Sh. Kavi Mahajan Vs M/s Heeranandani Realtors Pvt. Ltd (National Anti-Profiteering Authority)
Respondent has benefited from the additional ITC to the extent of 10.66% of the turnover during the period from July, 2017 to August, 2918 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers and has profiteered an amount of Rs. 3,79,10,058/- inclusive of GST @ 12% on the base profiteered amount of Rs. 3,38,48,266/-. Further, the Respondent has realized an additional amount of Rs. 1,69,878/- which includes both the profiteered amount @ 10.66% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1. He has further realized an additional amount of Rs. 3,77,40,180/- which includes both the profiteered amount @ 10.66% of the taxable amount (base price) and 12% GST on the said profiteered amount from the flat buyers other than the Applicant No. 1 as mentioned in Annexure-22 of the Report dated 21.02.2019. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of Rs. 3,77,40,180/- and the amount of Rs. 1,69,878/- to the other flat buyers and the Applicant No. 1 respectively along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made, within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-22 attached with the Report dated 21.02.2019.
In view of the above facts 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 commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. In case the above benefit is not passed on by the Respondent the Applicant No. 1 or any other buyer shall be at liberty to approach the Tamil Nadu State Screening Committee to initiate fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017.
Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
The present Report dated 21.02.2019 and the supplementary Reports dated 15.04.2019 and 30.05.2019 have been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the case are that vide his application dated 12.06.2018 filed before the Tamil Nadu State Screening Committee on Anti-profiteering under Rule 128 (2) of the CGST Rules, 2017, the Applicant No. 1 had alleged profiteering by the Respondent in respect of purchase of Flat at AMALFI-2603, House of Hiranandani, 5-63 OMR, Egattur, Chennai-600130. The above
Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above flat. The Tamil Nadu State Screening Committee on Anti-profiteering had prima facie found that the Respondent had not passed on the benefit of ITC to the above Applicant as the same should have been computed against the instalments paid by the Applicant No. 1 against the price of the flat. The above Screening Committee had forwarded the said application with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 (2) of the above Rules. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meetings held on 07th & 08th August, 2018, wherein it was decided to forward the same to the DGAP to conduct detailed investigation in to the complaint according to Rule 129 (1) of the CGST Rules, 2017.
2. The Applicant had furnished the following documents along with his application:-
i. Duly filled in Form APAF-1.
ii. Copy of the Demand letters of both pre-GST & post-GST periods.
3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued Notice dated 11.09.2018 under Rule 129 (3) of the above Rules, asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on to the above Applicant by way of commensurate reduction in the price of the flat and in case it was so, to suo moto compute the quantum of the same and mention it in his reply to the Notice along with the supporting documents. The Respondent was given opportunity to inspect the non-confidential evidence/information furnished by the above Applicant during the period between 18.09.2018 to 20.09.2018 in accordance with Rule 129 (5) of the above Rules and he availed of the said opportunity and inspected the documents on 24.09.2018. Vide e-mail dated 05.02.2019, the above Applicant was also given opportunity to inspect the non-confidential documents/reply submitted by the Respondent on 11.02.2019 or 12.02.2019. However, the Applicant did not avail of the said opportunity.
4. The DGAP has covered the period from 01.07.2017 to 31.08.2018 during the current investigation. The time limit to complete the investigation was extended by this Authority, vide its orders dated 20.11.2018 and 15.01.2019. in terms of Rule 129 (6) of the above Rules.
5. The DGAP has further stated that the Respondent had submitted replies vide his letters/emails dated 24.09.2018, 25.09.2018, 17.10.2018, 25.10.2018, 26.10.2018, 03.01.2019, 07.01.2019, 15.01.2019, 25.01.2019, 30.01.2019, 31.01.2019, 05.02.2018 and 08.08.2019. The submissions of the Respondent were summed up by the DGAP as under:-
a) That the Respondent was constructing a project named AMALFI at Chennai where agreements with buyers were executed for the purpose of selling flats. He was paying Service Tax @ 4.50% on the total agreement value. As regards VAT, it was paid under the gross profit method, i.e., taxable turnover was arrived at by adding 25% margin to the actual purchases. The VAT liability was discharged every month but was recovered only once from the customers on 30th June, 2017. Further, the credit of Service Tax & VAT was availed by the Respondent. The project was approx. 75% complete as on 01.07.2017. Under GST, the Respondent was availing the credit of GST paid on inputs and input services and paying 12% GST on the sale value of the flats.
b) That the benefit of TRAN-1 credit under Section 140 of the Central Goods and Services Tax Act, 2017 and the benefit available under Section 142 (11) (c) of the said Act were not available to him. Further, the credit of Central Excise Duty paid on inputs was not available prior to GST but the same was admissible under the GST, the benefit of which was to be calculated and passed on to the customers at the time of handing over the possession of the flats after the completion of the project.
c) That the agreements for sale of flats entered into between the buyers and the Respondent had specified the milestones for recovery of the amount. The invoice could be raised only on achieving the milestone when the credit had been accruing on incurring the expenditure on construction. Therefore, there was no synchronization between the accrual of credit and the receipt of consideration for service during any period. In Amalfi project, Slab 35 had been cast in November, 2017 and the demand was raised in December, 2017. After Slab 35, as per the schedule of payment, the demand could be raised only after handing over the possession to the customers. The possession had not been given to the customers till the date of investigation and was most likely to be given in May, 2019. Thus, though the credit had accrued in December 2017, the corresponding income was yet to be received. Thus, the credit availed during the post-GST period should exclude Rs. 3,31,12,094/-, i.e., the value of credit availed during December, 2017 to August, 2018.
d) That the Service Tax turnover was Rs. 54,98,31,779/(2016-17) and Rs. 9,80,26,261/- (April-June, 2017). Therefore, the total Service Tax turnover was Rs. 64,78,58,040/-. The total area of the project was 3,54,025 sq. ft. whereas the turnover was only for 2,67,510 sq. ft. It was submitted that the total credit of Rs. 2,21,13,537/- must be re-computed based on the area relevant to the turnover. Therefore, the credit of Rs. 1,67,09,533/- (2,21,13,537 * 2,67,510 / 3,54,025) must be considered for determining the benefit derived by the Respondent. Similarly, in the post-GST regime, the total turnover was Rs. 31,33,60,755/- and the area relevant to the turnover was 2,85,150 sq. ft. Thus, the total credit of Rs. 4,98,08,556/- must be re-computed after giving effect to the credit mentioned above. Therefore, the credit of Rs. 1,66,96,462/- (4,98,08,556 (-) 3,31,12,094) must be considered for applying the calculation explained in this para. The revised figure of credit would be Rs. 1,34,48,192/- (1,66,96,462 * 2,85,150 / 3,54,025).
e) That the value of pre-GST turnover was Rs. 64,78,48,040/-and It was submitted that the said value also consisted of certain flats which were cancelled in the post-GST regime. It was also submitted that the value of those flats which was included in the turnover of Rs. 64,78,48,040/-, must be excluded. Therefore, Rs. 1,65,75,125/-, i.e., the value of the cancelled flats must be reduced from the pre-GST turnover.
f) That in terms of Section 17 (2) and Section 17 (3) of the Central Goods and Services Tax Act, 2017, the Respondent would be liable to reverse the proportionate input tax credit to the extent of flats sold after receipt of Completion Certificate (CC), which would have considerable implication on the credit availed by the Respondent. Therefore, the actual benefit could be determined only at the stage of the receipt of CC. The Respondent should pass on the benefit of ITC once the CC has been received.
6. The Respondent had also submitted the following documents/information to the DGAP vide his above mentioned letters/e-mails during the course of the investigation:-
(a) Copies of GSTR-1 Returns for the period from July, 2017 to August, 2018.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to August, 2018.
(c) Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017.
(d) Electronic Credit ledger for the period from July, 2017 to August, 2018.
(e) Copies of all demand letters, receipts and sale agreement/ in the name of the Applicant Sh. Kavi Mahajan.
(f) Details of applicable Tax rates- pre-GST and post-GST.
(g) Balance Sheet for the FY 2016-17.
(h) Copy of project report submitted to RERA.
(i) Details of taxable turnover and input tax credit for the project “AMALFI”.
(j) List of home buyers in the project ” AMALFI”.
7. The DGAP has also stated that all the documents placed on record were carefully examined by him and he had found that the main issues for determination were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not.
8. The DGAP has further stated that the Respondent, vide his letter dated 17.10.2018 had submitted the copies of the demand letters, the agreement and the payment schedule for the flat booked by the Applicant, the details of which are mentioned in Table-A’ below:-
Table-`A’
(Amount in Rs.)
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