Sh. Naresh K. Khetan Vs M/s. Azeagaia Development Pvt. Ltd. (National Anti-Profiteering Authority)
The present Report dated 24.09.2019 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the Applicant No. 1 had filed an application dated 21.01.2019 (Annex-1) before the Standing Committee on Anti-profiteering, under Rule 128 of the Central Goods and Services Tax Rules, 2017 alleging profiteering by the Respondent in respect of the purchase of Flat no. A-802 in Respondent’s project “Azea Botanica”, situated at Plot No. 11/GH/8. Vrindavan Yojana No.3, Sector-11, Lucknow and had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices of the apartment purchased by him, on implementation of the GST w.e.f. 01.07.2017. The said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, had forwarded the same with its recommendation to the DGAP for investigation to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients.
Held by NAA
We observe that the Respondent, vide his submissions before us, has himself admitted that he has resorted to profiteering in as much as the ITC benefit that has accrued to him was not passed on to his customes/ flat buyers/ recipients, by way of commensurate reduction in the prices of the flats/ units. We also observe that the Respondent is in agreement with the DGAP’s report and that he has stated that he is ready to pass on the said benefit to his customes/ flat buyers/ recipients.
We further observe that the DGAP has calculated the total profiteered amount as Rs. 2,72,21,532/- for the period from 07.2017 to 31.03.2019, out of which, an amount of Rs. 2,04,77,678/- was claimed to be passed on by the Respondent to the home buyers by way of reduction in the demand raised by him on his customers/ flat buyers/ recipients. The DGAP, vide his report dated 02.01.2020, has also reported that the claim of the Respondent that he had passed on the ITC benefit amounting to Rs. 2,04,77,6781- to his customers/ flat buyers by way of reducing the amount from their demand letters, has been duly verified by the DGAP with the data submitted by the Respondent and had been found to be correct as per the calculations made in the table-D & para-22 of the DGAP Report dated 24.09.2019. Table-D of the DGAP Report dated 24.09.2020 reveals that the amount of ITC benefit required to be passed on by the Respondent to the customers/flat buyers was Rs. 2,72,21,5321-, out of which an amount of Rs. 2,04,77,678/- had been claimed to have been passed on to his customers by the Respondent. The same has been verified by the DGAP. Hence, only the balance profiteered amount of Rs. 73,61,290/- is still required to be passed on by the Respondent, which was in the process of being passed on by him to his customers/ flat buyers/ recipients.
We find no reason to differ from the above-detailed computation of profiteering and hence the profiteered amount for the period from 01.07.2017 to 31.03.2019, in the instant case, is determined as Rs. 2,72,21,532/-. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats/shops commensurate with the benefit of ITC received by him as has been detailed above.
Further, out of the total profiteered amount of Rs. 2,72,21,532/-(inclusive of GST), the balance amount of benefit of Rs. 73,61,288/- shall be passed on, forthwith, by the Respondent to the customers/ flat buyers/ recipients, including Applicant No. 1, in accordance with Annexure-12 of the DGAP Report dated 09.2019.
The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 2,72,21,532/-. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients, including Applicant No. 1, on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017.
We also order that the balance amount of profiteering of Rs. 73,61,288/- and the entire interest on the total profiteered amount shall be paid by the Respondent within a period of 3 months from the date of this order, failing which the same shall be recovered by the concerned jurisdictional CGST Commissioner (where the Respondent is filing his GST Returns) as per the provisions of the CGST Act, 2017, under the supervision of the DGAP. We also direct the DGAP to take the requisite action, through the jurisdictional CGST Commissioner, to ensure that the benefit amounting to Rs. 73,61,288/- and the applicable interest on the total profiteered amount of Rs. 2,72,21,532 is actually passed on by the Respondent to his customers/ flat buyers/ recipients.
It is also observed that the present investigation is only up to 31.03.2019 and any additional benefit of ITC which shall accrue subsequently shall also be passed on to the customers/ flat buyers/ recipients by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 or any other buyer they shall be at liberty to approach the State Screening Committee Uttar Pradesh for initiating fresh proceedings under Section 171 of the above Act against the Respondent.
Further, in line with Rule 136 of the CGST Rules 2017, this Authority directs the jurisdictional CGST Commissioners to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible buyers along with applicable interest. A report in compliance of this order shall be submitted to this Authority by the jurisdictional Commissioner CGST within a period of 4 months from the date of receipt of this order
It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project `Azea Botanica’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. Accordingly, a notice be issued to him directing him to explain as to 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. The present Report dated 24.09.2019 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the Applicant No. 1 had filed an application dated 21.01.2019 (Annex-1) before the Standing Committee on Anti-profiteering, under Rule 128 of the Central Goods and Services Tax Rules, 2017 alleging profiteering by the Respondent in respect of the purchase of Flat no. A-802 in Respondent’s project “Azea Botanica”, situated at Plot No. 11/GH/8. Vrindavan Yojana No.3, Sector-11, Lucknow and had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices of the apartment purchased by him, on implementation of the GST w.e.f. 01.07.2017. The said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, had forwarded the same with its recommendation to the DGAP for investigation to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients. The minutes of the meeting were received by the DGAP on 27.03.2019 (Annex-2).
2. The DGAP has mentioned that alongwith the application the Applicant No. 1 had also submitted a copy of the flat buyer- seller agreement, copies of demand letters and copies of his communication with the Respondent.
3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued notice to the Respondent on 04.04.2019 (Annex-3) under Rule 129(3) of the above Rules, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all the supporting The Respondent was also given an opportunity to inspect the non-confidential evidence/information furnished by the Applicant No. 1 during the period from 10.04.2019 to 12.04.2019. However, the Respondent did not avail of the said opportunity. Vide e-mail dated 20.08.2019 (Annex-4) the Applicant No. 1 was also given an opportunity to inspect the non-confidential evidence/reply furnished by the Respondent on 26.08.2019 or 27,08.2019. However, he also did not avail of the said opportunity.
4. The DGAP in his above Report has stated that the period covered by the current investigation was from 01.07.2017 to 31.03.2019. Also, the time limit to complete the investigation was extended upto 26.09.2019 by this Authority vide its Order dated 19.06.2019 (Annex-5) in terms of Rule 129 (6) of the CGST Rules, 2017.
5. The DGAP has also stated that in response to the notice dated 15.01.2019, the Respondent has submitted replies vide letters 23.04.2019 (Annex-6), 14.05.2019 (Annex-7), 10.06.2019 (Annex-8), 09.08.2019 (Annex-9), and 05.09.2019 (Annex-10) and has stated:-
a. That he had outsourced the construction work to a contractor named M/s Vensa infrastructure Ltd. All the expenses on construction including material, labour and other expenses were to be borne by the contractor. The contactor on completion of various milestones had raised invoices based on the agreed rate and charged Service Tax/GST as applicable. In the pre-GST regime, out of the total Cenvat credit claimed by him, 75% was on Service Tax paid to the contractor for construction. Post implementation of GST, the applicable tax rate on works contract service had gone up from 6% to 18%. Despite an increase in the tax rate, he had not increased the rates of existing home buyers. Therefore he had not benefitted on account of ITC.
b. That he had given the home buyers 4% (aprox) discount in the name of GST ITC, which had been given from his own margin.
6. The DGAP in his Report has further stated that vide the aforesaid letters, the Respondent had submitted the following documents/information:-
a. GSTR-1 & GSTR-3B Returns for the period from July-2017 to March-2019.
b. Copies of Tran-1 Returns for transitional credit availed by
b. Copies of Service Tax and VAT Returns for the period from April, 2016 to June, 2017.
c. Electronic Credit Ledger for the period from July, 2017 to March, 2019.
d. Pre-GST and post-GST Applicable tax rates.
e. Copy of Balance Sheets for FY 2016-17 & 2017-18.
f. Details of turnover and ITC in respect of the project “Azea Botanica”.
g. List of home buyers in the project “Azea Botanica”.
7. The DGAP in his report has further stated that the Respondent had requested that the ITC Register and home buyers list were to be treated as confidential in terms of Rule 130 of the above Rules.
8. The DGAP has further stated that the various replies of the Respondent and the documents/evidence on record have been carefully examined and the main issues to be examined were (a) whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and if so, (b) Whether the Respondent has passed on such benefit to the recipients by way of commensurate reduction in prices, in terms of Section 171 (1) of the CGST Act, 2017.
9. The DGAP in his report has mentioned that the Respondent had submitted a copy of the sale agreement dated 20.05.2016, for the sale of Flat No. A-802 to the Applicant in his project “Azea Botanica”, measuring 2055 square feet, at the basic sale price of Rs. 2800/- per square feet. The details of the payment schedule have been furnished by the DGAP in Table-‘A’ below:-
Table-A (Amount in Rs.)
