Susheel Prasad Todi Vs Acme Housing India Pvt Ltd. (National Anti-Profiteering Authority)
In this case It is established that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the builder as he has profiteered an amount of Rs. 2,10,57,462/- which includes 12% GST on the base profiteered amount of Rs. 1,88,01,305/-. The Respondent has also realized an additional amount to the tune of Rs. 1,91,662/- from the Applicant No. 1 which includes both the profiteered amount @2.61% of the taxable amount (base price) and the GST on the said profiteered amount. Accordingly, the above amounts shall be paid to the above Applicant and the other eligible house buyers by the Respondent along with interest ©18% from the date from which these amounts were realised from them till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, within a period of 3 months from the date of passing of this order.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. This Report dated 03.07.2019 has 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 18.01.2018 submitted to the Maharastra Screening Committee on Anti-profiteering under Rule 128 (2) of the CGST Rules, 2017, the Applicant No. 1 had alleged profiteering by the Respondent while he had purchased Flat in Respondent’s project named “Acme Ozone Herbelia”, Ghodbunder Road, Manpada, Thane, Maharashtra 400610. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in price w.e.f. 01.07.2017 to him. The Maharashtra State Screening Committee had examined the above application and after its prima facie satisfaction that the Respondent had violated the provisions of Section 171 of the CGST Act, 2017, had sent the same with its recommendations for necessary action to the Standing Committee on Anti-profiteering as per the provisions of Rule the Standing Committee on Anti-profiteering in its meeting held on 13.12.2018 and was referred to the DGAP under Rule 128(2) for conducting detailed investigation on the allegations levelled by the Applicant No. 1.
2. The DGAP has stated in his Report that the Applicant No. 1 had submitted the following documents along with his application:
(a) Duly filled in Form APAF-1.
(b) Proof of identification (Aadhar card).
(c) Copies of the demand letters.
3. The DGAP had issued Notice under Rule 129(3) of the CGST Rules, 2017 on 16.01.2019 (Annexure-3 of the Report) asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on to the above Applicant through commensurate reduction in the price of the flat and if so, to suo moto determine the quantum of such benefit and communicate the same with necessary evidence. An opportunity to inspect the non-confidential evidence/information submitted by the Applicant No. 1 was also afforded to the Respondent, which the Respondent didn’t avail. In response to the Notice dated 14.01.2019, the Respondent submitted to the DGAP:-
(i) That in order to determine the benefit accruing to him in respect of the project, which needed to be passed on to his buyers, he had appointed Advocates & Solicitors firm M/s. Economic Law Practices (‘ELP’) and the said firm had carried out the exercise of determination of savings/benefit accruing due to change in taxation regime. The benefit/saving arrived at by the said firm was 3.16% of the total value of area sold as on 30th June, 2017. It was also intimated that the project “Herbilia” was a sub project under “Acme Ozone” project having RERA Registration No. taxguru.in P51700001038. He further claimed that he had already passed on the benefit of Rs 3,11,726/- to the Applicant, vide letter dated 27.04.2018.
(ii) He further submitted to the DGAP that he would be giving discount on account of additional input tax credit to all the home buyers at the time of handing over the possession, so that the correct amount could be worked out and passed on. Also, he was not certain whether flat buyers would take possession of the flats or cancel the bookings or transfer the bookings after availing discount or whether they would make payment of all the instalments in time etc.
(iii) That the benefit of additional input tax credit arising due to implementation of GST could only be ascertained and quantified at the time of completion of construction of the project as his milestones for billing and receipt of inward supply were not linked to each other, also in terms of Rule 42 of the Rules, he would be required to reverse input tax credit on receiving the completion certificate.
(iv) The Respondent also submitted to the DGAP that he, being registered under the Maharashtra Regulatory Authority incorporated under Real Estate (Regulation & Development) Act, 2016 (RERA), could not increase the cost of the flat and if benefit was computed at the intermediate stage by comparing the input tax credit availed till date and passed on to the flat buyers without taking into account the eventualities like reversal of credit on receipt of the completion certificate and non-deposit of tax by his suppliers, he would not be able to recover the amount from flat buyers at a later stage due to provisions of RERA. Therefore, it was not possible for him to quantify the benefit of additional input tax credit on recurring basis during the period of construction.
(v) The Respondent further stated to the DGAP that he was not procuring the construction materials directly from the vendors but had given contracts to various Contractors. Majority of construction material had been procured by the Contractors who were providing works contract service to him. These Contractors had charged Service Tax under works contract service which was creditable to him even in the pre-GST period. The effective Service Tax rate on works contract was 6% (15% of 40%) and in the GST period, work contract service attracted GST @18% which was eligible for credit even in the pre-GST period. Similarly, for other input services, increase in credit was due to increase in tax rate. The increase in the input tax credit was not due to availability of credit on items which were not eligible for credit in the pre-GST period but due to increase in the tax rate on items which were eligible for credit even in the pre-GST period. Therefore, there was no additional input tax credit flowing due to introduction of GST.
(vi) The Respondent further submitted to the DGAP that his agreements with the flat buyers were long-term contracts spanning over several years and payments made by the flat buyers were provisional as the contract was not said to have been fulfilled/concluded unless construction was completed and flat buyers made full payment of the agreement value. If any of these events did not get fulfilled, the contract would get terminated and supply would be deemed to have not taken place.
(vii) The Respondent submitted the following documents to the DGAP:-
(a) Copies of GSTR-1 returns for the period July, 2017 to December, 2018.
(b) Copies of GSTR-3B returns for the period July, 2017 to December, 2018.
(c) Copies of Tran-1 returns for transitional credit availed by the Respondent.
(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 December, 2018.
(f) Tax rates, pre-GST and post-GST.
(g) Copy of Balance Sheet for FY 2016-17 & 2017-18.
(h) Payment plan of the Applicant alongwith agreement and demand letters.
(i) Details of turnover and input tax credit in respect of the project “Acme Ozone Herbelia”.
(j) List of home buyers in the project “Acme Ozone Herbelia”.
4. The DGAP stated that the Respondent submitted a copy of the sale agreement dated 08.12.2017, for the sale of flat no. 607, to the Applicant No. 1 in his project “Acme Ozone Herbelia”, measuring 984 square feet at the basic sale price of Rs. 13,447/- per square feet. The details of amounts and taxes paid by the said Applicant to the Respondent, is furnished in the table below:-
Table
(Amount in Rs.)
