Niranjan Swain Vs LIC HFL Care Homes Ltd. (NAA)
Authority finds that the Respondent has profiteered by an amount of Rs. 1,85,70,263/- during the period of investigation i.e. 01.07.2017 to 30.09.2020. This amount of Rs. 1,85,70,263/- includes the amount relating to the Applicant No. 1 amounting to Rs. 1,27,892/-. The above amount that has been profiteered by the Respondent from the recipients of supply in the Project shall be refunded by him, along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such refund payment and per the provisions of Rule 133 (3) (b) of the GCST Rules 2017.
The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 1,85,70,263/-. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on by way of refund payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017.
It is also evident from the above narration of facts that the Respondent has denied the benefit of ITC to his home buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of above Act. That 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 30.09.2020, therefore, the Respondent is liable for imposition of penalty under the provisions of the above Section for the amount profiteered from 01.01.2020 onwards. Accordingly, notice be issued to him.
The concerned jurisdictional CGST/SGST Commissioner is directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each homebuyer/shopbuyer as per the details provided in para 26 supra of this Order along with interest ©18% as prescribed. In this regard an advertisement of appropriate size to be visible to the public may also be published in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder (Respondent) —M/s. LIC HFL Care Homes Ltd., Project- `Jeevan Ananda’, Location- Mouja Aiginia, Khandagiri, Bhubaneswar, Tahasil, Khurda District and amount of profiteering so that the concerned homebuyers/shopbuyers 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 naa.gov.in. Contact details of concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement.
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 4 months from the date of receipt of this Order.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The Present Report dated 28.01.2021 has been received from 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 (Rules). The brief facts of the case are that the Standing Committee on Anti-profiteering, after being prima facie satisfied, had forwarded the complaint filed under Rule 128 of the CGST Rules, 2017 by Applicant No. 1 alleging profiteering by the Respondent in respect of the purchase of Flat no. 605 of Block No. A-3 in the project “Jeevan Ananda”, situated at Plot Bhubaneswar, Mouja Aiginia, Khandagiri, Bhubaneswar, Khurda District. Applicant No. 1 has alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in prices and charged GST ©12% on the demand raised post-GST. Applicant No. 1 had further alleged that he was allotted an under-construction flat on 18.08.2011 and had paid 90% of the consideration under the erstwhile Service Tax regime and the balance consideration was due to be paid under the GST regime. Further, the Applicant submitted the following documents along with his application in APAF-1:-
a. Copy of Allotment Letter dated 18.08.2011 along with Brochure of the project.
b. Copies of letters dated 19.11.2019, 20.02.2020 & 17.06.2020 written by the Applicant requesting the Respondent to recalculate the basic price considering benefit of ITC in the GST regime.
c. Copy of Aadhar Card.
d. Copy of Demand Letter dated 13.01.2020.
e. Copy of Reply dated 24.12.2019 given by the Respondent wherein it was stated that “the cost of flats was exclusive of taxes and hence the allottees had paid the Service Tax before GST- regime accordingly. In the GST regime, the GST amount as applicable had been charged as per prevailing laws in this regard. Allottees registered with GST number could claim the ITC towards GST paid by them.”
2. Vide the above-mentioned Report, the DGAP has stated:-
a. That on receipt of the reference from the Standing Committee on Anti- Profiteering on 15.10.2020, a Notice under Rule 129 of the Rules was issued on 09.11.2020, 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 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.
b. That vide letter dated 21.12.2020, the Respondent requested to provide a copy of the Minutes of the Standing Committee’s meeting along with the complaint filed by the Applicant, which were provided to the Respondent vide the DGAP’s letter dated 06.01.2021.
c. That the period covered by the current investigation was from 01.07.2017 to 30.09.2020.
d. That vide various letters/e-mails dated 30.11.2020, 21.12.2020, 12.01.2021 and 14.01.2021, Respondent submitted the following documents/information:
i. Copies of GSTR-1 Returns for the period July 2017 to September 2020.
ii. Copies of GSTR-3B Returns for the period July 2017 to September 2020.
iii. GSTR-9/9C for the FY 2017-18 & 2018-19.
iv. Copies of ST-3 Returns for the period April 2016 to June 2017.
v. Tax rates – pre-GST and post-GST.
vi. Copies of audited Balance sheets for FY 2016-17 to 2019-20.
vii. Copies of the Sale agreement, all Demand Letters, Payment Receipts, and Sub Lease Deed entered with the Applicant.
viii. Copy of Electronic Credit Ledger for the period July 2017 to September 2020.
ix. Declaration in Annexure-IV to Notification No. 3/2019-CT (Rate) dated 29.03.2019.
x. CENVAT/Input Tax Credit register for the period April 2016 to November 2019.
xi. Details of VAT, Service Tax and GST turnover, output tax liability payable and ITC availed for the project “Jeevan Ananda”.
xii. Copy of Long term Lease deed with Government of Odisha for procurement of land.
xiii. Copy of Occupancy Certificate no. 27896 dated 25.11.2019.
xiv. Copy of RERA Registration Certificate dated 30.08.2018 along with all project progress reports submitted to RERA up to September 2020.
xv. List of home buyers & commercial shop buyers in the project “Jeevan Ananda”.
xvi. The approved cost of the project “Jeevan Ananda”.
xvii. Pro-rated computation of benefits.
e. That in response to the Notice dated 09.11.2020 and subsequent reminders, Respondent replied vide above-said letters/e-mails and the same were summed up as follows: –
i. The Respondent had successfully developed two projects in Bengaluru, Karnataka (Jeevan Anand Phase I and Jeevan Anand Phase II). These projects were completed way back in 2007 and 2014, respectively. At present, the Respondent had only one ongoing project, namely “Jeevan Ananda” located at Bhubaneswar, which was commenced in the year 2011.
ii. The project was registered under Odisha Real Estate (Regulation and Development) Rules 2017 with registration no. MP/19/2018/00170.
iii. The Respondent had obtained the parcel of land for the development of the project on a long-term lease contract executed with the Government of Odisha on 7.11.2007 for a period of 90 years. As per the terms of the Land Lease contract, the said land could be used by the Respondent for the construction of buildings and structures for commercial and residential establishments. The Respondent had appointed various contractors for conducting various activities, including construction works, water treatment works, procurement and installation of lifts, power transmission and supply works, firefighting contracts, etc.
iv. Before the implementation of Goods and Services Tax, taxes applicable on construction activities included Service Tax on the provision of construction services and Value Added Tax (VAT) on the transfer of property in goods involved in the execution of the works contract. Since the entire construction contract was outsourced by the Respondent to various contractors, he was not liable to pay VAT under Section 10(4a)(b) of the Odisha VAT Act, 2004. Hence, he had not obtained registration under Odisha VAT Act 2004. Consequently, the Respondent was neither charging VAT from the home buyers nor availing any ITC of VAT paid on goods used/involved in the project.
v. For Service Tax, the Respondent was registered and paying tax under the composition scheme provided under Rule 2A of the Service Tax (Determination of Valuation) Rules, 2006 on 30% of the total amount charged for the Works Contract. As per the said Rule 2A, the Respondent was not eligible to avail CENVAT Credit of Excise Duty paid on goods (i.e. inputs) used in the development of the Project. However, he was eligible to avail CENVAT Credit of Service Tax paid on all input services used in the Project. As Service Tax paid on input services was fully creditable, Service Tax paid on input services was not considered as project cost.
vi. With the implementation of GST effective 01.07.2017, the Respondent migrated to the GST regime and obtained registration in the State of Odisha under the GST Laws. In the GST regime, the activities of the Respondent were regarded as a supply of service under Schedule II (Entry 5B or Entry 6) of the CGST Act 2017. For valuation under the GST regime, the Respondent was eligible to avail abatement on the value of land (i.e. 1/3rd of the amount charged) for the purpose of computing GST liability under Notification No. 11/2017-CT(R) dated 28th June 2017. Therefore, the Respondent was charging GST on 2/3rd of the amount charged by it from the home buyers post implementation of GST. The GST rate was 18%, hence, the effective rate of GST charged by the Respondent was 12% after availing of the 1/3rd abatement.
vii. The Respondent completed the Project in November- 2019 and received Occupancy Certificate No. 27896/BDA, Bhubaneshwar dated 25,11.2019 from the Bhubaneshwar Development Authority.
viii. He was eligible to claim credit of Service Tax paid on input services, but he was not eligible to take any credit of VAT paid on the ‘goods’ purchased/used in the Project. However, in the present GST regime, there was no restriction on availing ITC of GST paid on goods used in the project, and to that extent, there might be an ITC benefit. Break-up of the goods and services procured in the GST regime was given in Table-‘A’ below:-
Table-‘A’
