Damodar Ropeways & Infra Limited Vs Salarpuria Signum Complex LLP (NAA)
It is observed from the DGAP’s report that the ITC, as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 5.07%, whereas, during the post-GST period (July-2017 to September, 2020), it was 5.60% for the project ‘Victoria Vista‘. The DGAP has found that, post-GST, the Respondent has been benefited from additional ITC to the tune of 0.53% (5.60% – 5.07%) of his turnover for the project `Victoria Vista’ 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 all the flat buyers as Rs. 3,80,367/- for the project ‘Victoria Vista’, which was availed by the Respondent. The profiteering amount determined by the DGAP during the period 01.07.2017 to 30.09.2020 is in respect of the units in respect of units which belong to Sh. Narendra Kumar Bardia (unit no. 8B) Rs. 11,872/- (including GST), Sh. Swapan Ghosh (unit no. 9B) Rs. 1,60,626/- (including GST), Sh. Harish Agarwal (unit no. 18B) Rs. 2,01,339/- (including GST) and Sh. Firoz Bei (unit no. 19B) Rs 6,530/- (including GST). Further, it also appears from the report of the DGAP that the commensurate proportion of benefit of ITC is to be calculated as discussed supra and needs to be passed on to the eligible recipients proportionate to their share at the time of supply (sale of their share of flats) as envisaged in the Notification No. 4/2018-(Central Tax).
However, the Authority finds that the profiteering amount of Rs. 3,80,367/- (including GST) has been determined by the DGAP in respect of the four units (out of Respondent’s 17 units) sold by the Respondent from his share of flats till the period of investigation i.e. upto 30.09.2020. It was reported by the DGAP that no unit from the Applicant No. I to 9’s share of flats (27 units) were sold till the investigation period. Therefore, only 4 units were considered for the calculation of profiteered amount by the DGAP during the investigation period 01.07.2017 to 30.09.2020.
Further, the Authority finds that as per the Applicant No. 1’s submissions dated 20.06.2022, the Respondent has received the Completion Certificate on 18.05.2022. Further, the Respondent during the Personal hearing held on 08.06.2022 has also stated that the Occupancy Certificate has been received by him for the said project in May, 2022. Therefore, in the given facts and circumstances, the Authority finds that this is a fit case to direct the DGAP to conduct the investigation upto the date of Completion Certificate so that the commensurate benefit of ITC in respect of all units are calculated.
Therefore, without going into the merits and the other submissions made by the Respondent and the Applicant No. 1 to 9 at this stage, the Authority finds that this case needs to be reinvestigated by the DGAP
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 31.03.2021 had been received in National Anti-Profiteering Authority (NAA or Authority) 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 on his behalf and 8 other companies namely M/s Accurate Real Estates Private Limited, M/s Splash Properties Pvt. Ltd., M/s Abundant Properties Pvt. Ltd., M/s Seed Properties Pvt. Ltd., M/s King Properties Pvt. Ltd., M/s Mason Buildcon Pvt. Ltd., M/s Pansy Nirman Pvt. Ltd., and M/s Techserve Tele Services Pvt. Ltd., collectively referred to as `land owners’ alleging profiteering by the Respondent in respect of the development agreement entered into with the Respondent on 26.12.2013 and also the allocation agreement dated 02.05.2017 thereto, in respect of the Respondent project “Victoria Vista”, Kolkata. The above Applicants had alleged that the Respondent had not passed on commensurate benefit of 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 31.03.2021, had inter-alia, stated that:-
a) The aforesaid reference was examined and forwarded by the Standing Committee on Anti-profiteering and was received by the DGAP on 15.10.2020 to conduct a detailed investigation in the matter. Accordingly, investigation was initiated to collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. 1 to 9 in respect of construction service supplied by the Respondent.
b) On receipt of the said reference from the Standing Committee on 15.10.2020, a Notice under Rule 129 of the CGST Rules, 2017 was issued by the DGAP on 13.11.2020, 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 26.11.2020 to 27.11.2020, which the Respondent did not avail.
c) 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.
d) The period covered by the current investigation was from 01.07.2017 to 30.09.2020.
e) The time limit to complete the investigation was 14.04.2021.
f) In response to the DGAP’s Notice dated 13.11.2020, the Respondent submitted his reply vide mail / letter dated 25.11.2020, 02.12.2020, 04.01.2021, 03.02.2021, 10.03.2021, 17.03.2021 and 25.03.2021. The Applicant No. 1 had also submitted home buyers list for the owners share of allotment vide his letter dated 08.03.2021 forwarded through email.
g) Vide the aforementioned letters/e-mails, the Respondent and Applicant No. 1 submitted the following documents/ information:
i) Brief profile of the Respondent.
ii) Copies of GSTR-1 and GSTR-3B Returns for the period July, 2017 to September, 2020 and copy of GSTR-9 Returns for the FY 2017-18 & 2018-19.
iii) Copy of Tran-1 filed.
iv) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.08.2020.
v) Copies of ST-3 returns for the period April, 2016 to June,
vi) CENVAT/ITC register for the period April, 2016 to September, 2020.
vii) Details of applicable tax rates, pre-GST & post-GST.
viii) Balance Sheet for the FY 2016-17, 2017-18, 2018-19.
ix) Copy of RERA Registration bearing No. HIRA/P/KOL/2018/000025 for the project Victoria Vista under West Bengal Housing Industry Regulatory Authority.
x) Copy of Agreement/Registry between the land owners and
the developer for the project “Victoria Vista”.
xi) Copies of Declarations made in Annexure-IV to the Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019.
xii) Status of the project “Victoria Vista” as on 30.09.2020 in terms of tower-wise sold and unsold units.
xiii) Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to September, 2020 for all the projects separately including the project “Victoria Vista”.
xv) List of home buyers in the project “Victoria Vista”.
h. Copy of tax invoices for the months of Feb’18, Mar’18, Sept’ 18 to Mar’19, April’19, July’19, Aug’19, Nov’19 to March’20, June’ 20 to Sept’20.
i. In the Notice dated 13.11.2020, the Respondent was informed that if any information/documents was provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was required to be furnished. The Respondent vide mail dated 25.03.2021 requested to treat all the documents submitted by him as confidential. Accordingly, the documents had been treated as confidential under Rule 130 of the Rules.
i) The subject Application and several replies submitted by the Respondent along with the documents had been carefully examined by the DGAP. The main issues for determination are:
ii) 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.
J. 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 was under construction but not sold was provisional ITC which might be required to be reversed by the Respondent, if such units remained 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 are 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 exempted 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 exempted supply under subsection (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.
k. In response to the Notice of Initiation of investigation dated 13.11.2020 and subsequent reminder dated 12.03.2021, the Respondent vide his submission dated 03.02.2021 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. From the Respondent’s submission dated 17.03.2021, it was observed that the Respondent obtained the RERA Registration bearing No. HIRA/P/KOL/2018/000025 for the project “Victoria Vista” under West Bengal Housing Industry Regulatory Authority.
l. 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, as seen from the Respondent’s submissions dated 17.03.2021 “We were not registered under the State VAT laws in the state of West Bengal. We are engaged only in real estate development activity, on which VAT was not payable in the state. Hence no such return was required to be filed by us “. Accordingly, no credit of VAT had been considered for computation of profiteering.
m. 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. 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 September, 2020, the details of the ITC availed by him, his turnover from the project “Victoria Vista”, and the ratio of ITC to the turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to September, 2020) periods were calculated and has been furnished in table-`A’ below:
