Shivkumar Tattimani Vs Axis Concept Construction Pvt. Ltd (NAA)
ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.17% and during the post-GST period (July-2017 to April-2020), it was 13.52% for the project “Axis Vedam”. This confirms that, post-GST. the Respondent has been benefited from additional ITC to the tune of 12.36% [13.52% (-) 1.17%] of his turnover for the said project and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs 40,94,480/-for the project –Axis Vedam”. the details of which are mentioned in Table- B above. This Authority finds that the project “Axis Vedam” comprises of 46 units in all and out of the above. 21 units belong to land owner which were handed over to him after obtaining the Occupancy Certificate for possession and in respect of rest 4 units of the Respondent’s share of 25 units. 2 units were sold post OC and in respect of other 2 units, there were no payments receive in post GST period. Therefore. the profiteering amount of Rs. 40.94,480/- is with respect to 21 customers/flat buyers/recipients amongst all the customers as on 30.04.2020 in the project “Axis Vedam”. The list of 21 customers/flat buyers/recipients has been attached as Annexure – ‘A’ with this Order, containing the details of the amount of benefit of ITC to be passed on in respect of the project –Axis Vedam” of the Respondent.
In view of the above discussions, the Authority finds that the Respondent has profiteered by an amount of Rs 40.94.480/- for the Project “Axis Vedam” during the period of investigation i.e. 01.07.2017 to 30.04.2020. The above amount that has been profiteered by the Respondent from his customers/flat buyers/recipients in the above said 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 payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules. 2017.
The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP’s Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 30 04 2020. in the instant case, as Rs. 40.94.480/- for the Project “Axis Vedam”. This Authority under Rule 133 (3) (a) of the CGST Rules. 2017 orders that the Respondent shall reduce the prices to be realized from the customers/flat buyers/recipients commensurate with the benefit of ITC received by him as has been detailed above.
The Respondent is also liable to pay interest as applicable on the entire amount profiteered. i e Rs. 40.94.480/- for the project “Axis Vedam” 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/ payment. as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 29.01.2021 has been furnished by the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the present case are that an application was filed before the Karnataka State Screening Committee on Anti-profiteering, under Rule 128 of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “the Rules”), by the Applicant No. 1, alleging profiteering by the Respondent in respect of purchase of Flat No. 103, in the Respondent’s project “Axis Vedam”. The Applicant No. 1 has alleged that the Respondent had not passed on commensurate benefit of Input Tax Credit (ITC) to him, on implementation of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017.
2. The DGAP in his Report dated 29.01.2021, inter-alia stated that:-
i. The Karnataka State Screening Committee on Anti-profiteering examined the said application and observed that the Respondent had not passed on the appropriate benefit of ITC to the Applicant No. 1 as the additional ITC available to Respondent should have been apportioned against the instalments towards the price of the flat. The Karnataka State Screening Committee forwarded the said application with its recommendation, to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the Rules.
ii. The aforesaid reference had been examined by the Standing Committee on Anti-profiteering, the minutes of which were received by the DGAP on 06.05.2020.
iii. The Applicant No. 1 had submitted along with application the copy of demand letters issued to him, both pre-GST and post-GST.
iv. The Applicant No. 1 had booked a Flat No. 103 in the Respondent’s project “Axis Vedam”, for which Agreement for Sale, Construction Agreement & Customization Supplementary Agreement, all three were executed on 13.06.2016, in the pre-GST period.
v. On receipt of the said reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the CGST Rules, 2017 had been issued by the DGAP on 02.06.2020, calling upon the Respondent to reply as to whether the Respondent 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 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 19.06.2020 to 22.06.2020, which the Respondent did not avail.
vi. The Respondent vide his e-mail dated 12.06.2020 submitted that the Applicant No. 1 had cancelled the booking and he had paid all the amounts due to the Applicant No. 1 including the compensation amount and had also closed the II FL Bank loan as per the pre-closure letter and after the receipt of confirmatory mail dated 24.05.2018 from the Applicant No. 1, he had sold the Flat No 103 to another customer in the month of July-2018 (after obtaining Occupancy Certificate) which was in the knowledge of the Applicant No 1. However. on verification of the documents/information submitted by the Respondent from time to time, it has been observed by the DGAP that, the Respondent has availed additional benefit of ITC under the GST regime. the benefit of the same has to be passed on to the recipients u/s 171 of CGST Act. Therefore, irrespective of the cancellation of booking by the Applicant No. 1, it had been decided to continue the investigation initiated Further, the Respondent vide his e-mail dated 23 01.2021 submitted that all the documents/information were to he treated confidential.
vii. The period covered by the current investigation was from 01 07.2017 to 30 04.2020.
viii. The time limit to complete the investigation was up to 05.11.2020, 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 Notification No. 35/2020-Central Tax dated 03.04.2020. as amended vide Notification No. 55/2020 dated 27.06.2020 and 91/2020-Central Tax dated 14.12.2020 (Annex-5). issued by the CBIC under Section 168A of the COST Act, 2017wherein the last date for submission of Report has been extended up to 31.03.2021.
ix. In response to t he notice dated 04.06.2020, the Respondent has submitted his reply vide letters/e-mails dated 12.06.2020, 30.06.2020, 02.09.2020, 28.09.2020, 30.09.2020, 01.12.2020, 21.12.2020, 24.12.2020, 23.01.2021, 28.01.2021.
x. 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 April. 2020.
b. Copies of GSTR-3B returns for the period July, 2017 to April, 2020.
c. Copy of Electronic Credit Ledger for the period01.07.2017 to 30.04.2020.
d. Copies of Tran-1 for the period July, 2017 to December, 2017.
e. Copies of VAT & ST-3 returns for the period April, 2016 to June, 2017.
f. Copies of all demand letters, sale agreement/contract issued in the name of the Applicant No. 1.
g CENVAT/Input Tax Credit register for the period April, 2016 to April, 2020.
h. Copy of Balance Sheet for FY 2016-17 & 2017-18.
i. Tax rates, pre-GST and post-GST.
j. Details of turnover, output tax liability/GST payable and ITC availed and his reconciliation with the turnover as per the list of home-buyers.
k. List of home buyers in the project “Axis Vedam”.
xi. The Respondent vide e-mail dated 23.01.2021 has submitted that the information shared, documents and data submitted were confidential in nature and accordingly the same had been treated as confidential in terms of Rule 130 of the CGST Rules. 2017
xii. The subject application and various replies submitted by the Respondent along with the documents had been carefully examined. The main issues for determination was whether there had been 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.
xiii. The other aspect to be considered, while determining profiteering was 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 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 has been received after issuance of completion certificate, where required. by the competent authority or after his first occupation, whichever is 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 panty for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is 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 is 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, ITC pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate additional ITC available to him post-GST.
xiv. In response to the notice of initiation of investigation dated 02.06.2020 and subsequent reminders, the Respondent vide his submission dated 21.12.2020 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. The Respondent vide his submission dated 02 09.2020 further submitted that the provisions of the RERA Act. 2016 were not applicable to the subject project and accordingly, he had not obtained RERA registration for the same.
xv. From the above, it was clear that the credit on input services was admissible to the Respondent under Rule 20) of the Cenvat Credit Rules 2004, which was utilized to pay service tax. Further, the Respondent vide email dated 01.12.2020 submitted that he had opted for composition scheme and hence had not claimed any input credit. under VAT. The fact of non-availment of input credit, under VAT was corroborated by his VAT Returns.
xvi. 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 were in force at the material time. Moreover. since the Respondent was paying VAT @4 0% under Composition scheme and had made payments only in cash as was evidenced from the VAT returns submitted, he was not eligible to avail ITC of VAT paid on the inputs. 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 April, 2020, the details of the ITC availed by him, his turnover from the project “Axis Vedam” and the ratio of ITC to the turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to April. 2020) periods were calculated and has been furnished in table-‘A’ below:
