, Applicant No. 67, Sh. Ritesh Yadav, Applicant No. 68 Sh. Balvinder Singh, Applicant No. 69, Sh. Sukhbir Singh, Applicant No. 70 and Sh. Kuldeep Kumar Pandey, Applicant No. 71 in person.
2. None for the DGAP.
3. None for the Respondent.
ORDER
1. The present Report dated 04.06.2019, has been received on 10,06.2019 from the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The DGAP has reported that a reference was received from the Standing Committee on 07.01.2019 to conduct detailed investigation in respect of applications filed by the Applicants No. 1 to 38 under Rule 128 of the CGST Rules, 2017 alleging profiteering in respect of construction service supplied by the The above Applicants had submitted that they had purchased flats in the Respondent’s project “Floridaa” situated at Bhatola, Sec-82. Faridabad, Haryana and alleged that the Respondent had not passed on the benefit of input tax credit (ITC) to them by way of commensurate reduction in prices,
2. The Haryana State Screening Committee on Anti-profiteering had originally examined the application of the above Applicants, in its meeting held on 30,10.2018 and observed that there was lesser burden of tax in the GST regime due to availability of ITC, which the Respondent should have passed on to his customers, in term of Section 171 of the CGST Act, 2017, The Haryana State Screening Committee had forwarded the said application with its recommendation, to the Standing Committee on Anti-profiteering on 31.10.2018, for further action, in terms of Rule 128 of the CGST Rules, 2017.
3. The Standing Committee on Anti-profiteering. vide the minutes of its meeting held on 11.03.2019, forwarded the above applications along with 3 more applications received from the Applicants No. 39 to 41 in respect of the above project of the Respondent. The above three Applicants had also alleged that the Respondent had not passed on the benefit of ITC by way of commensurate reduction in price, on implementation of GST w.e.f. 01.07.2017.
4. Consequently, the DGAP issued a notice under Rule 129 of the Rules on 15.01.2019 calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicants by way of commensurate reduction in prices and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as to furnish all supporting documents to substantiate his claim.
5. The period covered by the DGAP in the current investigation is from 01,07.2017 to 31.12,2018 and the construction service was supplied by the Respondent in the State of Haryana only.
6. In response to the notice dated 15.01.2019, the Respondent submitted his replies in parts vide letters and e-mails dated 01.2019, 14.012019, 21.02.2019, 18.03.2019, 19.03 2019, 28.03.2019, 09.04.2019, 10.04.2019 and 09.05.2019. The reply of the Respondent to the DGAP contained the following: ‑
(a) The Respondent submitted that he was in the business of construction of flats under Haryana Affordable Rousing Policy, 2013, in a single residential project “Floridaa” situated at Bhatola, Sec-82, Faridabad, Haryana. The project was registered with the Haryana Real Estate Regulatory Authority (HRERA) bearing project registration No, 244 of 2017 dated 09 2017 and it comprised of 823 residential flats on an area of 3,95,375 sq. ft. and 45 commercial shops on an area of 14,985 sq. ft.
(b) The Respondent also submitted that in the pre-GST regime, construction of affordable housing was exempt from Service Tax, vide Notification No. 09/2016-ST dated 01.03,2016, where it was covered by the definition of works contract and attracted Haryana VAT @ 5% (approximately) with full ITC of VAT paid on goods involved in the execution of the project and no tax was levied on labour sub-contract works which was the major portion of the project. On introduction of GST w.e.f. 01.07.2017, the construction of affordable housing was taxable © 18% (effectively @ 12% after 1/3rd abatement for the value of land), vide Notification No. 11/2017-Central Tax (Rate) dated 28 06.2017 which was further reduced to 12% (effectively @ 8% after 1/3rd abatement for the value of land), w.e.f. 01.2018, vide Notification No. 01/2018-Central Tax Rate) dated 25.01.2018. Therefore, the total indirect tax burden on the project had increased after the introduction of GST,
(c) He also claimed that construction business was very complex and on a provisional basis, he had passed on the benefit of Rs. 23 crores (approx.) in the month of January, 2019 as the benefit of additional ITC on introduction of GST, to his customers who had booked flats and commercial shops in the project prior to the introduction of GST and assured that the final benefit which accrued to them post-GST over the period of completion of the project, would be duly passed on at the time of giving possession of the fiats. Accordingly, he had requested to drop the proceedings.
(d) The Respondent also requested to stay the present proceedings on the basis of stay granted by the Hon’ble High Court of Delhi in the case of Mis, Abbott Healthcare Pvt. Ltd. on the issue of Constitutional validity of Section 171 of the CGST Act, 2017 and Chapter XV of the above Rules.
7. The Report further stated that the Respondent had submitted the following documents to the DGAP:-
(a) Copies of GSTR-1 returns for the period July, 2017 to December, 2018.
(b) Copies of GSTR-3B returns for the period July, 2017 to December, 2018.
(c) Copies of VAT & ST-3 returns for the period April, 2016 to June,
(d) Copies of all demand letters, sale agreement along with allotment letter, settlement deed and payment details in respect of the Applicants 01, 05, 07, 22, 30. 39, 40 and 41 above.
(e) Details of applicable tax rates, pre-GST and post-GST.
(f) Copy of audited Balance Sheet (including all annexures and profit & loss account) for FY 2016-17 & FY 2017-18.
(g) Copy of Electronic Credit Ledger for the period 01.07.2017 to 12.2018.
(h) CENVAT/ITC register for the period April. 2016 to December,
(i) Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to December, 2018 for the project “Floridaa”.
(j) List of home buyers in the project “Floridaa” along with details of commercial shop buyers.
(k) Details of benefit of ITC passed on to the buyers along with sample customer’s ledger.
8. In addition the Respondent, also submitted a copy of flat buyer’s agreement dated 31.07,2015, entered by the Applicant No. 1 and demand letters for the sale of flat No. D-0403, measuring 479,98 sq. ft, at the basic sale price of Rs. 4,000/- per sq. ft. and 100 sq. ft. of balcony area at the basic sale price of Rs. 500/- per sq. ft. The details of amounts and taxes paid by the Applicant No. 1 to the Respondent have been furnished in Table-‘A’ below–
Table- ‘A’
(Amount in Rs.)
