ATS Township guilty of profiteering in its project ATS Rhapsody: NAA

Kundan Kumar Sinha Vs ATS Township Pvt. Ltd. (NAA)

Applicant alleged profiteering by ATS Township Pvt. Ltd. in respect of purchase of a Flat No. 4032 in Tower-4 in the Respondent’s project ‘ATS Rhapsody’, situated at Plot No. GH12/1, Sector-1, Village Bisrakh, Greater Noida, Uttar Pradesh. 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 and charged GST @ 12 % on the amount due to him against payment.

In the instant case, there is no reduction of rate of tax during the relevant period and the only issue which is required to be decided by the Authority is as to whether Respondent is required to pass on the benefit of input tax credit. As mentioned in earlier paragraphs, the DGAP has carried out investigation in the subject matter and collected relevant information/evidences from the Respondent and after the analysis of the same the DGAP has come to a conclusion that the Respondent has gained benefit of ITC on the supply of Construction services after the implementation of GST w.e.f. 01.07.2017 and the Respondent was required to pass on such benefit to the buyers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act, 2017 during the period 01.07.2017 to 31.05.2020.

In view of the above facts and findings discussed in the earlier paras at 34, 35 and 37, this Authority agrees with the methodology adopted by the DGAP in its Report to calculate the profiteered amount. This Authority has taken note of claim of the Respondent regarding transfer of benefit of Rs.15,48,92,888/- and also findings of the DGAP in Table D in para 22 supra, that an amount of Rs. 9,03,74,981/- was to be transferred out The Respondent has claimed to pass on excess benefit to some buyers at the expansion of other buyers as mentioned in the said Table D. The Respondent has not been able to provide any methodology whereby such amount of Rs.15,48,92,888/- was passed on whereas the DGAP has calculated amount of Rs. 9,03,74,981/- in scientific manners as mentioned in the Annexure-24 of said Report. Hence, this Authority determines that the Respondent has realized an additional amount of Rs. 9,03,74,981/- which includes both the profiteered amount @ 5.69% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 395 buyers/recipients [including the amount of Rs.2,72,720/- (including GST @12%) from the Applicant No. 1] during the period from 01.07.2017 to 31.05.2020 which was required to be passed on such home buyers/customers/recipients of supply of his impugned project.

The details of eligible buyers to whom supply was made by the Respondent in his 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 of supply are identifiable as per the documents placed on record therefore, the Respondent is directed to pass on the above said 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) to above said buyers/recipients, 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 An nexu re-`A’, failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017.

For the reasons mentioned hereinabove and in the given facts and circumstances and also stated position of law we find that the Respondent has denied the benefit of ITC to the buyers of his flats/shops/units in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. As the said provision which has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019, the Respondent is liable to penalty for the amount profiteered by him from 1.01.2020 onwards. Accordingly, notice be issued to the Respondent for such purpose.

FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY

The instant Report dated 24.02.2021, has been furnished to National Anti-Profiteering Authority (this Authority) 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 03.06.2020 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 No. 4032 in Tower-4 in the Respondent’s project “ATS Rhapsody”, situated at Plot No. GH12/1, Sector-1, Village Bisrakh, Greater Noida, Uttar Pradesh. 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 and charged GST @ 12 % on the amount due to him against payment. He submitted that the price of above said flat was Rs. 1,03,93,300/- (Inclusive of GST @ 12%) as per “Agreement to Sale”. As he had paid 3 installments with old rate of tax however, he was claiming for the benefit of reduction in tax w.e.f. 01.04.2019 which was not given on current demand notice dated 08.11.2019. Further he submitted copy of Tax invoice dated 08.11.2019 along with his application.

2. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the CGST Rules 2017, was issued on 26.06.2020 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 was afforded an opportunity by the DGAP to inspect the non-confidential evidences/information during the period 16.07.2020 to 17.07.2020 however, the Respondent through his authorized representative, had availed of the said opportunity on 11.12.2020 and collected the non-confidential documents submitted by the Applicant No. 1.

4. The Applicant No. 1 vide e-mail dated 15.02.2021, was afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 18.02.2021 or 19.02.2021 however, he had availed the opportunity of inspection of documents by visiting the DGAP’s office on 18.02.2021 and collected the non-confidential documents submitted by the Respondent.

5. The DGAP has further stated that the period covered by the current investigation was from 01.07.2017 to 31.05.2020.

6. The statutory time limit to complete the present investigation was 02.12.2020 which was extended up to 31.03.2021 by virtue of Notification No. 35/2020-Central Tax dated 03.04.2020 as amended vide Notification No. 55/2020-Central Tax dated 27.06.2020, Notification No. 65/2020-Central Tax dated 01.09.2020 and Notification No. 91/2020-Central Tax dated 14.12.2020 issued under Section 168A of the CGST Act, 2017 where, “any time limit for completion or compliance of any action, by any authority, had 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 30th day of March, 2021, and where completion or compliance of such action had not been made within such time, then, the time-limit for completion or compliance of such action, shall be extended up to the 31st day of March, 2021”.

7. In response to the Notice dated 26.06.2020 and various reminders and Summons, the Respondent has submitted his replies vide letters/e-mails dated 06.01.2020, 17.08.2020, 31.08.2020, 21.09.2020, 26.10.2020, 05.11.2020, 26.11.2020, 17.12.2020, 27.12.2020, 06.01.2021, 1 6.0 1 .2021, 02.02.2021, 16.02.2021 and 17.02.2021, which have been summed up by the DGAP as under:-

(a) He was engaged in the construction of residential projects at various locations. He had commenced his impugned project “ATS Rhapsody” at Noida in the month of December, 2016 was still under construction. Occupancy Certificate for the aforesaid project has not received.

(b) He had opted old scheme for discharging GST @ 12% (after 1/3rd abatement towards Land) in accordance with the Notification

(c) He claimed to have been passed on the benefit of ITC through basic selling price at the time of booking and on tax invoices to certain buyers.

8. The Respondent vide aforementioned letters/e-mails, has furnished the following documents/information:-

a. Copies of GSTR- l & 3B Returns for the period July, 2017 to May, 2020.

b. Copies of GSTR-9 & 9C Returns for FY 2017-18 and 2018-19.

c. Copies of ST-3 and VAT Returns for the period April, 2016 to June, 2017.

d. Copy of Trans-1.

e. Tax rates – pre-GST and post-GST.

f. Copy of Audited Balance Sheet for FY 201,6-17, 2017-18 & 2018- 19.

g. Copies of Sale agreement/Contract, all Demand Letters issued to the Applicant No. 1.

h. Copy of Electronic Credit Ledger for the period July, 2017 to May, 2020.

i. Declaration in Annexure-IV to the Notification No. 3/2019-CT (Rate) dated 29.03.20219.

j. CENVAT/ ITC register for the period April, 2016 to May, 2020.

k. Details of VAT, Service Tax and GST turnover, output tax liability payable and ITC availed by the Respondent.

l. Copy of Land Allotment Agreement dated 06.09.2016

m. Copy of Project Report submitted to RERA.

n. List of home buyers in the project “ATS Rhapsody” along with details of benefit passed on.

0. Copies of all documentary evidences vide which benefit passed on to the customers.

9. The documents/information submitted by the Respondent has been kept confidential in terms of Rule 130 of the CGST Rules, 2017, except which one pertaining to the Applicant No. 1 and summary chart of tax rates being paid by the Respondent.

10. The reference received from the Standing Committee on Anti-profiteering, various replies of the Respondent and the documents/evidences on record had been carefully scrutinized by the DGAP. The main issues for determination were:-

(i) Whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent on implementation of GST w.e.f. 01.07.2017 and if so,

(ii) Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017.

11. The Respondent vide e-mail dated 21.09.2020, furnished copies of demand letters, payment receipts and sale agreement of Flat No. 4032, Tower-4, measuring 2400 sq.ft. at total base price of Rs. 92,79,732/-(including two car parking), pertaining to the Applicant No. 1. The schedule of payment has been tabulated below in Table-`A’:-

Table-`A’                     

(Amount in Rs.)

12. The Applicant No. 1 claimed for the benefit of reduction in rate of tax from 12% to 5% in the light of Notification No. 3/2019- Central Tax (Rate) dated 29.03.2019 w.e.f. 01.04.2019 albeit the Respondent had opted tax rate of 12% (after 1/3rd abatement towards land) to discharge his tax liabilities.

Therefore there was no reduction in rate of tax w.e.f. 01.04.2019 with regard to Applicant No. 1’s unit.

13. As per 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.

14. On the allegation of profiteering, prior to GST was introduced, the Respondent was eligible to avail Credit of Service Tax paid on input services and credit of VAT paid on purchase of inputs. The CENVAT credit of the Central Excise duty paid on inputs was not admissible as per the CENVAT Credit Rules, 2004, which was in force at the material time. As the Respondent was not collecting VAT from customers and discharging his output tax liability on deemed 10% value addition on purchase value in cash and there was no direct relation of turnover reported in VAT Returns with the amount collected from home buyers, therefore, credit of VAT paid on purchase of inputs and the VAT turnover was not considered in the working for computation of ITC ratio to taxable turnover in pre-GST regime. Further, post-GST, the Respondent was entitled to avail ITC of GST paid on all the inputs and the input services including the sub-contracts.

15. From the information submitted by the Respondent for the period April, 2016 to May, 2020, the details of the ITC availed by him and his turnover from the project “ATS Rhapsody” and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to May, 2020) periods, has been tabulated below in Table-

Table-‘B’

                                    (Amount in Rs.)

16. In view of the above Table- ‘B’, it is clear 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 0.63% whereas during the post- GST period (July, 2017 to May, 2020), the percentage was 7.19%, which confirms that post-GST, the Respondent had benefited from additional ITC to the tune of 6.56% [7.19% (-) 0.63%] of the turnover. Accordingly, the profiteering had been examined by comparing applicable tax rate and ITC available in the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.50% was payable with the post- GST period (July, 2017 to May, 2020) when the effective GST rate was 12% (GST @18% along with 1/3rd abatement for land value) on construction services in terms of Notification No.11/2017-Central Tax (Rate), dated 28.06.2017. Accordingly, on the basis the figures contained in Table- ‘B’ above, the comparative figures of the ratio of ITC availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, was tabulated in Table- ‘C’ below:-

Table-`C’  

(Amount in Rs.)

17. In view of the Table-‘C’ above, it is observed that the additional ITC of 6.56% of the turnover should have resulted in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of  Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on by the Respondent to the respective recipients.

18. In view of the above calculation, it is evident that on the basis of the aforesaid CENVAT/input tax credit availability in the pre and post-GST periods and the details of the amount raised/collected by the Respondent from the Applicant No. 1 and other home buyers during the period 01.07.2017 to 31.05.2020, the Respondent had benefited by an additional amount of ITC, by an amount of Rs. 9,03,74,981/- including GST @12% on the base amount of Rs. 8,06,91,947/-. The buyers and unit no. wise break-up of this amount was given in Annex-24 to the above said DGAP’s Report dated 24.02.2021. This amount is inclusive of Rs. 2,72,720/- (including GST on the base amount of Rs. 2,43,500/-) which was the benefit of ITC required to be passed on to the Applicant No.1

19. The Respondent has supplied such construction services in the State of Uttar Pradesh only.

20. The above profiteering has been computed for 395 home buyers. The Respondent had booked 475 units till 31.05.2020 out of total 579 units and out of which 80 customers who had booked the units had not paid any consideration during the post-GST period 01.07.2017 to 31.05.2020 (period under investigation). Therefore, if the ITC in respect of these 80 units was considered to calculate profiteering in respect of 395 flats where payments had been received after GST, the ITC as a percentage of turnover might be erroneous. Therefore, the benefit of ITC in respect of these 80 units might be calculated when the consideration was received from such units by taking into account the proportionate ITC in respect of such units.

21. The Respondent claimed that he had passed on the benefit of Rs. 16,53,20,924/- to 395 home buyers from whom the amount was raised/collected by him during the period from 01.07.2017 to 31.05.2020 and submitted copies of invoices, price sheets and signed undertakings by the home buyers vide which he had passed on the benefit of ITC. Such documents have been verified by the DGAP with the list of home buyers and found to be correct. Further, to substantiate the Respondent’s claim of passing on of benefit, the DGAP has sent e-mails to the Applicant No. 1 and 386 home buyers out of total 395 buyers on 08.02.2021 & 17.02.2021, to / confirm the amount of benefit received from the Respondent. In response, only 114 home buyers replied out of which 93 home buyers had confirmed the receipt of benefit of ITC from the Respondent and 6 home buyers had requested additional time to cross check the amount with documents available with them and 15 buyers, (including the Applicant No. 1) denied to have received any such benefit.

22. The DGAP, on examination of documentary evidences and confirmations from buyers, has noticed that the Respondent had passed on ITC benefit of Rs. 15,48,92,888/- to 380 home buyers. In some cases, he had passed on the benefit of ITC more than the required commensurate benefit whereas in some cases, the benefit of ITC passed on was less than the required commensurate benefit. A summary of category-wise ITC benefit required to be passed on and the benefit passed on, has been furnished in Table-1)” below:-

Table-‘D’                                     

(Amount in Rs.)

23.In view of the above Table ID’, the DGAP has observed that the benefit passed on by the Respondent to 135 buyers (mentioned at S.No. 3 of the above table) was less by an amount of Rs. 29,14,810/- than what he ought to have passed on to them. Further, the benefit passed on by the Respondent to 245 buyers (mentioned at S.No. 2 of the above table) was higher by an amount of Rs. 7,02,82,782/- than what he should had passed on to them. Such excess benefit passed on to 245 buyers, cannot be set off against the additional benefit required to be passed on to the other recipients and it could only be adjusted against any future benefit that might accrue to such recipients.

24. On conclusion, the DGAP has submitted that the benefit of additional ITC to the tune of Rs. 9,03,74,981/- (including GST) which is 6.56% of the turnover, accrued to the Respondent in post-GST period which was required to be passed on by him to the respective buyers. The DGAP has observed that the Respondent had passed on the benefit of ITC of Rs. 15,48,92,888/-to 380 home buyers as mentioned in Table-‘D’ above which had been verified from the documentary evidences submitted by the Respondent and confirmations received from buyers. Further, as 15 buyers (including the Applicant No. 1) had denied the receipt of benefit as claimed by the Respondent. Therefore, in view of the above facts, the DGAP has stated that the Respondent was yet to pass an additional amount of Rs. 2,72,720/-(including GST) to the Applicant No. 1 and Rs. 25,77,345/- to 14 other buyers as mentioned at S. No. 1 & 4 of Table-‘D’ above. Further, the investigation revealed that the Respondent was required to pass on the additional benefit of ITC amounting to Rs. 29,14,810/- as mentioned at S. No. 3 of Table- `D’ above, to 135 other buyers who are not Applicants in the present proceedings. These buyers are identifiable as per the documents provided by the Respondent giving the names and addresses along with Unit No. allotted to such buyers. Therefore, this additional amount of Rs. 29,14,810/- was required to be pass to such eligible buyers. Therefore, the Respondent was required to pass total amount of Rs. 57,64,875/- (including GST) to the Applicant No. 1 and other buyers as mentioned in S. No. 1, 3 & 5 of Table- ‘D’.

25. The present investigation covers the period 01.07.2017 to 31.05.2020. Profiteering, if any, for the period post May, 2020, has not been examined as the exact quantum of ITC that will be available to the Respondent in future cannot be determined at this stage, when he is continuing in availing input tax credit in respect of the said project.

26. In view of the above findings, the Section 171(1) of the Central Goods and Services Tax Act, 2017, requiring that “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices”, has been contravened by the Respondent.

27. The above Report was carefully considered by this Authority and a Notice dated 08.03.2021 was issued to the Respondent to explain why the Report dated 24.02.2021 submitted by the DGAP should not be accepted and his liability for profiteering in violation of the provisions of Section 171 of the CGST Act 2017 should not be determined and penalty under section 171(3A) of the CGST Act 2017 read with Rule 133 (3)(d) of the CGST Rules 2017 should not be imposed. The Respondent was directed to file his reply to the allegations levelled in the aforesaid DGAP’s Report dated 24.02.2021. Accordingly the Respondent has filed his written submissions dated 05.07.2021 wherein the Respondent has inter alia stated that:-

(a).The Report dated 24.02.2021 provides that the benefit of ITC has been passed on to 135 buyers (mentioned in Annexure-29 of the said Report) was short by Rs. 29,14,810/- which. is still required to be passed on to them by him whereas he has claimed that he had passed on ITC benefit to 129 buyers was short by Rs. 16,27,543/- and in respect of remaining 06 buyers, he has passed on total ITC benefit to such buyers which was required to be passed on.

(b). The Report dated 24.02.2021 shows that the benefit of ITC has been passed on to 14 buyers (mentioned in Annexure-30 of the said Report) was short by Rs. 25,77,345/- which is still required to be passed on to them by him whereas he has claimed that he had passed on total ITC benefit to such buyers which was required to be passed on.

(c) He had passed on the benefit of Rs. 2,72,720/- to the Applicant No. 1 even though the ITC benefit of Rs. 6,39,422/- on the total value of unit had already been passed on to him. The denial of passing on of such ITC benefit by the Applicant No. I was merely an exercise of arm twisting and seeking extra benefit.

(d) The said DGAP’s Report accepts ‘denial by customers’ as not passed on the ITC benefit event though legal documents on record, is illegal and not a justified approach. He challenges the premise on which such denial emails had been accepted as final. The DGAP should have examined such legal documents before accepting the denials by the customers. The documents submitted on record contained proper signatures of such customers to whom ITC benefit had been passed on and it may be observed that the majority of customers had confirmed receipt of ITC benefit on the same/similar documents. Therefore, denial by few customers on mail could not be treated as if benefit of ITC had not been extended to them.

(e) He seeks waiver of penalty and interest, as ITC benefit had been passed on to all the customers.

(f) The calculations of profiteering done by the DGAP, were erroneous and conceptually flawed. He did not agree with the said calculations. The formula used by the DGAP was conceptually flawed as it did not take care of the fluctuations of the expenses done pre-GST and post GST. In pre-GST period only 1 year and 3 months ratio had been taken whereas in post-GST period 3 years cumulative ratio was drawn. Business expenses varied during a span of time and did not remain constant and therefore that ratio would give false escalated figures. The calculations done by the DGAP had also added profiteering for difference of ITC availed on services which were neutral in both the periods (General rate on services increased from 15% to 18%, however it was not a benefit to the Respondent).

(g) The profiteering should have been calculated only on the ITC availed on goods by him in post GST period as the such availment of ITC on goods was not available in pre-GST period and became available in post GST. In respect of ITC on services, it was available in pre-GST as well as post GST period therefore it was neutral so far as profiteering was concerned.

28. The Applicant No. 1 vide his submission dated 23.08.2021 has stated that the Respondent has charged 12% GST instead of 5% GST rate on his flat from him.

29. The above said submissions dated 05.07.2021 and 23.08.2021 of the Respondent and Applicant No. 1 respectively were forwarded to the DGAP for clarification under Rule 133(2A) of the CGST Rules, 2017. Therefore, the DGAP vide his letter dated 11.03.2022, has furnished his clarifications on the contentions of the Respondent and Applicant No. 1 placed at paras 27 and 28 supra, given as under:-

(i) Upon contention mentioned at para 27 (a) supra:- In respect of 129 buyers, the Respondent has not provided any documentary evidence for any subsequent benefit transferred and hence could not be verified during investigation by DGAP. Further in respect of 06 buyers, the claim of the Respondent has not been considered as the such buyers vide their emails, have denied the receipt of benefit.

(ii) Upon contention mentioned at para 27 (b) to (d) supra:- The Report has been prepared on the basis of denial of such claim by these 14 buyers via emails. Accordingly, the Report has prepared as per the responses received.

(iii) Upon contention mentioned at para 27 (f) supra:- DGAP vide Report dated 24.02.2021 considered the period from April, 2016 to June, 2017 (15 months) in the pre-GST Regime with the purpose to cover a reasonable period just before the GST so that a proper percentage of Input tax credit available to the Respondent could be arrived at. Further, during this Pre-GST period there was no variation of rate of tax on services and prior to that there were several changes in the rate of service tax as well as changes in the conditions for eligibility of availment of CENVAT Credit of Service Tax and Excise Duty including rate of abatement etc. which would result• in distorted picture of CENVAT. Thus, this period was taken to find out the average ratio of input tax credit availability with turnover. The ratio of ITC and turnover in Pre-GST is compared with ratio of ITC in post GST. The period during the GST regime may be one month or one year, depending upon the period of investigation. It does not mean that if the period is larger than the availability of ITC would increase or decrease but it only gives a ratio which represents the period for comparison, It is a prevailing practice being followed in DGAP to take pre-GST period from 01.04.2016 to 30.06.2017 and has been followed in all cases.

Further, there is direct correlation between turnover and ITC as the Respondent was discharging his GST output liability out of the ITC available to him on the basis of the turnover i.e. the cost realized by him from the buyers. Moreover, the benefit is to be passed on the additional ITC proportionate to the payment made by a buyer and hence the above ratios are relevant. Therefore, the above claim of the Respondent cannot be accepted. It is also submitted that the increase in the cost of inputs and input services may be a factor for determination of price but this factor is independent of the output GST rate. As there is no cost escalation  clause in the agreement entered by the Respondent with the home buyers, the increase in cost, if any is a kind of business risk which must have been factored in by him at the time of entering into agreements. The Respondent cannot claim to set off such increase in his cost with the benefit of input tax credit which is the sacrifice of precious tax revenue made from the kitty of the Central and the State Governments and required to be passed on to the end consumers who bear the burden of tax.

(iv). Upon contention mentioned at para 27 (f) supra:- In the erstwhile pre-GST regime, various taxes and Cesses were being levied by the Central Government and the State Governments, which got subsumed in the GST. Out of these taxes, the input tax credit (ITC) of some taxes was not being allowed in the erstwhile tax regime. For example, the input tax credit of Central Sales Tax, which was being collected and appropriated by the States, was not admissible. Similarly, in case of construction service, while the input tax credit of Service Tax was available, the input tax credit of Central Excise duty paid on inputs was not available to the service provider. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST with effect from 01.07.2017, all these taxes got subsumed in the GST and the input tax credit of GST is available in respect of all goods and services, unless specifically denied. This additional benefit of input tax credit in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 171 of GST Act, 2017.

(v) .Upon contention mentioned at para 28 supra:- The Respondent has opted 12 % Tax rate in the light of Notification No. 3/2019- Central Tax (Rate) dated 29.03.2019 w.e.f. 01.04.2019 to discharge his output GST liability therefore, the aforesaid Notification is not applicable on him and accordingly, there is no reduction in rate of tax w.e.f. 01.04.2019 with regard to Applicant No. l’s unit.

30. The above said clarifications dated 11.03.2022 of the DGAP, has been forwarded to the Respondent as well as the Applicant No. 1 for their reply on it accordingly both of them have furnished their replies dated 25.04.2022 and 18.04.2022 respectively wherein the Applicant No. 1 has reiterated his previous submissions and the Respondent have inter alia stated that;

Respondent :- The calculation of profiteering made by the DGAP is erroneous as in the pre-GST period the Respondent had availed VAT credit of Rs. 98,16,066/- during 2016-17 and 2017-18 which has not been considered by the DGAP while calculating profiteering.

31. The above said submissions dated 25.04.2022 and 18.04.2022 of the Respondent and the Applicant No. 1 respectively have been forwarded to DGAP for clarification. Therefore, the DGAP vide his letter dated 09.05.2022, has furnished his clarifications stating that the arguments made vide above said submissions by the Respondent as well as the Applicant No. 1 have already been dealt vide DGAP’s Report dated 24.02.2021.

32. In the interest of natural justice, hearings on 11.04.2022, 08.06.2022 and 08.2022 were granted to the Respondent and the interested parties wherein the Respondent and the Applicant No. 1 have re-iterated their arguments made by them vide their earlier submissions which have already been taken on record.

33. The Authority has carefully considered the Reports of the DGAP, the submissions filed by the Respondent and the other material placed on record including submissions made during hearings. The Authority finds that the Applicant No. 1 had filed a complaint against the Respondent alleging that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price on the purchase a flat in the “ATS Rhapsody” Project which was executed by the Respondent at Plot No. GH12/1, Sector-1, Village Bisrakh, Greater Noida, Uttar Pradesh. The said complaint was examined by the Standing Committee on Anti-Profiteering and forwarded to the DGAP for detailed investigation on 03.06.2020, who vide his investigation Report dated 24.02.2021 furnished to this Authority, had stated that the Respondent is engaged in the construction of residential projects, has constructed/developed the impugned project “ATS Rhapsody” containing 579 flats/shops. The Respondent has opted 12% Tax rate in the light of Notification 03/2019 CT(R) dated 29.03.2019 w.e.f. 01.04.2019 to discharge his GST liabilities towards the said project. The Respondent has not received Occupancy Certificate for the impugned project. As the input Tax Credit (ITC) @ 7.19 % and 0.63% of the turnover were available to the Respondent during the post-GST period and pre-GST period the respectively as per the Table- B mentioned at para 15 supra, therefore, the DGAP has concluded that the Respondent had benefited from the additional ITC to the tune of 6.56% (7.19 % – 0.63%) of the turnover during the period from 01.07.2017 to 31.05.2020, which was required to be passed on to buyers of the impugned Project. As the Respondent has not reduced the basic prices of his flat/shops by 6.56% due to the additional benefit of ITC. Accordingly, he has contravened the provisions of Section 171 of the CGST Act, 2017 and Rules made thereunder. The DGAP had concluded that the benefit of Rs. 9,03,74,981/- (including GST@ 12%) was to be passed on by the Respondent to 395 buyers (inclusive Applicant No. 1) for the period from 01.07.2017 to 31.05.2020 under the provisions of Section 171 of the CGST Act, 2017. Further, the DGAP has found that since, the Respondent has passed on the benefit of ITC of Rs. 15,48,92,888/- to 380 buyers (excess Rs.7,02,82,782/- to the benefit was to be passed on to 380 buyers). Hence, according to the DGAP, the Respondent is yet to pass on the ITC benefit of Rs.57,64,875/- to 150 buyers as mentioned at Table-D above.

34. As per the said Report, only 93 home buyers/customers/recipients out of 386 (to whom emails were sent by the DGAP, out of 395) eligible home buyers/customers/recipients have confirmed receipt of ITC benefit and the remaining home buyers/customers/recipients had either not responded or denied to receipt of benefit, to the communication made by the DGAP. Thus, evidence in respect of only 93 out of 395 eligible customers/recipients has been submitted. Hence, this Authority finds that, the above claims of the Respondents and the DGAP’s verification is neither definitive nor conclusive. Hence, the same cannot be accepted.

35. The Authority finds that the DGAP has computed the ratio of CENVAT as a percentage of the turnover for the pre-GST period and compared it with the ratio of ITC to the turnover for the post-GST period, and then computed the percentage of the benefit of additional ITC which the Respondent was required to pass on to the flat buyers/recipients. The above ratios had been computed by the DGAP based on the data/details provided by the Respondent which have been duly verified from his Service Tax, VAT and GST Returns filed by them for the period April 2016 to June 2017 and July 2017 to May 2020 respectively. The DGAP has taken into consideration the ITC of various taxes/cesses (Service Tax/ Cess/ CENVAT/ VAT/ GST), during the pre GST and GST periods, as available to the Respondent, as per the verifiable records/ assessed statutory Returns of the Respondent as submitted by the Respondent. Hence, the amounts considered in the Tables ’13’ and (⁴‘ in the DGAP’s Report, as reproduced above, are established to be correct. Since, the ratios calculated by the DGAP are based on the factual record submitted by the Respondent/obtained by the DGAP; hence these can be relied upon while computing the profiteered amount. The above methodology had been approved by this Authority in all such cases where the benefit of ITC was required to be passed on to the flat buyers/recipients of construction service.

36. In view of the above discussion and findings and after taking into consideration the provisions of the law and the submissions made by the Respondent, the issues to be decided are as under:-

• Whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent on implementation of GST w.e.f. 01.07.2017 and if so,
• Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017 and whether various issues raised by the Respondent sustainable ? And also, whether the Respondent is liable to be penalize in terms of Section 171 (3A) of the CGST Act 2017.

37. In the instant case, there is no reduction of rate of tax during the relevant period and the only issue which is required to be decided by the Authority is as to whether Respondent is required to pass on the benefit of input tax credit. As mentioned in earlier paragraphs, the DGAP has carried out investigation in the subject matter and collected relevant information/evidences from the Respondent and after the analysis of the same the DGAP has come to a conclusion that the Respondent has gained benefit of ITC on the supply of Construction services after the implementation of GST w.e.f. 01.07.2017 and the Respondent was required to pass on such benefit to the buyers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act, 2017 during the period 01.07.2017 to 31.05.2020.

38. In view of the above facts and findings discussed in the earlier paras at 34, 35 and 37, this Authority agrees with the methodology adopted by the DGAP in its Report to calculate the profiteered amount. This Authority has taken note of claim of the Respondent regarding transfer of benefit of Rs.15,48,92,888/- and also findings of the DGAP in Table D in para 22 supra, that an amount of Rs. 9,03,74,981/- was to be transferred out The Respondent has claimed to pass on excess benefit to some buyers at the expansion of other buyers as mentioned in the said Table D. The Respondent has not been able to provide any methodology whereby such amount of Rs.15,48,92,888/- was passed on whereas the DGAP has calculated amount of Rs. 9,03,74,981/- in scientific manners as mentioned in the Annexure-24 of said Report. Hence, this Authority determines that the Respondent has realized an additional amount of Rs. 9,03,74,981/- which includes both the profiteered amount @ 5.69% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 395 buyers/recipients [including the amount of Rs.2,72,720/- (including GST @12%) from the Applicant No. 1] during the period from 01.07.2017 to 31.05.2020 which was required to be passed on such home buyers/customers/recipients of supply of his impugned project.

39. The details of eligible buyers to whom supply was made by the Respondent in his 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.

40. Since, all the home buyers of supply are identifiable as per the documents placed on record therefore, the Respondent is directed to pass on the above said 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) to above said buyers/recipients, 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 An nexu re-`A’, failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017.

41. For the reasons mentioned hereinabove and in the given facts and circumstances and also stated position of law we find that the Respondent has denied the benefit of ITC to the buyers of his flats/shops/units in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. As the said provision which has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019, the Respondent is liable to penalty for the amount profiteered by him from 1.01.2020 onwards. Accordingly, notice be issued to the Respondent for such purpose.

42. 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.

43. This Authority as per Rule 136 of the CGST Rules 2017 directs the jurisdictional Commissioner, CGST, Noida and SGST, Lucknow to monitor compliance of this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent (GST  Registration No. 09AAHCA6981C1ZJ) 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 ATS Township Pvt. Ltd., ATS Tower, Plot No.16, Sector 135, Noida, Uttar Pradesh-201305, for his Project “ATS Rhapsody”, situated at Plot No. GH12/1, Sector-1, Village Bisrakh, Greater Noida, Uttar Pradesh and amount of profiteering Rs. 9,03,74,981/-, so that the 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 Order is available on this Authority’s website www.naa.gov.in.

44. Contact details of concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement. A report in compliance of this Order shall be submitted to this Authority and the DGAP by the Commissioners CGST /SGST within a period of 4 months from the date of receipt of this Order.

45. The present investigation has been conducted up to 31.05.2020 only. However, the Respondent is liable to pass on the benefit of ITC which would become available to him till the date of issue of Completion Certificate. Accordingly, the concerned jurisdictional Commissioner CGST/SGST are directed to ensure that the Respondent passes on the benefit of ITC to the eligible home buyers/shop buyers/ recipients of supply as per the methodology approved by this Authority in the present case and submit report to this Authority through the DGAP. The Applicant No. 1 or any other interested party/person shall also be at liberty to file complaint against the Respondent before the Uttar Pradesh State Screening Committee in case the remaining benefit of ITC is not passed on to them.

46. In view of facts discussed hereinabove and the findings thereof, the Authority has reason to believe that since the Respondent has been found to have contravened the provisions of Section 171 of the CGST Act 2017 in respect of the subject Project “ATS Rhapsody” and hence there is every possibility that similar contravention may has taken place with his other projects. This Authority in terms of Rule 133 (5)(a) of the CGST Rules 2017 also directs the DGAP to investigate profiteering in relation to other Projects executed by the Respondent, if any, under the provision of section 171 of the CGST Act 2017.

47.The Hon’ble High Court of Delhi, vide its Order dated 10.02.2020 in the case of Nestle India Ltd. & Anr. Vs. Union of India has held that:-

“We also observe that prima facie, it appears to us that the limitation of period of six months provided in Rule 133 of the CGST Rules, 2017 within which the authority should make its order from the date of receipt of the report of the Directorate General of Anti Profiteering, appears to be directory in as much as no consequence of non-adherence of the said period of six months is prescribed either in the CGST Act or the rules framed thereunder.”

In view of the above, it is clear that the time limit of 06 months provided in Rule 133 (1) of the CGST Rule 2017, is directory in nature to determine and to pass an order by this Authority. Hence this order having been passed today under Rule 133 (1) of the CGST Rules 2017.

48. A copy each of this order be supplied, free of cost, to the DGAP, the Applicant No. 1, the Respondent, jurisdictional Commissioner, CGST, Noida and SGST, Lucknow, the Secretary (Town and Country Planning) Govt. of Uttar Pradesh and Uttar Pradesh RERA for necessary action. File be consigned after completion.