Sh. Dhiraj Shetty Vs Bhagwati Infra (NAA)
The brief facts of the present case, are that a reference was received by the DGAP from the Standing Committee on Anti-profiteering on 09.10.2019 to conduct a detailed investigation in respect of an application filed under Rule 128 of the Central Goods and Services Tax Rules, 2017 alleging profiteering by the Respondent in respect of purchase of a flat in the Respondent’s project ‘Bhagwati Eminence’, situated at Plot 7/7A, Sector-13, Nerul, Navi Mumbai. The Applicant No. 1 alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price against payments due to him. The Applicant No. 1 also stated that on raising concern to the Respondent, he was informed that already a discount of 3% had been given to him on the 12% GST and remaining 4% of the ITC will be used by the promoters without passing it on to the customers on the reasoning that GST ITC refunds process was unclear, complex and uncertain. Further, on being asked about who keeps the remaining part of ITC after the 3% discount given to the customer from the 12% GST, the Applicant No. 1 received the following reply vide email dated 06.07.2019 which reads as “Before 31/03/2019 builder has already paid 12% on the due amount so obviously the amount goes to the government tax.”
NAA determines that the Respondent has realized an additional amount of Rs. 1,56,77,149/- which includes both the profiteered amount @ 2.44% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 71 home buyers/shop buyers/ recipients of supply including Applicant No. 1 during the period from 01.07.2017 to 30.09.2019 which was required to be passed on the eligible home buyers of his impugned project. The details of eligible home buyers/shop buyers/ recipients of supply to whom supply has been made by Respondent in the impugned Project and from whom additional amount on account of benefit of ITC had been realized by the Respondent during the aforesaid period along with details of such additional amount is given in Annexure-`A’ to this Order. Since, all the home buyers/shop buyers/ recipients of supply are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the profiteered amount along with the interest @ 18% per annum (from the dates from which the said profiteered amount was collected by him from each of them till the date such amount is passed on/returned/refunded), if not already passed on/returned/refunded, within a period of 3 months from the date of passing of this Order as per the details mentioned in Annexure-`A’, failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017.
Accordingly, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondents shall reduce the prices to be realized from the home buyers/shop buyers/ recipients of supply in the above Project commensurate with the benefit of ITC received by him as detailed above.
This Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Mumbai, Maharashtra to monitor compliance of this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as determined by the Authority, is passed on to all the eligible home buyers/shop buyers/ recipients of supply. It may be ensured that the benefit of ITC is passed on to each home buyer/shop buyer/ recipient of supply as per Annexure-A attached with 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 Respondent M/s Bhagwati Infra, 1306, Real Tech Park, Plot No. 39/2, Sector- 30A, opp. Vashi Railway Station, Vashi, Navi Mumbai- 400 705, for their Project “Bhagwati Eminence”, situated at Plot 7/7A, Sector-13, Nerul, Navi Mumbai and amount of profiteering Rs. 1,56,77,149/- , so that his concerned home buyers/shop buyers/ recipients of supply can claim the benefit of ITC if not passed on. Home buyers/shop buyers/ recipients of supply may also be informed that the detailed NAA Order is available on Authority’s website www.naa. gov.in.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The instant Report dated 04.11.2020, has been furnished by the Applicant No. 2 i.e. Director General of Anti-Profiteering (DGAP) under Rule 129(6) of the Central Goods and Services Tax Rules, 2017. The brief facts of the present case, are that a reference was received by the DGAP from the Standing Committee on Anti-profiteering on 09.10.2019 to conduct a detailed investigation in respect of an application filed under Rule 128 of the Central Goods and Services Tax Rules, 2017 alleging profiteering by the Respondent in respect of purchase of a flat in the Respondent’s project “Bhagwati Eminence”, situated at Plot 7/7A, Sector-13, Nerul, Navi Mumbai. The Applicant No. 1 alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price against payments due to him. The Applicant No. 1 also stated that on raising concern to the Respondent, he was informed that already a discount of 3% had been given to him on the 12% GST and remaining 4% of the ITC will be used by the promoters without passing it on to the customers on the reasoning that GST ITC refunds process was unclear, complex and uncertain. Further, on being asked about who keeps the remaining part of ITC after the 3% discount given to the customer from the 12% GST, the Applicant No. 1 received the following reply vide email dated 06.07.2019 which reads as “Before 31/03/2019 builder has already paid 12% on the due amount so obviously the amount goes to the government tax.” 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 input tax credit.
(b) Copy of Demand Letters and receipts.
2. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 09.10.2019, a Notice under Rule 129 of the CGST Rules 2017, was issued on 15.10.2019 by the DGAP, calling upon the Respondent to reply as to whether he admitted that the benefit of input tax credit 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.
3. The Respondent as well as the Applicant No. 1 were afforded an opportunity by the DGAP to inspect the non-confidential evidences/information during the period 24.10.2019 to 25.10.2019 and on 07.10.2020 to 12.10.2020 respectively however, neither Respondent nor Applicant No. 1 had availed of the said opportunity.
4. The Applicant No. 1 vide e-mail dated 28.09.2020 had requested to send the non-confidential documents by e-mail therefore, the DGAP vide e-mails dated 20.10.2020 and 22.10.2020 had provided the non-confidential documents/reply furnished by the Respondent which the Applicant No. 1 vide e-mails dated 21.10.2020 & 22.10.2020 acknowledged to have received and submitted that :-
(a) The Respondent has collected 9% GST on the agreement value, even though the prevailing GST rate was 12% before April 2019.
(b) For flats booked from Jan 2019 to Aug 2019, it seems to be massive variation in the agreement value when the market rate was around 1.45 Cr for a 2BHK (47.01 sq meters) in the area. The potential reason might be the promoter incentivized under-reporting of the agreement value (through cash transactions i.e. no transaction traceability) to lower the GST, Stamp Duty and other Tax commitment which are directly linked to the agreement value leading to tremendous loss to the National Exchequer from a single project under the group.
5. The period covered by the current investigation is from 01.07.2017 to 30.09.2019.
6. The statutory time limit to complete the investigation was 08.04.2020 at the end of DGAP which was extended upto 30.11.2020 by virtue of Notification No. 35/2020-Central Tax dated 03.04.2020, Notification No. 55/2020-Central Tax dated 27.06.2020 and Notification No. 65/2020-Central Tax dated 01.09.2020 issued by Central Government under Section 168A of the Central Goods and Services Tax Act, 2017 wherein it was provided that “any time limit for completion or compliance of any action, by any authority, has been specified in, or prescribed or notified under section 171 of the said Act, which falls during the period from the 20th day of March, 2020 to the 29th day of November, 2020, and where completion or compliance of such action has not been made within such time, then, the time-limit for completion or compliance of such action, shall be extended up to the 30th day of November, 2020.”
7. The Respondent even after several reminders and summons had not furnished all the required documents/information to DGAP to investigate the matter. Therefore, the DGAP vide letters dated 06.07.2020, 03.09.2020 and 07.09.2020 had requested the Jurisdictional CGST authorities to deploy an officer to collect requisite documents from the Respondent and forward the same to him to investigate the matter under section 171 of the CGST Act 2017. Accordingly, the aforesaid authorities had collected the documents as sought by DGAP, from the Respondent by visiting his premises an forwarded to the DGAP for necessary action.
8. The aforesaid documents of the Respondent has been summed up by the DGAP as under:-
(a) He is a partnership firm consisting of 06 partners and registered under Indian Partnership Act, 1932.
(b) Plot No. 7A, situated at Sector-13, Nerul, Navi Mumbai from City and Industrial Development Corporation of Maharashtra Ltd., (CIDCO), was allotted to the Respondent through auction by CIDCO, a governmental authority, mentioning the amount of Service Tax of Rs. 3,58,20,322/- in its allotment letter. Copy of said allotment letter along with copies of receipts no. 1400010306/2016 dated 17.10.2016 for Rs. 1,86,23,725/- & receipt no. 1400011617/2016 dated 16.11.2016 for Rs. 1,71,96,596/- issued by CIDCO for payment made by him towards Service Tax on the said plot, were furnished by the Respondent to the DGAP.
(c) The impugned project “Bhagwati Eminence” having Maharashtra RERA Regn. No. P51700008436, consists of 76 residential flats and 19 commercial shops, out of which 65 flats and 6 shops were sold as on 30.09.2019. The Occupancy Certificate has not been received till date.
(d) He had opted for 12% (GST @18% along with 1/3rd abatement for land value) with ITC in accordance with Notification No: 03/2019-Central Tax (Rate) dated 29th March 2019.
9. The Respondent submitted the following documents/information:
(a) Copies of GSTR-1 for the period July, 2017 to Sept., 2019.
(b) Copies of GSTR-3B for the period July, 2017 to Sept., 2019.
(c) Copies of ST-3 returns for the period April, 2016 to June, 2017.
(d) Screenshot of Tran-1 along with copy of letter dated 06.08.2019 filed by the Respondent before the office of Assistant Commissioner (GST & Excise), Division-III, CGST Belapur Commissionerate regarding verification of transitional credit claimed in form TRAN-1.
(e) Tax rates – pre-GST and post-GST.
(f) Copy of audited Balance sheet for FY 2016-17, 2017-18 & 2018-19.
(g) Sample copy of sale agreement/contract issued to one Customer in the project “Bhagwati Eminence”.
(h) Copy of Electronic Credit Ledger for the period July, 2017 to Sept., 2019.
(i) CENVAT/ITC register for the period April, 2016 to Sept., 2019.
(j) Copy of allotment letter dated 25.08.2016 issued by City and Industrial Development Corporation of Maharashtra Ltd., (CIDCO) along with receipts of payments of Service Tax.
(k) Copy of project report submitted to RERA.
(l) Details of Service Tax and GST turnover, output tax liability payable and input tax credit availed for the project “Bhagwati Eminence”.
(m) List of home buyers in the project “Bhagwati Eminence” reconciling with ST-3/GSTR-3B returns.,
and no information/documents was classified by the Respondent as confidential in terms of Rule 130 of the Rules 2017.
10. The DGAP had scrutinized the submissions/replies of the Respondent, Applicant No. 1 and the documents/evidences on record and submitted his Investigation Report dated 04.11.2020 to this Authority, wherein the DGAP has inter alia stated that:-
(i). The main issues for determination were:-
