Sh. Deepak Garg Vs JKG Construction Pvt. Ltd. (NAA)
The present Report dated 31.08.2021 had 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 & Services Tax (CGST) Rules, 2017 alleging profiteering by the Respondent in respect of the purchase of shops in the Respondent’s project ” JKG Palm Court ” by not passing on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in prices after implementation of GST w.e.f. 01.07.2017. The Standing Committee forwarded the copy of the complaint of Applicant No. 1 to the DGAP for detailed investigation.
Held by NAA
The Authority finds that, to verify the claims of the Respondent of having passed on the benefit of ITC to the recipients of supply, the DGAP had sent emails dated 17.08.2021 to only 324 buyers (whose email addresses were provided by the Respondent). In response to these 324 emails, 23 home buyers had denied the receipt of any benefit. Hence, this Authority finds that, such verification is not comprehensive, complete, definite or conclusive and hence cannot be accepted.
The Authority finds that the Respondent has profiteered by an amount of Rs. 5,14,06,920/- during the period of investigation i.e. 01.07.2017 to 31.10.2020. The Authority determines an amount of Rs. 5,14,06,920/- (including 12% GST) under section 133(1) as the amount profiteered by the Respondent from his home buyers/shop buyers/customers/recipients of supply in the impugned Project (as per Annexure-A to this Order), including Applicant No. 1, which shall be refunded by him along with interest @18% thereon, as prescribed, from the date when the above amount was profiteered by him till the date of such payment, as per the provisions of Rule 133 (3) (b) of the GCST Rules 2017. The amount profiteered is Rs. 1,99,182/- in respect of Applicant No.1 .
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 buyers of the flats/shop buyers/customers/recipients of supply 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. 5,14,06,920/-, for the project `JKG Palm Court’. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients of supply, 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 provisions of Rule 133 (3) (b) of the CGST Rules, 2017.
The complete list of homebuyers/shop buyers/customers/recipients of supply is attached with this Order, with the details of the amount of benefit of ITC to be passed on along with interest @ 18%, as prescribed, in respect of the project `JKG Palm Court’ of the Respondent as in the said Annexure-`A’.
This Authority also orders that the profiteered amount of Rs. 5,14,06,920/- for the project `JKG Palm Court’ along with the interest @ 18% from the date of receiving the profiteered amount from the homebuyer/customers/recipients of supply till the date of passing the benefit of ITC shall be paid/passed on by the Respondent within a period of 3 months from the date of this order failing which it shall be recovered as per the provisions of the CGST Act, 2017.
It has also been found that the Respondent has denied the benefit of additional ITC to his customers/buyers/recipients of supply in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and resorted to profiteering and hence, committed an offence under section 171 (3A) of the CGST Act, 2017. As the said provision was inserted only with effect from 1.01.2020, therefore, the Respondent is liable for the imposition of penalty for the period from 01.01.2020 onwards under the provisions of the said Section. Accordingly, a Notice be issued to the Respondent for the said purpose.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 31.08.2021 had 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 & Services Tax (CGST) Rules, 2017 alleging profiteering by the Respondent in respect of the purchase of shops in the Respondent’s project ” JKG Palm Court ” by not passing on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in prices after implementation of GST w.e.f. 01.07.2017. The Standing Committee forwarded the copy of the complaint of Applicant No. 1 to the DGAP for detailed investigation.
2. The DGAP vide above said Report dated 31.08.2021 has inter-alia stated that:-
i) On receipt of the reference from the Standing Committee on Anti-profiteering, a Notice for initiation of investigation under Rule 129 of the Rules was issued by the Director General of Anti-profiteering on 20.11.2020, 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 documents in support of his reply. Further, the Respondent was afforded an opportunity to inspect the non-confidential evidences/information which formed the basis of the said Notice, during the period 03.12.2020 to 04.12.2020. The authorized representative of the Respondent availed of the said opportunity on 04.12.2020.
ii) Vide e-mail dated 17.08.2021, the Applicant was also given an opportunity during 19.08.2021 & 23.08.2021 to inspect the non-confidential documents/reply furnished by the Respondent. The Applicant availed of the said opportunity on 19.08.2021. The Applicant vide email dated 20.08.2021 submitted his observation on the documents inspected and made his submission.
iii) The period covered by the current investigation was from 01.07.2017 to 31.10.2020.
iv) The statutory time limit to complete the investigation was upto 14.04.2021, as per Rule 129(6) of the CGST Rules, but, due to force majeure caused in the light of Covid-19 pandemic, the investigation could not be completed on or before the above date. However, in terms of the Notification No. 35/2020-Central Tax dated 03.04.2020, as amended vide Notification No. 55/2020-Central Tax dated 27.06.2020 and 91/2020-Central Tax dated 14.12.2020, issued by the Central Government, wherein the last date for submission of report had been extended upto 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.
v) As complete and relevant documents were not submitted by the Respondent even after repeated requests, Summons under Section 70 of the CGST Act, 2017 read with Rule 132 of the Rules was issued on 18.05.2021 to Shri Jai Kumar Goel, Director of the Respondent to produce the relevant documents. In response to the Summons dated 18.05.2021 and 02.08.2021.The Respondent had submitted complete information/ documents required for investigation on 17.08.2021.
vi) In response to the Notice dated 20.11.2020 and various reminders and Summons, the Respondent replied vide letters/e mails dated 04.12.2020, 10.12.2020, 24.12.2020, 04.01.2021, 15.02.2021, 24.02.2021, 01.03.2021, 01.06.2021, 24.06.2021, replied vide letters/e mails dated 04.12.2020, 10.12.2020, 24.12.2020, 04.01.2021, 15.02.2021, 24.02.2021, 01.03.2021, 01.06.2021, 24.06.2021, 25.06.2020 and 17.08.2021.
vii) Vide the above mentioned replies, the Respondent submitted that the Company was a real estate developer, incorporated on May, 2001 with the Registrar of Companies, NCT, New Delhi with the main object of promoting Real Estate Business through developing Residential cum commercial complexes. The Company was engaged in business of construction of Residential cum commercial properties at Greater Noida. The main project carried by the company was JKG Palm Court, which was being constructed in 02 phases.
viii) The Respondent had claimed that he had already passed on the benefit of Rs. 1,86,112/- to the Applicant and Rs. 6,13,37,994/- to the other customers in terms of Section 171 of the CGST Act, 2017. Thus, the Respondent claimed that he had passed on total benefit of Rs. 6,15,24,106/-.
ix) Vide the aforementioned letters/e-mails, Respondent submitted the following documents/ information:
(a) Copies of GSTR-1 returns for the period July, 2017 to October, 2020.
(b) Copies of GSTR-3B returns for the period July, 2017 to October, 2020.
(c) Copies of Tran-1 return for transitional credit availed by the Noticee.
(d) Copies of VAT & ST-3 returns for the period April, 2016 to June, 2017.
(e) Electronic Credit Ledger for the period July, 2017 to October, 2020.
(f) CENVAT/ITC register for the F.Ys. 2016-17 to 2020-21 (upto October, 2020).
(g) Status of project— Architect Certificate as on 30.09.2020 for Phase 1 & 2 tower wise.
(h) Copies of all demand letters issued and sale agreement in the name of Mrs. Chetna Garg.
(i) Copy of temporary Occupancy Certificate dated 27.06.2019.
(j) Details of applicable Tax rates, pre-GST and post-GST.
(k) Details of Service Tax, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to October, 2020.
(l) Copy of Financial Statements for FY 2016-17 to 2019-20.
(m) Copy of project report submitted to RERA.
(n) Copy of Agreement between land owners for the project.
(o) List of all buyers in the project “JKG Palm Court”.
x) The Respondent vide email dated 10.12.2020 submitted that all his submission/documents made to department vide email dated 10.12.2020 was confidential. However, the Respondent had not given any non-confidential summary of the same. he had also not given any reason as to why summarization was not possible.
xi) 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) which 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 his first occupation, whichever was earlier”. Thus, the ITC pertaining to the residential units and commercial shops which was 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 exempted 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 exempted 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”.
Therefore, the ITC pertaining to the unsold units might not fall within the ambit 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 net benefit of additional ITC available to him post-GST.
xii) As regards the allegation of profiteering with regard to Project- JKG Palm Court, it was observed that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent were eligible to avail CENVAT credit of Service Tax paid on input services. However, CENVAT credit of Central Excise duty paid on inputs was not admissible, as per the CENVAT Credit Rules, 2004, which was in force at the material time. Moreover, the Respondent were paying VAT under Uttar Pradesh VAT Scheme, wherein he were required to discharge his output VAT liability on deemed value addition on the purchase of the inputs. It was also evident from the submissions made by the Respondent that there was no direct correlation between the turnover for VAT as reported in his VAT returns for the period April, 2016 to June, 2017, filed by the Respondent and the actual demand raised by him from the buyers. Therefore, the ITC of VAT and the VAT turnover had not been considered for computation of the ratio of ITC to the turnover for the pre-GST period. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and the input services. From the information submitted by the Respondent for the period April, 2016 to October, 2020, the details of the ITC availed by them, his turnover from the project “JKG Palm Court” and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to October, 2020) periods, was furnished in table-`A’ below:
Table-`A’ (Amount in Rs.)
