Shri Kamal Nayan Singhania Vs Elegant Properties (National Anti-Profiteering Authority)
In this case Respondent has profiteered by an amount of Rs. 1,42,369/- during the period of investigation. Therefore, 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 commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 31.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on the Applicant No. 1 or other buyers they shall be at liberty to approach the State Screening Committee Karnataka for initiating fresh proceedings under Section 171 of the above Act against the Respondent. 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 the future.
It is evident from the above that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017. Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. This Report dated 10.10.2019 has been received from the Applicant No. 2 i.e. the Director-General of Anti-Profiteering (DGAP), under Rule 133 (4) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the present case are that a reference was received from the Standing Committee on Anti-profiteering on 30.08.2018, to conduct a detailed investigation in respect of an application dated 29.05.2018 filed by the Applicant No. 1 which was originally examined by the Screening Committee of Karnataka under Rule 128 (2) of the above Rules, alleging profiteering by the Respondent in respect of the purchase of a flat by the Applicant No. 1 in the project “Elegant Berkeley” situated at Hennur Village, Kasaba Hobli, BBMP Ward No. 30, Bangalore North. In the said application the Applicant No. 1 alleged that the Respondent had not provided any tax invoice for the supply of construction service, charged higher GST @ 18% instead of 12% w.e.f. 01.07.2017 and also Service Tax was charged after GST came into force. Further, the Applicant alleged that the Respondent had raised the cost of the flat from Rs. 99,00,000 (Agreement Value) to Rs. 1,05,48,000/- after implementation of GST by extracting Service Tax on the already paid amount in the pre-GST era and also charged GST @ 18% (instead of 12%) on the balance amount after the introduction of GST. The said application was examined by the Applicant No. 2 and the Investigation Report dated 04.10.2018 under Rule 129(6) of the Rules, 2017 was submitted to the Authority.
2. The DGAP vide the said Report dated 04.10.2018 concluded that the allegation in the application dated 28.05.2018 related to excess charging of Service Tax and GST by the Respondent which could not be redressed through the provisions of Section 171 of the Central Goods and Services Tax Act, 2017. However, this Authority, vide its letter dated 15.11.2018, referred the matter back to the DGAP under Rule 133(4) of the Rules, to conduct investigation after observing due formalities and also incorporating the observations dated 07.11.2018, made by the Screening Committee of Karnataka on the said report dated 04.10.2018.
3. The DGAP on receipt of the above reference from this Authority decided to collect the evidence necessary to determine whether the benefit of the input tax credit has been passed on by the Respondent to the Applicant No. 1 in respect of the construction service supplied by the Respondent and a Notice under Rule 129 (3) of the Rules was issued by the DGAP on 12.2018 to submit reply as to the whether the ITC benefit was passed on to the recipients and also asked the Respondent to suo-moto determine the quantum of benefit which was not passed on. The Respondent as well as the above Applicant was allowed to inspect the evidence submitted by the other party however both of them did not avail the same.
4. The DGAP claimed that the Respondent had also not supplied the complete information sought by him by stating that he was not in a position to submit the desired information as all the relevant documents had been seized by the Commercial Taxes Department (Enforcement), South Zone-02 Bengaluru. Accordingly, the DGAP asked the jurisdictional Authorities to permit the Respondent to access to the seized documents, however, vide letter 10.04.2019 and 29.04.2019, the Additional Commissioner of Commercial Taxes (Enforcement), South Zone, Bengaluru-47 informed that he had not seized any documents or books of accounts from the business premises of the Respondent and has obtained only the photocopies of the documents required for verification. Hence repeated summons were issued against him under Section 70 of the CGST Act, 2017 read with Rule 132 of the CGST Rules, 2017 to appear and submit the desired information/documents.
5. The DGAP further submitted that when after repeated letters and summons the Respondent failed to submit the complete documents/information he decided to depute a team of officers to visit the premises of the Respondent to collect the requisite documents/ records/ information and accordingly a team of one Assistant Director and one Superintendent of the office of DGAP visited the premises of jurisdictional CGST Commissionerate (Bengaluru East). The Respondent was also intimated about the date of the visit by a letter dated 21.05.2019 which was duly acknowledged by him. During the visit, all the requisite documents/information were collected from the Respondent and also statement of sh. B. Rajashekar, partner, Respondent had been recorded on 27.05.2019. However, copies of purchase bills were not readily available with the Respondent which were assured to be sent over email within three working days.
6. The Respondent submitted his replies to the DGAP vide letters/e-mails/statement dated 11.12.2018, 19.12.2018, 27.12.2018, 05.03.2019, 02.04.2019, 23.04.2019, 23.05.2019, 24.05.2019, 25.05.2019, 27.05.2019, 28.05.2019, 29.05.2019, 30.05.2019, 31.05.2019, 03.06.2019, 04.06.2019, 07.06.2019, 08.06.2019, and 10.06.2019. The replies of the Respondent are summed up as follows:-
(a)That he was a partnership firm, having two partners namely i) B. Rajashekhar and ii) Smt. Vijaya Chamundi, having single GST registration. He was engaged in Civil Works and Contracts for Construction and sale of Residential Flats under the Joint Development Agreements (JDA).
(b)That the project “Elegant Berkeley” was a joint development project (JDP) where MOU was signed on 14.09.2011 to develop the project. The JDA was signed on 29.04.2015 after the approval for the construction of the project was obtained on 04.02.2013. The project consisted of 36 Residential Units of which the Respondent’s share was 20 Residential units all of which have been sold and he had charged GST @ 18% earlier from his customers in the absence of clear-cut directions and then he was charging GST @ 12% and was in the process of refunding the excess amount charged from the Applicant No. 1 and other customers.
(c)That he was not in a position to furnish the requisite information to this office since all the records had been taken by DCCT- (Enforcement). The Respondent further submitted that he had taken the GST registration on 03.04.2018 and thus not filed the GSTR-1 and GSTR-3B for the period from July 2017 to March 2018.
(d)That the project “Elegant Berkeley” was completed in December 2016, there was no major work pending, and only minor finishing like painting and cleaning took place post GST on which he had availed ITC.
(e)That ST-3 returns have not been filed by him and thus he has received a Show Cause Notice dated 20.04.2018 from the Office of the Principal Commissioner of Central Tax, GST Commissionerate- Bengaluru East for an amount of Rs. 1,23,26,3951,
(f) Further, in the statement recorded on 27.05.2019, the Respondent stated that he was engaged in civil works and contracts for construction and sale of Residential Flats under the Joint Development Agreements. He entered into agreements with the buyers of flats and receive advance before completion of construction. As of 1st July 2017, he was undertaking construction of 11 projects. Further, he had not introduced or launched any new projects after GST came into force. He was maintaining his books of accounts by electronic means in Tally software and classified accounts for all the projects as separate cost centers.
(g)That the project “Elegant Barkley” was a Joint Development Project where Memorandum of Understanding was entered with M/s. Amala Engineering Co. (Pvt.) Ltd.(hereinafter referred to as the Land Owner”) on 14-09-2011 to develop the project and the plan got approved on 04-02-2013 and he had started construction of the project in January 2013 (excavation). He entered into the Joint Development Agreement on 29-04-2015. As per MoU and JDA entered with the landowner, he was required to construct a total of 36 Residential Flats, one Club, and one Recreational Centre. He owned right to sell 20 out of total 36 Residential flats and he had already sold all the 20 flats of has share. Further, he stated that he had neither received nor applied for Occupation Certificate or Completion Certificate as it was not mandatory to get such a Certificate for a small project. It was mandatory for high rise buildings only. He also furnished the Account statement of all the 20 Residential flats buyers in the project “Elegant Barkley”. As per the agreement entered with the buyers, he had received the consideration from the prospective buyers of flats and gave the receipts. He also submitted that he did not raise any tax invoice towards the money received.
(h)That he had furnished the summary ledger of Input VAT and GST for the period from 01.04.2016 till 31.10.2018 for the project Elegant Barkley. As the Project was completed in December 2016, there was no major work pending and only minor finishing work like painting and cleaning had taken place after the introduction of GST, in respect of which, he had availed ITC.
(i) That he had received the Notice from office of Assistant Commissioner of Commercial Taxes, Bengaluru for cancellation of registration for the reason of not furnishing GST returns for a continuous period of six months. He also submitted that a survey was also conducted at his premise on 25.03.2019 by the Deputy Commissioner of Income Tax, Circle- 1(2)(1), Bengaluru under Section 133A of the Income Tax Act, 1961 and he impounded the books of account.
7. The DGAP has covered the period from 01.07.2017 to 31.10.2018 for investigation. The Respondent. vide his aforementioned letters and e-mails, has submitted the following documents/information:
(a) Copies of GSTR-1 Returns for the period from April 2018 to March 2019.
a. Copies of GSTR-3B Returns for the period from April 2018 to March 2019.
(b)Copies of VAT returns for the period from April 2016 to June 2017.
(c) Copies of all the demand letters and the sale agreement/ contract issued in the name of the Applicant.
(d)Copy of Joint Development Agreement dated 29.04.2015 entered with the Land Owner.
(e)Details of applicable tax rates, pre-GST, and post-GST.
(f) Copy of 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 01.04.2018 to 31.12.2018.
(h)CENVAT Credit/Input Tax Credit ledgers for the period from April 2016 to March 2019.
(i) List of home buyers in the project “Berkeley”.
(j) Copies of Purchase invoices during the period from July 2017 to October 2018.
(k)Copies of Show Cause Notices received from Service Tax, Commercial Taxes, SGST (Jurisdictional), and Income Tax Authorities.
(I) Copy of Bank Statement for the period 01.07.2017 to 31.12.2018.
8. The DGAP has submitted that the Respondent, vide letter dated 02.04.2019, submitted a copy of Sale agreement dated 04.11.2014, demand letters and payment recipients for the sale of flat no. T2-First Floor to the Applicant, measuring 1,972 square feet, at the basic sale price of Rs. 5,020/- per square feet. As the Respondent had not raised any tax invoice and shown amount received from the Applicant as Loan, the details of amounts and taxes paid by the Applicant No. 1 to the Respondent are furnished in Table-‘A’ below.
Table-`A’
(Amount in Rs.)
