Sh. Vivek Gupta Vs Maheshwari Infratech Pvt. Ltd (National Anti-Profiteering Authority)
Fact of the case:
The present Report dated 24.09.2019 has been received 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 an application dated 29.11.2018 was filed before the Standing Committee on Anti-profiteering, under Rule 128 (1) of the CGST Rules, 2017 by the Applicant No. 1 alleging profiteering in respect of construction service supplied by the Respondent. The above Applicant had submitted that he had purchased Shop No. G-122 in the Respondent’s commercial project “U FARIA”, situated at C-04A, Sector-16B, Greater Noida, Uttar Pradesh and had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price of the shop. The above application was examined by the Standing Committee on Anti-profiteering, in its meeting held on 11.03.2019, the minutes of which were received by the DGAP on 27.03.2019, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, it was decided by the DGAP to initiate an investigation and collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. 1 in respect of the construction service supplied by the Respondent.
Held by NAA:
Based on the above facts it is clear that an amount of Rs. 1,77,50,478/- of ITC has been blocked by the State GST authorities as is evident from Annexure-2 mentioned above. Therefore, the Respondent cannot utilize the above amount for discharging his GST output liability. The Respondent can accordingly, not be said to have obtained the additional benefit of above amount of ITC during the post-GST period. Therefore, the ratio of ITC to the turnover computed by the DGAP during the post-GST period vide Table-B cannot be considered for computation of the profiteered amount until the above amount of ITC is made available to the Respondent for utilization. Therefore, the amount of Rs. 24,78,383/-computed as the profiteered amount by the DGAP as per Annexure-14 cannot be determined as the profiteered amount in terms of Section 171 (1) of the above Act read with Rule 133 (1) of the CGST Rules, 2017. Perusal of the credit note issued in favour of Applicant No. 1 shows that the Respondent has claimed that an amount of Rs. 95,205/-has been passed on to him on 07.07.2018 as benefit of ITC by recording “Being GST input credit of 5% on demand raised against demand being passed on to customer”. In reply to the claim made by the Respondent the DGAP has stated vide his Report dated 31.01.2020 that the Respondent had not produced the above credit notes during the course of the investigation and hence, the above credit notes have not been verified by him. In view of the above Report of the DGAP the claim made by the Respondent that he has passed on the benefit of ITC by issuing credit notes also needs to be verified. Based on the above findings, the Report dated 24.09.2019 furnished by the DGAP cannot be accepted and the DGAP is directed to further investigate the present case under Rule 133 (4) of the CGST Rules, 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 24.09.2019 has been received 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 an application dated 29.11.2018 was filed before the Standing Committee on Anti-profiteering, under Rule 128 (1) of the CGST Rules, 2017 by the Applicant No. 1 alleging profiteering in respect of construction service supplied by the Respondent. The above Applicant had submitted that he had purchased Shop No. G-122 in the Respondent’s commercial project “U FARIA”, situated at C-04A, Sector-16B, Greater Noida, Uttar Pradesh and had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price of the shop. The above application was examined by the Standing Committee on Anti-profiteering, in its meeting held on 11.03.2019, the minutes of which were received by the DGAP on 27.03.2019, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, it was decided by the DGAP to initiate an investigation and collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. 1 in respect of the construction service supplied by the Respondent.
2. Thereafter, the DGAP had issued Notice to the Respondent on 08.04.2019 under Rule 129 (3) of the above Rules, calling upon him 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 supporting documents. The Respondent vide the said Notice, 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, which the Respondent did not avail of. The Applicant No. 1 vide e-mail dated 17.09.2019 was also afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 18.09.2019 or 19.09.2019, which the Applicant No. 1 also did not avail of. The DGAP has also stated that the period covered by the current investigation was from 01.07.2017 to 31.03.2019 and the time limit to complete the investigation was extended upto 26.09.2019 by this Authority, vide its order dated 19.06.2019, in terms of Rule 129 (6) of the above Rules.
3. The Respondent had submitted his replies vide letters and e-mails dated 13.04.2019, 09.05.2019, 29.05.2019, 06.06.2019, 29.07.20 14.08.2019, 02.09.2019 and 19.09.2019, The replies of the Respondent have been summed up by the DGAP as follows:-
(a) That the area mentioned in the RERA report was total plot area. Plot area multiplied by FAR and after adding common area, total saleable area was derived.
(b) That the turnover for the period from April, 2016 to June, 2016 was Rs. 14.59 Crore and for the period from July, 2017 to March, 2019 was Rs. 12.71 Crore (excluding other incomes and cancellations). Further, the home buyers list as well as the Service Tax and GST Returns were also reconciled with the turnover.
(c) That instead of the value of relevant ITC availed post GST for the purpose of calculation of profiteering, the ITC utilized post GST should be considered.
4. The Respondent vide his aforementioned letters, has also submitted the following documents/information:-
(a) Copies of GSTR-1 Returns for the period from July, 2017 to March, 2019.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to March, 2019.
(c) Copies of VAT Returns (including all annexure) & ST-3 Returns for the period from April, 2016 to June, 2017.
(d) Copies of all demand letters issued and the sale agreement made with the Applicant No. 1.
(e) Copies of Balance Sheets for FY 2016-17 and 2017-18.
(f) Copy of Electronic Credit Ledger for the period from 01.07.2017 to 31.03.2019.
(g) CENVAT/ITC Register for the FY 2016-17, 2017-18 and 2018-19.
(h) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit for the period from April, 2016 to June, 2017 for the project “U Faria”.
(i) List of home buyers in the project “U Faria”.
(j) Copy of Project Report submitted to the RERA.
(k) TRAN-1 Statements for the period from July, 2017 to December,2017.
(l) Details of applicable tax rates, pre-GST and post-GST.
5. The DGAP after examining the above application, various replies of the Respondent and the documents/evidence on record has stated that the main issues for determination were whether there were benefits 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, whether the Respondent has passed on such benefits to the recipients by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017.
6. The DGAP has also informed that the Respondent has submitted a copy of the Project Report of the “U Faria” project and the payment schedule for the purchase of shops. The Respondent, vide his letter dated 29.05.2019 and subsequent letter, submitted copies of the demand letters issued to the Applicant No. 1. The details of the payment plan of the Applicant No. 1 to the Respondent are furnished in Table-A below:-
Table-‘A’
7. The DGAP has also intimated that Para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) reads as “Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building”. Further, clause (b) of Para 5 of Schedule-II of the CGST Act, 2017 reads as “(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after his first occupation, whichever was earlier”. Thus, the DGAP has submitted that the ITC pertaining to the commercial shops which were under construction but not sold was provisional ITC which would be required to be reversed by the Respondent, if such shops remained unsold at the time of issue of the Completion Certificate (CC), in terms of Section 17 (2) & Section 17 (3) of the CGST Act, 2017, which read as under:-
“Section 17 (2) Where the goods or services or both were used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as was attributable to the said taxable supplies including zero-rated supplies.
Section 17 (3) “The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient was liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.”
Therefore, the DGAP has claimed that the ITC pertaining to the unsold units would not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling prices of his shops to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST.
8. The DGAP has also reported that the submissions of the Respondent in respect of the turnover have been examined and during the investigation, the turnover has been considered from the Home Buyers list submitted by the Respondent. The Respondent has also contended that the ITC utilized post-GST should be considered for calculation of profiteering. The DGAP has observed that in all the investigations done in such cases, the figure of ITC availed was taken and not the ITC utilized. Further, the unutilized credit out of availed, would be utilized in future to set off the tax liability by the Respondent.
9. The DGAP has further reported that prior to 01.07.2017 i.e. before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services but credit of CENVAT on Central Excise Duty was not available in respect of the commercial shops sold by him. The Respondent was also not eligible to avail ITC of VAT paid on the inputs. However, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. The DGAP has analysed, from the data submitted by the Respondent, covering the period from April, 2016 to March, 2019, the details of the ITC availed by him, his turnover from the project “U Faria” and computed the ratio of ITC to turnover, during the pre-GST period from April, 2016 to June, 2017 and post-GST period from July, 2017 to March, 2019, which has been furnished by him in theTable-B below:-
Table-`B’
(Amount in Rs.)
