Vishal Garg Vs JMD Limited (NAA)
It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his Project JMD Imperial Suits/Suburbio-67 (Suburbio-1)in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 31.05.2020, therefore, the Respondent is liable for imposition of penalty under the provisions of the above Section. Accordingly, notice be issued to him to explain why penalty as prescribed under Section 171 (3A) should not be imposed on him.
The concerned jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each homebuyer as per this Order along with interest @18%. In this regard an advertisement of appropriate size (visible enough to public at imminent page) may also be published by the concerned Commissioner in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder (Respondent) — JMD Limited, Project- “JMD IMPERIAL SUITS” Location- Gurugram, Haryana and amount of profiteering Rs. 33,35,330/- so that the concerned homebuyers can claim the benefit of ITC if not passed on. Homebuyers may also be informed that the detailed NAA Order is available on Authority’s website www.naa.gov.in. Contact details of concerned Jurisdictional CGST/SGST Commissioner responsible for compliance of the NAA’s order may also be advertised through the said advertisement. Such an advertisement will help ensure that is compiled with mandate of Section 171(2) of the CGST Act and will be a step to make certain that the benefit due to every eligible recipient is received by him from the Respondent.
The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of this Order to this Authority and the DGAP within a period of four months from the date of receipt of this Order.
Further, the DGAP is also directed to monitor the compliance of this order by the concerned jurisdictional CGST/SGST Commissioner.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The present Report dated 26.08.2021 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 case are that the Applicant No. 1 had filed an application under Rule 128 (1) of the CGST Rules, 2017 against the Respondent alleging profiteering in respect of construction service supplied by him. The Applicant No. 1 had stated that he had purchased a flat in the Respondent’s project “JMD IMPERIAL SUITES” 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 the price on implementation of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017.
2. The DGAP has stated that the aforesaid reference was examined by the Standing Committee on Anti-profiteering, the minutes of which were received by the DGAP on 06.2020.
3. The DGAP has submitted that the Applicant No-1 along with the application had submitted the copy of Statement of Account Flat/Space No 222 dated 06.06.2019. post-GST.
4. The DGAP has reported that the Applicant had booked a Flat/Space No. 222 in the Respondent’s project “JMD IMPERIAL SUITES”, for which Buyer’s Agreement was executed on 08.04.2011, in the pre-GST period.
5. The DGAP has further stated that on receipt of the said reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the CGST Rules, 2017 was issued by the Director General of Anti-profiteering on 30.06.2020 calling upon the Respondent to reply as to whether he admit that the benefit of ITC had not been passed on to the 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 furnish all supporting documents. Further, the Respondent was given an opportunity to inspect the non-confidential evidences/information submitted by the Applicant No.1 during the period 08.07.2020 to 10.07.2020, which the Respondent did not avail.
6. The DGAP has further submitted that the Applicant No.-1 vide his letter dated 13.07.2020, received in the DGAP on 21.07.2020 submitted that “we had mutually sorted out/ settled all the disputes vide Settlement Agreement dated 13.07.2020. We had nothing left pending on any account whatsoever including GST/VAT towards M/s JMD and fully satisfied with the aforesaid Settlement Agreement. We hereby withdrawal his above cited complaint and further confirm & declare that no amount was pending on any account whatsoever towards M/s JMD Limited including GST/VAT.” There had been no mention of as to how the subject issue had been sorted out and also as to how the benefit of ITC to be passed on had been worked out and the quantum of benefit passed on to the above Applicant in the Applicant’s withdrawal letter referred to above. However, on verification of the documents / information submitted by the Respondent from time to time, it had been observed that the Respondent had availed additional benefit of ITC under the GST regime. the benefit of the same had to be passed on to the recipients u/s 171 of CGST Act. The Standing Committee on Anti-profiteering in its 28th meeting held on 26.05.2020 have observed that ” In the present meeting. a total of 38 complaints appear to have Pan India ramification or had been recommended by the State Screening Committees for further investigation. These were discussed by the Committee and found to have sufficient and necessary prima facie evidence of profiteering: hence, it was decided to forward these complaints to DG Anti-profiteering for further investigation.” The above referred case was included in said 38 complaints considered by the Standing Committee in its 28th meeting held on 26.05.2020.
7. The DGAP has further reported that the Respondent vide his submissions dated 25.02.2021 submitted that “JMD Imperial Suites was a sub project of the project “Suburbio-1” and vide his further submissions dated 25,06.2021 submitted that the project “Suburbio-67” was also known as “Suburbio-1 having total saleable area of 4.23,405 sq. ft. (approx) and the occupancy certificate for the entire project had been granted by Directorate of Town & Country Planning (DTCP), Haryana vide Memo No. ZP-347/SD(BS)/2018/29796 dated 18.10 2018.
8. The DGAP has also stated that the Respondent despite being requested to clarify as to the nature of agreements entered into with the prospective buyers were wholly construction linked or payment linked or mixed, had not submitted any reply in this regard. Therefore, the period covered by the current investigation had been considered as proposed in the NOI i.e. from 01.07.2017 to 31.05.2020.
9. The DGAP has also submitted that the time limit to complete the investigation was up to 02.12.2020, as per Rule 129(6) of the CGST Rules, 2017. However, due to force majeure caused in the light of Covid-19 pandemic, the investigation could not be completed on or before the above date. In terms of the Notification No. 35/2020-Central Tax dated 03.04.2020 wherein “any time limit for completion or compliance of any action, by any authority or by any person, had been specified in, or prescribed or notified under the said Act, which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, and where completion or compliance of such action had not been made within such time, then, the time limit for completion or compliance of such action, shall be extended upto the 30th day of June, 2020″. This was amended vide Notification No. 55/2020 dated 27.06.2020 and 91/2020-Central Tax dated 14.12.2020, issued by the Central Government under Section 168A of the Act wherein the last date for submission of report had been extended up to 31.03.2021. Further, Hon’ble Supreme Court of India passed an order dated 08.03.2021 in Suo Moto Writ Petition (Civil) No. 3 of 2020, wherein, it was stated that “in cases where the limitation would had expired during the period between 15.03.2020 till 14.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall had a limitation period of 90 days from 15.03.2021. In the event the actual balance period of limitation remaining, with effect from 15.03.2021, was greater than 90 days, that longer period shall apply”. The above relief had been extended and the period from 14.03,2021 till further orders shall also stand excluded in computing the limitation period as per the Hon’ble Supreme Court’s Order dated 27.04.2021 passed in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020 .
10. The DGAP has also reported that in response to the Notice dated 30.06.2020, the Respondent submitted his reply vide letters/emails dated 13.07.2020, 05.08.2020, 14.08.2020, 27.08.2020, 02.12.2020, 21.12.2020, 31.12.2020, 12.01.2021, 15.01.2021, 29.01.2021, 25.02.2021, 01.03.2021, 23.03.2021, 09.06.2021 and 25.06.2021.
11. The DGAP has stated that the vide the aforementioned letters/e-mails, the Respondent submitted the following documents/information:
(a) Copies of GSTR-1 returns for the period July, 2017 to May, 2020.
(b) Copies of GSTR-3B returns for the period July, 2017 to May, 2020.
(c) Copy of GSTR-9 return for F.Y. 2017-18, 2018-19 & 2019-20.
(d) Copy of Tran-1 for the period July, 2017 to December, 2017.
(e) Copy of Electronic Credit Ledger for the period July, 2017 to May, 2020.
(f) Copies of VAT & ST-3 returns for the period April, 2016 to June, 2017.
(g) Copy of sale agreement/contract issued in the name of the Applicant.
(h) CENVAT/Input Tax Credit register for the period April, 2016 to May, 2020.
(i) Details of applicable tax rates, pre-GST and post-GST.
(j) Copy of Balance Sheet for FY 2016-17, 2017-18 & 2018-19.
(k) Details of ST, ITC of VAT, CENVAT Credit for the period April, 2016 to June, 2017 and output GST and ITC of VAT, CENVAT Credit for the period July, 2017 to May, 2020.
(l) List of home buyers in the project SUBURB10-67(Suburbio-1)’.
(m) Haryana VAT assessment order for the year 2016-17 issued by the Excise and Taxation Officer-cum-Assessing Authority, Gurugram East.
(n) Project wise bifurcation of ITC of VAT for the period April, 2016 to June, 2017 wherein he had intimated that he had not claimed any ITC of VAT for the period April to June, 2017.
(o) Status of the project “SUBURBIO-67 (Suburbio-1)” in terms of sold and unsold units.
(p) Copy of Occupancy Certificate (Memo No. ZP-347/SD(BS)/2018/29796 dated 18.10.2018).
(q) Copy of Conveyance Deed executed on 10.12.2012 between M/s. Ansal Properties & Infrastructure Ltd. and M/s. Anand Dham Realters Pvt. Ltd. in favour of M/s. JMD Ltd.
12. The DGAP has stated that the Respondent vide his letters dated 09.06.2021 & 25.06.2021 submitted that the project “Suburbio-67” was also known as “Suburbio-1” having total saleable area of 4,23,405 sq.ft. (approx) and total permissible FSI of 3,22,989 sq.ft. (approx.). Out of total permissible FSI of 3,22,989 sq.ft. (approx.), the Respondent had purchased FSI of 2,22,621 sq.ft. vide sale deed dated 10.12.2012 from Ansal Properties & Infrastructure Ltd. and Anandham Realtors Pvt. Ltd. and change of developer for the said FSI of 2,22,621 sq.ft. had already been obtained vide permission dated 27.02.2019. Further, remaining FSI of 1,00,368 sq.ft, was jointly purchased by the Respondent and Mr. Sushil Kumar Daima & Ors. from M/s. Spring Foundation vide conveyance deed dated 30.06.2014 for which application for change of developer was filed and was under process.
13. The DGAP has reported that the said FSI of 1,00,368 sq.ft. was jointly owned by the Respondent along with Mr. Sushi! Kumar Daima & Ors.( mentioned as sandwood in the records of the Respondent) in the ratio 50:50 and thereafter they had mutually entered into a collaboration agreement for development of the said FSI into commercial building, wherein it was mutually agreed that both parties shall contribute their respective shares as 50% towards all expenses pertaining to the cost of construction and sale proceeds out of the same shall be shared as 50:50. The Respondent further submitted that no area had been booked / sold out of the aforesaid area.
14. The Respondent further submitted that the aforesaid combined FSI of 3,22,989 sq.ft. (approx.) was one project (Suburbio-67, otherwise also called as Suburbio-1) and that the Occupancy Certificate was granted for the entire project vide Memo No. ZP-347/SD(BS)/2018/29796 dated 18.10.2018 by the DTCP, Haryana. The Respondent vide his submission dated 14.08.2020 submitted that the provisions of the RERA Act, 2016 were not applicable to the subject project “SUBURB10-1” because he had filed the application for Occupancy Certificate before the applicability of RERA in real estate.
15. The DGAP has further stated that the Respondent vide his letter dated 29.01.2021 received by the DGAP on 03.02.2021 submitted that the information shared as per notice received from the office of Director General of Anti profiteering was highly confidential and requested not to share the same with anyone and accordingly the same had been treated as confidential in terms of Rule 130 of the CGST Rules, 2017.
16. The DGAP has further reported that the subject application and multiple replies submitted by the Respondent along with the documents have been carefully examined. The main issue for determination was whether there was reduction in rate of tax or additional benefit of ITC availed by the Respondent after implementation of GST w,e.f. 01.07.2017 and if so, whether the Respondent passed on such benefit to the recipients, in terms of Section 171 of the CGST Act, 2017.
17. The DGAP has also stated that the other aspect to be considered, while determining profiteering was that para 5 of Schedule-Ill 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 Paragraph 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 had been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever was earlier”. Thus, the ITC pertaining to the residential units which were under construction but not sold was provisional ITC which might be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the Completion Certificate, 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 was 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 might 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”.
18. The DGAP has also submitted that the in response to the Notice of Initiation of investigation dated 30.06.2020 and subsequent reminders, the Respondent vide his submission dated 09.06.2021 provided the details of turnover and CENVAT credit /ITC availed for all the projects as mandated under erstwhile CENVAT Credit Rules 2004, present CGST Rules 2017& RERA regulations. The Respondent vide his submission dated 14.08.2020 further submitted that the provisions of the RERA Act, 2016 were not applicable to the subject project “SUBURB10-67 (Suburbio-1)” because they had filed the application for Occupancy Certificate before the applicability of RERA in real estate.
19. The DGAP reported that from the above, it was clear that the credit on input services was admissible to the Respondent under Rule 2(1) of the Cenvat Credit Rules 2004, which was utilized to pay service tax. Further, the Respondent vide letter dated 15.01.2021 submitted that as per the Assessment Order No. 886/2016-17 dated 27.02.2020, he was eligible for credit of t 7.91 ,900/- for the FY 2016-17 and out of that 13,66,212/- was with reference to the project “SUBURB10-67 (Suburbio-1)”. Further, as seen from the Respondent’s letter dated 29.01.2021 wherein it was communicated that he had not taken VAT input for the period April, 2017 to June, 2017. Accordingly, ITC of VAT of 13,66,212/- for the period 01.04.2016 to 30.06.2017 had been considered for computation of profitability.
20. The DGAP reported that the Respondent vide letter dated 25.06.2021 submitted that he had made reversal of ITC against the unsold super area of 1,62,426.39 sq.ft. that was under the exclusive ownership of the Respondent and 1,11,758.61 sq.ft. under the joint ownership with Mr. Sushil Kumar Daima & Ors (mentioned as sandwood in the records of the Respondent) in respect of the units that were unsold.
21. The DGAP has stated that it was observed that prior to 01.07.2017, i.e., before GST was introduced. the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services. However, CENVAT credit of Central Excise duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which was in force at the material time. Moreover, in the pre-GST regime as seen from the VAT returns it was observed that he had awarded the work to various subcontractors and had also purchased certain materials on which credit of VAT was claimed. However, as seen from the Order No. 886/2016-17 dated 27.02.2020 issued Under Haryana Value Added Tax, 2003 by the Excise and Taxation Officer-cum-Assessing Authority, Gurugram submitted vide Respondent’s letter dated 15.01.2021 it was observed that the Input Tax allowed proportionate to the sold area was 17,91,900/- and also as seen from the reconciliation of Purchase and VAT for the Financial year 2016-17 the credit attributable to the project “SUBURB10-67 (Suburbio-1)” was 13.66,212/-. Further, as seen from the Respondent’s letter dated 29.01.2021 wherein it was communicated that he had not taken VAT input for the period April, 2017 to June, 2017. Accordingly, the credit of VAT for the period April, 2016 to June, 2017 was considered as t 3 66,212/- for the purpose of computation of the element of profiteering. Further, post-GST, the Respondent could avail the ITC of GST paid on all the inputs and input services. From the information submitted by the Respondent for the period April, 2016 to May, 2020, the details of the ITC availed by them, his turnover from the project “SUBURB10-67 (Suburbio-1) and the ratios of ITC to the turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to May, 2020) periods was calculated and was furnished in Table-A’ below:
