In re Smt. Sudha Vs Diya Greencity Pvt. Ltd. (NAA)
Introduction: The Competition Commission of India (CCI) has directed a fresh investigation into the “Diya Greencity” project of Diya Greencity Pvt. Ltd. following a detailed report received from the Director-General of Anti-Profiteering (DGAP). The investigation stems from a complaint filed under Rule 128 of the Central Goods & Service Tax (CGST) Rules, 2017, by an aggrieved homebuyer, alleging non-passage of Input Tax Credit (ITC) benefits post the introduction of GST in 2017.
Background: The complainant, Smt. Sudha, had asserted that Diya Greencity Pvt. Ltd. failed to reduce flat prices in the “Diya Greencity” project, located at Raj Nagar Extension, Meerut Road, Ghaziabad, in proportion to the benefit of ITC accrued after the implementation of GST on July 1, 2017.
DGAP Investigation Findings: The DGAP’s report, dated April 20, 2023, outlined key points from its investigation:
1. The investigation period covered July 1, 2017, to October 31, 2022.
2. Diya Greencity Pvt. Ltd. had applied for the Completion Certificate for “Diya Greencity,” but it was rejected for non-compliance with formalities.
3. The Respondent claimed to have passed on the ITC benefit to 650 customers upon possession of flats, amounting to Rs. 3,81,70,416.
4. The DGAP found that post-GST, the Respondent benefitted from additional ITC of 5.43% of turnover, totaling Rs. 12,65,48,780.
5. The Respondent was alleged to have not fully passed on the benefit, as confirmed by only 102 out of 650 customers in the verification process.
6. A total of Rs. 42,11,007 in ITC benefit was confirmed as passed on by the Respondent to 64 customers.
7. The DGAP concluded that the Respondent contravened Section 171 of the CGST Act by not passing on the ITC benefit.
Response from Diya Greencity Pvt. Ltd.:
In response to the investigation report, Diya Greencity Pvt. Ltd. presented several arguments:
1. Illegality of Profiteering Methodology:
- The Respondent contended that the methodology adopted by DGAP was unconstitutional and inconsistent with Section 171(3) and Rule 126 of the CGST Rules 2017.
- Diya Greencity Pvt. Ltd. argued that the absence of a prescribed methodology for profiteering calculation rendered the entire process invalid.
- The Respondent cited cases challenging the constitutionality of anti-profiteering provisions pending in the Delhi High Court.
2. Applicability to Post-GST Bookings:
- Diya Greencity Pvt. Ltd. asserted that anti-profiteering provisions should not apply to customers who booked flats post-GST, claiming mutual agreement on prices.
- The Respondent referred to a Delhi High Court case involving M/s DRA Aadithya Projects Pvt. Ltd. as precedent for an interim stay on anti-profiteering investigations for post-GST period bookings.
3. Settlement with Smt. Sudha:
- Diya Greencity Pvt. Ltd. informed about a settlement with Smt. Sudha, who withdrew the complaint in exchange for a consideration price of Rs. 27,50,000.
- The Respondent argued that this settlement rendered the DGAP’s observation on passing on the ITC benefit to Smt. Sudha null and void.
4. Revision of Profiteering Amount:
- Diya Greencity Pvt. Ltd. challenged the DGAP’s calculation of profiteering amount, questioning the use of GST rates at 12% instead of the effective rates.
- The Respondent argued for a reduction in the profiteering amount due to the cancellation of flats and questioned the legality of adding GST to the profiteered amount.
Verification Process Accuracy:
- The Respondent disputed the accuracy of the DGAP’s verification process, claiming that ITC benefits had indeed been passed on to 38 customers.
Penalty under Section 171(3):
- Diya Greencity Pvt. Ltd. requested that no penalty be imposed under Section 171(3) of the CGST Act, stating compliance with Section 171.
CCI’s Decision and Re-Investigation Order: After considering the DGAP’s report, the Respondent’s submissions, and subsequent clarifications, the CCI found merit in some of the Respondent’s contentions. Consequently, the CCI has directed a re-investigation on specific issues:
