Pruthviraj Vijay Dhavale Vs Ashdan Developers Pvt. Ltd. (Competition Commission of India)
In the case of Pruthviraj Vijay Dhavale vs. Ashdan Developers Pvt. Ltd., the Competition Commission of India (CCI) conducted an investigation into alleged profiteering by Ashdan Developers regarding the purchase of flats in their project “The Kul Nation.” The primary allegation was that Ashdan Developers had not passed on the benefit of Input Tax Credit (ITC) to the home buyers, as required under Section 171 of the CGST Act, 2017.
Detailed Analysis:
The investigation revealed several key points:
- The application for this investigation was filed by Pruthviraj Vijay Dhavale, referred to as “Applicant No. 1,” who alleged profiteering by Ashdan Developers.
- The investigation covered the period from July 1, 2017, when GST was implemented, to April 30, 2020.
- Due to the impact of the COVID-19 pandemic, the investigation’s time limit was extended to March 31, 2021.
- Ashdan Developers submitted various documents and information, including tax returns, credit ledgers, agreements with buyers, and more.
- The DGAP (Director General of Anti-Profiteering) calculated the benefit of ITC and found that it had increased by 0.24% during the post-GST period.
- It was noted that certain home buyers had already received benefits in line with the new tax rates, and the Respondent had claimed to pass on the benefit to these buyers.
- An extensive review of documents and communication with home buyers confirmed that many of them received the benefits as claimed by Ashdan Developers.
- As a result, the total benefit passed on by Ashdan Developers exceeded the additional benefit available, as required under Section 171.
- The DGAP concluded that Ashdan Developers had complied with the requirements of Section 171, and no further action was necessary.
Conclusion:
In the Pruthviraj Vijay Dhavale vs. Ashdan Developers case, the CCI found that the benefit of ITC had been passed on to the home buyers. As a result, the proceedings initiated under Section 171 of the CGST Act, 2017 were dropped, and no anti-profiteering violation was established.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
1. The Director General of Anti Profiteering (hereinafter referred to as “the DGAP”) vide its investigation report dated 26.02.2021 stated that the Standing Committee on Anti-profiteering received an application filed under Rule 128 of the CGST Rules, 2017 (hereinafter referred to as “the Rules”), by Sh. Pruthviraj Vijay Dhavale, resident of 348, Ganesh Peth, Flat No. 23, Swami Sankul Building, 3rd Floor, Near New Milak Market, Opposite Laxmi Road, Pune- 411002 (hereinafter referred to as “the Applicant No. 1”)alleging profiteering by M/s Ashdan Developers Pvt. Ltd. (formerly known as M/s Kul Developers Pvt. Ltd.), Solitaire World, Level 8, S. No. 36/1/1, opposite Regency Classic, Mumbai Bangalore Highway Baner, Pune, Maharashtra- 411045 (hereinafter referred to as “the Respondent”) in respect of the purchase of flat in the Respondent’s project “The Kul Nation”. The Applicant No. 1 alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in prices after implementation of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017.
2. The aforesaid application was examined by the Standing Committee on Anti-profiteering in its meeting and forwarded the same to the DGAP for further investigation on 06.05.2020. Accordingly, the investigation was initiated by the DGAP to collect evidence necessary to determine whether the benefit of ITC (hereinafter referred to as “ITC”) had been passed on by the Respondent to the Applicant No. 1 in respect of the supply of Construction Services. 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 also afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice during the period from 25.06.2020 to 26.06.2020. The Respondent did not avail the said opportunity.
4. Vide e-mail dated 07.01.2021, the Applicant No. 1 was also afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent from 18.01.2021 to 19.01.2021. The Applicant No. 1 vide email dated 07.01.2021 informed that it was not possible to visit Delhi. Thus, the Applicant No. 1 did not to avail the said opportunity.
5. The period covered by the current investigation was from 01.07.2017 to 30.04.2020.
6. The time limit to complete the investigation was up to 05.11.2020, as per Rule 129(6) of the CGST Rules but, due to force majeure caused by the 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 dated 27.06.2020 and Notification No. 91/2020-Central Tax dated 14.12.2020, issued by the Central Government, the last date for submission of the Report by DGAP was extended upto 31.03.2021.
7. In response to the Notice dated 02.06.2020 and various reminders, the Respondent replied vide letters/e-mails dated 26.06.2020, 04.09.2020, 02.11.2020, 26.11.2020, 12.12.2020, 18.01.2021, 08.02.2021, 10.02.2021 and 24.02.2021.
8. Vide the aforementioned letters/e-mails, the Respondent submitted the following documents/ information:
(a) Brief profile.
(b) Copies of GSTR-1, GSTR-3B, and GSTR-9 Returns for the period from July 2017 to April 2020.
(c) Copies of Tran-1 and TRAN-2 statements for the period from July 2017 to December 2017.
(d) Copies of VAT & ST-3 Returns for the period from April 2016 to June 2017.
(e) Electronic Credit Ledger for the period from July 2017 to April 2020.
(f) CENVAT/ITC Register for the FY 2016-17 to April 2020, reconciled with VAT, ST-3, and GSTR-3B Returns along with details of credit reversals.
(g) Copy of Architect Certificate showing the stage of construction for Tower-1 as of 30.04.2020.
(h) Copies of all demand letters issued, sale agreement/ contract, and supplemental agreement executed with the Applicant No. 1.
(i) Details of applicable Tax rates, pre-GST and post-GST.
(j) Details of Service Tax, CENVAT credit for the period from April 2016 to June 2017, and output GST and ITC of GST for the period from July 2017 to April 2020.
(k) Copy of the Incorporation certificate with changed name.
(l) Minutes of meeting with existing customers.
(m) Comparative chart showing changes in the amenities.
(n) Sample copy of booking form, agreement and invoices/ demand letters raised to customers who booked flats in post-GST period.
(o) Copy of Financial Statements for FY 2016-17, 2017-18 & 201819.
(p) Copy of project registration certificates with RERA.
q) List of home buyers in the project “VTP Beaumonde, Tower-1”.
(r) Sample copy of supply of service invoice for Infrastructure construction work and approval services.
(s) Detailed working of Transitional credit attributable to Tower-1 of the VTP Beaumonde.
(t) Detailed working of the CENVAT & ITC attributable to Tower-1 of the “VTP Beaumonde”.
(u) Sample copy of demand letters/ Tax Invoices issued to various home buyers.
9. The subject applications, various replies of the Respondent and the documents/evidence on record had been carefully examined by the DGAP. The main issues for investigation by the DGAP were:
(i) Whether there was a reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so,
(ii) Whether the Respondent passed on such benefit to the recipients in terms of Section 171 of the CGST Act, 2017.
10. The DGAP verified the phase-wise project registration details from the official website of Maharashtra Real Estate Regulatory Authority (RERA) and observed that there were 7 Towers that were registered in the name of Respondent. The details of the same are tabulated in Table A:
Table-A
