Hemant Kejriwal Vs Siddha Infradev LLP (NAA)
It is clear to us from the documents placed on record that the Respondent has claimed to have sold 70 flats after the introduction of GST and also claimed that he had freshly negotiated the prices of these flats after considering the benefit of the input tax credit. On this issue, the DGAP vide his clarificatory Report dated 16.09.2020 has himself stated that this claim of the Respondent needed to be further examined as the same was made before this Authority and not before him.
Accordingly, the Report dated 19.03.2020 furnished by the DGAP needs to be revisited by him. Thus the DGAP is directed to further investigate the present case under Rule 133 (4) of the CGST Rules, 2017 up to 30.10.2020 or till the date of issuance of Completion/Occupancy Certificate whichever is earlier and verify the claim of the Respondent that 70 (Seventy) flats have been sold after the introduction of GST, i.e. 01.07.2017 and to ascertain as to whether the benefit of the input tax credit has been passed on by the Respondent to the eligible flat buyers by way of commensurate reduction in prices or not.
It is also directed that a detailed Report shall be submitted under Rule 129 (6) of the above Rules. If required the DGAP shall be at liberty to take the assistance of the field Tax Authorities of the Central and the State Government who are directed to extend all cooperation to the DGAP in terms of Rule 136 of the CGST Rules, 2018 and Para 38 of the “Methodology & Procedure” framed under 126 of the CGST Rules, 2017 and notified on 28.03.2018 by this Authority. The respondent is also directed to extend all assistance to the DGAP during the course of further investigation of the present case.
Therefore the DGAP is also directed to ascertain whether the Respondent has been constructing any other projects during the pre-GST and post-GST regimes and if so, the DGAP is also directed under Section 171 (2) of the CGST Act to verify whether the provisions of Section 171 have been followed by the Respondent in the case of other projects being constructed by him and submit a comprehensive Report under Rule 129 (6) of the CGST Rules, 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present Report dated 19.03.2020 has been received from 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 case are that the DGAP received a reference from the Standing Committee on Anti-profiteering on 28.06.2019 recommending a detailed investigation against the Respondent in respect of an Application filed by Applicant No. 1 under Rule 128 of the Central Goods and Services Tax Rules, 2017 alleging profiteering by the Respondent in respect of the purchase of a residential unit, i.e. Flat No. 904 in Block-3, in Respondent’s project “Siddha Sky” located in Kolkata. Applicant No. 1 has alleged that the Respondent had not passed on the benefit of input tax credit (ITC) by way of commensurate reduction in prices despite having charged GST @12% on the payments made by him to the Respondent. The Applicant No. 1 also submitted that on having raised the said issue with the Respondent, he has received the following reply vide email dated 11.01.2018 from the Respondent which read as follows- “As per the provisions of the GST Act in which the purchasers are entitled to receive benefit of lower prices on account any reduction in rate of tax on any supply of goods or services and benefit of Input Tax Credit, as put in place in the said Act. You will however appreciate that the said GST Act which came in force only on 01.07.2017 is in its nascent stage. There is no clarity with regard to the manner in which the benefit of input tax credit and any reduction of tax rate, shall be quantified. In the above circumstances, it is difficult for us to precisely estimate the benefit which we have to transfer to our buyers at this stage. We are in the process of working out the cost benefits both in our hands as also in the hands of the customers, but it will take time to work out the exact benefits if any that will accrue to the customers. If any benefit will arise; we shall definitely inform you on or before the time of possession and or final payment.”
2. Applicant No. 1 has further submitted before the DGAP that although Respondent accepted the fact that the benefit of input tax credit should be passed on but, the manner of passing the credit was not clear, therefore, he had not passed on such benefit till the date of filing of the application. Further, the Applicant No.1 submitted the following documents along with his application:-
a) E-mails of correspondence with Respondent requesting to pass on the benefit of the input tax credit.
b) Copies of Demand Letters raised on him by the Respondent.
c) Copy of an advertisement published on Respondent’s website wherein it was advertised that- “Price increase from April 2019, Buy a Flat. NO GST and Save up to Rs. 15.11 Lakhs”.
3. The DGAP, on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, issued a Notice under Rule 129 of the Rules on 09.07.2019, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC has not been passed on to his recipients 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 to furnish all documents in support of his reply. Further, the DGAP allowed the Respondent to inspect the non-confidential evidence/information which formed the basis of the above-said Notice, during the period from 17.07.2019 to 19.07.2019. However, the Respondent did not avail of the said opportunity. Vide e-mail dated 27.02.2020, the Applicant No. 1 was also allowed to inspect the non-confidential documents/reply furnished by the Respondent on 03.03.2020 or 04.03.2020. However, Applicant No. 1 did not avail of the said opportunity.
4. The DGAP has reported that he has covered the period from 01.07.2017 to 30.06.2019 during the current investigation. The time limit to complete the investigation was extended up to 27.03.2020 by this Authority vide its order dated 23.12.2019, in terms of Rule 129(6) of the Rules.
5. The DGAP has stated that the Respondent has submitted his replies vide his various letters/ e-mails but he did not furnish the complete records/ information and relevant documents which were required for investigation. Hence, Summons under Section 70 of the Central Goods and Services Tax Act, 2017 read with Rule 132 of the Rules, were issued to Sh. Sanjay Jain, Designated Partner of the Respondent, asking him to appear before the DGAP on 14.11.2019. In response to the abovementioned Summons, the representatives authorized by the Respondent, Ms. Sonia Dube, Advocate and Ms. Surbhi Anand, Advocate appeared before the DGAP on behalf of Sh. Sanjay Jain on 14.11.2019 and requested the DGAP for 10 days to submit the requisite records/ documents. Thereafter, the Respondent submitted his response to the above said Notice and Summons vide his various letters and emails and furnished the following documents/ information before the DGAP:-
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 ST-3 returns for the period from April 2016 to June 2017.
d) A submission that as per the West Bengal Value Added Tax Rules, 2003, VAT laws did not apply to him.
e) Screenshot of his Tran-1.
f) Tax rates applicable in his case in the pre-GST and post-GST periods.
g) Copies of his audited Balance sheet for FYs 2016-17 & 2017-18.
h) Copy of all the Demand Letters and Sale Agreement/Contract issued by him to the Applicant.
i) Copy of his Electronic Credit Ledger for the period from July 2017 to June 2019.
j) CENVAT/ Input Tax Credit register for the period from April 2016 to June 2019.
k) Copy of the Joint Development Agreement between him and landowners dated 15.09.2016.
I) Details of his Service Tax and GST turnover, his output tax liability, and the ITC availed by him for the project “Siddha Sky”.
m) Blockwise Sales & Stock Summary as of 30/06/2019 of the project “Siddha Sky”.
n) List of homebuyers in his project “Siddha Sky”.
6. The DGAP has summed up the various contentions of the Respondent as follows:-
a) That the taxation laws applicable to the real estate sector had undergone several changes upon the introduction of GST and clarity was lacking on certain issues relating to the real estate sector.
b) That he had always complied with the GST laws as applicable from time to time and was willing to comply with the provisions of Section 171 of the Central Goods and Services Tax Act, 2017; that the Applicant No. 1 had been informed that the benefit on account of ITC if any, will be calculated and the demands to be raised on Applicant No. 1 in the future will be suitably adjusted on the completion of the project.
c) That the impugned project comprised of several blocks that were under different stages of construction at the time of the investigation; that these blocks were also under different stages of completion on the date of implementation of GST.
d) That the ITC claimed by him by way of filling TRAN-1/ TRAN-2 had also not reached finality and there was considerable confusion in this regard.
e) That the GST laws had been subsequently amended by withdrawing the availability of ITC to the service provider if he opted for a 5% rate of GST; that this change has made computation of the ITC benefit difficult in the intermediate period.
f) That notwithstanding the above, he was committed to complying with all the provisions of the GST law including the provisions of Section 171 of the Central Goods and Services Tax Act, 2017.
g) That there were some homebuyers from whom he had received advances but their units were not yet allotted and that their case should be treated as falling outside the scope of Section 171 of the Central Goods and Services Tax Act, 2017; that certain customers from whom he had received advances were in the process of cancellation of their bookings/ units.
h) That he had executed an Agreement dated 15th September 2016 with the landowners that provided for revenue-sharing between him and the landowners; that since the unite belonged to him, he had availed the entire CENVAT credit/ ITC in respect of all the units.
i) that for calculating the share of revenue between the landowners and him, the following basis had been agreed between them vide their aforementioned Agreement:-
i. That no units/area was to be allocated to the landowners, who were entitled to the revenue arising out of the first 36,610 sq. ft. sold in the project.
ii. That he was entitled to revenue arising out of the 42,995 sq. ft. which would be sold after the sale of the share of the landowners.
iii. That the revenue out of the remaining 7,54,545 sq. ft. will be shared in the 44.5: 55.5 ratio between him and the landowners, respectively.
j) That since his Agreement with the landowners provided for sharing of revenue, he was entitled to the ITC in its entirety and was not required to pass on the ITC to the landowners.
k) That he had opted for the 12% effective GST rate along with ITC under Notification No: 03/2019-Central Tax (Rate) dated 29th March 2019.
l) That his “No GST” advertisement was in respect of his scheme that lasted for a limited period in March 2019; that under this scheme, he had offered to issue credit notes, covering the amount of GST, to any prospective customer on booking flat in the project; and the burden of GST was to be borne by the Respondent and no GST was evaded.
7. The DGAP has stated that the examination of the case records, including the complaint filed by Applicant No. 1, the reference from the Standing Committee on Anti-profiteering, the various replies of the Respondent and the documents/evidence on record, revealed that investigation was required to address the following issues:-
a) Whether the Respondent was benefitted on account of ITC on account of the implementation of GST w.e.f. 01.07.2017 and if so,
b) Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
8. DGAP has reported that the Respondent, vide his letter dated 22.07.2019, has furnished a copy of the Sale Agreement dated 16.11.2016, the Booking Application form dated 25.10.2016, the demand letters issued by him and the payment receipts in respect of the sale of Flat No. SS/3/904, Block 3 to the Applicant, at a basic price of Rs. 1,76,09,500/-. Based on the above, the details of various amounts and taxes paid by Applicant No. 1 to the Respondent have been detailed by the DGAP in the Table-A’ below:-
Table-A
