Sh. Sibi John Vs. Logix City Developers Pvt. Ltd. (NAA)
1. The present Report dated 27.03.2020 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) on 13.05.2020 after 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 Applicants No. 1 had filed an application alleging profiteering by the Respondent in respect of purchase of Flat No. A-804, Tower-A, in the project ‘Blossom Zest’ situated at Sector 143, Noida, Gautam Budh Nagar, Uttar Pradesh. The Applicant No. 1 had alleged that the Respondent had not passed on the benefit of input tax credit (ITC) by way of commensurate reduction in price after implementation of GST w.e.f. 01.07.2017, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. The Applicant No. 1 had also submitted copies of the demand letters along with his application form in the format APAF.
2. The Standing Committee on Anti-Profiteering had examined the application filed against the Respondent and it had referred the same to the DGAP for conducting detailed investigation under Rule 129 (1) of the CGST Rules, 2017 to ascertain whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients.
3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued notice to the Respondent on 08.07.2019 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 recipients 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 furnish all the supporting documents. The Respondent was also given opportunity to inspect the non-confidential evidence/information furnished by the Applicant No. 1 during the period from 15.07.2019 to 17.07.2019. However, the Respondent did not avail of the said opportunity. The Applicant No. 1 was also given an opportunity to inspect the non-confidential evidence/reply furnished by the Respondent on 15.01.2020 and 16.01.2020. The Applicant’s father Shri John Daniel inspected the documents on 14.01.2020 on behalf of the Applicant No. 1.
4. The DGAP in his above Report has stated that the period covered by the current investigation was from 01.07.2017 to 30.06.2019. Also, the time limit to complete the investigation was extended upto 27.03.2020 by this Authority vide its Order dated 24.12.2019 in terms of Rule 129 (6) of the CGST Rules, 2017.
5. The DGAP has also stated that in response to the notice dated 08.07.2019 and various reminders, the Respondent replied vide letters/e-mails dated 19.07.2019, 29.07.2019, 05.08.2019, 22.08.2019, 09.09.2019, 16.09.2019, 22.10.2019, 13.11.2019, 05.12.2019, 07.12.2019, 09.12.2019, 10.12.2019, 23.12.2019, 08.01.2020, 14.01.2020,17.01.2020 and 28.01.2020 and has stated that:-
a. He was in the process of developing many towers and the progress of each tower was at a different stage and completion certificates have been obtained for some of the towers. The Respondent has also submitted Completion Certificate (CC) dated 08.02.2019, as received from the NOIDA for Towers A, B, C and Studio Towers 1 & 2 (Phase-I). He has further submitted that in terms of RERA Act, regulating the real estate promoters were legally bound to register their on-going as well as new projects and maintain separate account for each of the projects.
b. The Respondent has also submitted reconciliation between the turnover as reported in its statutory erstwhile Service Tax Returns or GSTR and the turnover in his Annual Profit and Loss account. Further, the Respondent has provided details of reversal of credit for unsold units in the towers where CC has been received (i.e. Phase-I) and reversal of ITC in respect of opting of Composition Scheme w.e.f 01.04.2019. The Respondent has further submitted that with effect from 01.04.2019, he has opted for GST @ 5% and 1% scheme without GST credit therefore he was not taking credit on construction services. Further, the Respondent has not taken VAT credit since beginning to June, 2017.
c. The Respondent has further submitted that the turnover reported in Service Tax/ GST Returns cannot be reconciled with the turnover reported in the Balance Sheet as in case of “Continuous projects” revenue was recognised in Balance Sheet on the basis of “percentage of completion” method as per Guidance note prescribed by the Institute of Chartered Accountants of India. Whereas in the case of Service Tax/ GST Returns tax was deposited based on monthly demand raised to the customers as per the Builder Buyer Agreement. The monthly demand raised on the customer was reflected in the Service tax/ GST Returns. Due to two separate mechanism followed differently, the figure reflected in the Service Tax/ GST Returns did not match with the figure appearing in the Balance Sheet.
6. The DGAP in his Report has further stated that vide the aforesaid letters, the Respondent had submitted the following documents/information:-
(a) Copies of GSTR-1 Returns for the period from July, 2017 to June, 2019.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to June, 2019.
(c) Copies of Tran-1 Statement for transitional credit availed by the Respondent.
(d) Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017.
(e) Copies of VAT Assessment Orders for the Assessment Year 2013-14 to 2015-16.
(f) Electronic Credit Ledger for the period from July, 2017 to December, 2019.
(g) CENVAT/ITC Register for the period from 01.04.2017 to 31.03.2019.
(h) Reconciliation of turnover reported in GST Returns and list of Home buyers for the period from July, 2017 to March, 2019.
(i) Copies of all demand letters and agreement issued to the Applicant No. 1.
(j) Copies of agreements, invoices and receipts for various sample units.
(k) Copy of Occupancy Certificate dated 08.02.2019 for phase-I of the project.
(I) Tax rates, pre-GST and post-GST.
(m) Details of Service Tax, CENVAT credit for the period from April, 2016 to June, 2017 and output GST and ITC of GST for the period from July, 2017 to June, 2019.
(n) Tower-wise status of the Project as on 31.03.2019.
(o) Copies of Balance Sheets and Cost Audit Reports for Financial Year 2016-17 & 2017-18.
(p) List of home buyers in the project “Blossom Zest”.
7. The DGAP has stated that the Respondent has also submitted that the information relating to the Customer’s Names, Addresses, Contact Details, Saleable Area, Total Agreement Value, and Date of Allotment were to be treated as Confidential in terms of Rule 130 of the above Rules.
8. The DGAP in his report has further stated that various replies of the Respondent and the documents/evidence on record has been carefully examined by him 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 supplied 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 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 at the outset, it was observed from the website of the Respondent http://www.logixdroup.in/blossom-zest.php, that he has obtained Tower-wise 4 RERA registrations for the project. The registration-wise details of the project have been furnished by the DGAP in Table- ‘A’ below:-
Table-`A’
