Director-General of Anti-Profiteering Vs DLF Limited (NAA)
NAA finds that the Respondent has profiteered by an amount of Rs. 7,23,50;135/-, Rs. 12,94,35,170/- & Rs. 4,91,23,070/- for the projects ‘The Camellias’, ‘The Crest and The Ultima’ respectively during the period of investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers in all the above three projects shall be refunded by him, along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the GCST Rules 2017.
The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP’s Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 30.11.2020, in the instant case, as Rs. 7,23,50,135/-, Rs. 12,94,35,170/- & Rs. 4.91,23 070/- for the projects ‘The Camellias’, The Crest’ and ‘The Ultima’ respectively. 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/shops commensurate with the benefit of ITC received by him as has been detailed above.
The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 7,23,50,135/-, Rs. 12,94,35,170/- & Rs. 4.91,23.070/- for the projects ‘The Camellias, `The Crest and ‘The Ultima’ respectively. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017.
The complete list of homebuyers has been attached with this Order, with the details of amount of benefit of ITC to be passed along with interest @ 18% in respect of all the three projects ‘The Camellias’. ‘The Crest’ and ‘The Ultima’ of the Respondent as in the Annexure-1, 2 and 3 respectively.
We also order that the profiteering amount of Rs. 7,23,50,135/-, Rs. 12,94,35,170/- & Rs. 4,91,23,070/- for the projects `The Camellias’, ‘The Crest’ and The Ultima’ respectively along with the interest @ 18% from the date of receiving of advance from the homebuyer till the date of passing the benefit of ITC shall be paid/passed on by the Respondent within a period of 3 months from the date receipt of this order failing which it shall be recovered as per the provisions of the CGST Act, 2017.
It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats and the shops being constructed by him in his projects ‘The Camellias’, `The Crest’ and ‘The Ultima’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. That Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 30.11.2020, therefore, he is liable for imposition of penalty under the provisions of the above Section. Accordingly, notice be issued to him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 16.12.2021 has been received from the Director-General of Anti-Profiteering (DGAP) after a detailed investigation in accordance with Rule 129(6) of the Central Goods & Service Tax Rules, 2017. The brief facts of the present case are that the Sh. Sudhir Jain had filed an application under Rule 128 of the CGST Rules, 2017 alleging profiteering by the Respondent in respect of purchase of flat no. J-062, Tower-J, 6th Floor in the Respondent’s Project “The Sky Court”, in the DLF Garden City, Sector-86, Gurugram. He had also alleged that he had purchased the flat when the completion certificate was already received by the Respondent and possession was already given to many residents. Since, the sale of flats after issuance of completion certificate did not attract GST, he had alleged that the Respondent had charged GST @ 18 % on the Preferential Location Charges (PLC). The Haryana State Screening Committee on Anti-Profiteering had examined the said application and forwarded it with its recommendation, to the Standing Committee on Anti-Profiteering for further action, in terms of Rule 128 of the Rules. Further the aforesaid reference was examined by the Standing Committee on Anti-Profiteering in its meeting, the Minutes of which were received in the DGAP, whereby it was decided to forward the same to the DGAP, to conduct a detailed investigation in the matter. Sh. Sudhir Jain had submitted a demand letter along with his application.
2. This Authority went through the aforesaid Investigation Report dated 31.08.2020 submitted by the DGAP and passed an Interim Order No. 38/2020 dated 11.12.2020 and made the following observations:-
“25. It has also also been observed from the submissions of the Respondent that he is executing another project viz. “The Ultima” in the same “DLF Garden City”, situated in Gurugram. Haryana in respect of which the DGAP has not conducted any investigation to ascertain whether the Respondent is liable to pass on the benefit of ITC to the recipients of this project or not. Since the execution of the above project has been admitted by the Respondent himself therefore, there are sufficient reasons to believe that the Respondent is apparently liable to pass on the above benefit as per the provisions of Section 171 (1). Further, the Respondent also has a single GST registration and is maintaining joint ITC Register and is availing ITC on all the projects which he is executing from a common pool of ITC; to discharge his GST output liability on these projects through the combined GSTR-313 Returns. Therefore, all the projects on which the Respondent is availing ITC from the common pool are required to be investigated to determine whether he has passed on the benefit of 1TC to the buyers of each project, which are being executed by him. Accordingly, this Authority as per the provisions of Section 171(2) of the above Act after taking suo moto cognizance, directs the DGAP to conduct investigation in respect of the above project and submit Report to this Authority for determination whether the Respondent is liable to pass on the benefit of ITC in respect of the above project to the buyers or not as per the provisions of Section 171(1) of the above Act.”
’26. Due to the above reasons the Report dated 31.08.2020 furnished by the DGAP cannot be accepted. Therefore, in terms of the provisions of Rule 133(4) and Section 171(2) of the CGST Act, 2017 the DGAP is directed to further investigate the present case on the above issues and submit his Report under Rule 129(6) of the above Rules. The Respondent is directed to extend all assistance to the DGAP and furnish him necessary documents or information as required during the course of the investigation.”
3. Therefore, the DGAP has submitted the present Report under Section 171(2) of the CGST Act, 2017 covering the issues raised by this Authority in Para 25 of the above said I.O. dated 11.12.2020,
4. The DGAP has submitted that as per the directions of this Authority vide aforesaid Order dated 11.12.2020, all the projects on which the Respondent was availing ITC from the common pool were required to be investigated to determine whether he had passed on the benefit of ITC to the buyers of each project, which were being executed by the Respondent.
5. Accordingly, the DGAP has issued a notice dated 23.09.2021 calling for information in respect of all the projects covered under the same GST Registration No. of the Respondent to determine whether the benefit of ITC had been passed on by him to the recipients in respect of construction service supplied by him for all the projects and the Respondent was further requested to furnish the fresh requisite information/data for the period up to November, 2020.
6. It has also been claimed by the DGAP that the period covered by the current investigation was from 01.07.2017 to 30.11.2020. Though the Respondent claimed that the Occupation Certificate in all three projects were received from the competent authority prior to 30.11.2020 but the Respondent, vide his submission dated 12.12.2021, had confirmed that the in respect of payment plan, the customers have opted for payment plans as per their convenience and same will be mixed. Therefore, since the occupation certificates have been received in respect of all the 3 projects by the Respondent but the nature of agreements as claimed by the Respondent were linked with construction plan as well as payment plan i.e., mixed, the investigation has been carried out up to the period from 01.07.2017 to 30.11.2020 and not up to the date of receipt of occupation certificate in respective projects.
7 The DGAP has further mentioned that the present investigation was to be completed by 29.06.2021. However, due to force majeure caused in the light of Covid-19 pandemic, the investigation could not be completed on or before the above date. Further, Hon’ble Supreme Court of India passed an Order dated 08.03.2021 in Suo Moto Writ Petition (Civil) No. 3 of 2020, wherein, it was stated that “in cases where the limitation would have expired during the period between 15.03.2020 till 14.03.2021. notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15.03.2021. In the event the actual balance period of limitation remaining, with effect from 15.03.2021, is greater than 90 days, that longer period shall apply”. The above relief has been extended and the period from 14.03.2021 till further orders has also been excluded in computing the limitation period as per the Hon’ble Supreme Courts Order dated 27.04.2021 passed in Miscellaneous Application No. 665/2021 in SMWP(C) No. 3/2020. Further, the above relief has been further extended and the period from 02.10.2021 shall have limitation period of 90 days from 03.10.2021 as per the Hon’ble Supreme Court’s Order dated 23.09.2021 passed in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020. Therefore, the present Report has been filed during the period of limitation.
8. The Respondent has responded to the DGAP vide letter dated 23.09.2021 and subsequent reminders. the Noticee submitted his replies vide letters/e-mails dated 05.10.2021, 12.10.2021, 02.11.2021, 15.11.2021, 23.11.2021, 07.12.2021, 10.12.2021, 11.12.2021, 12.12.2021, 13.12.2021,
14.12.2021 and has submitted:-
a) That he has filed a writ petition under Article 226 and 227 of the Constitution of India before the High Court of Delhi (numbered as W P (C) No.12329 of 2021) inter alia against the DGAP and the National Anti-Profiteering Authority (NAA) seeking amongst others an appropriate writ, order or direction quashing the Order dated 11.12.2020 passed by the NAA.
b) The said Writ Petition came up for hearing on 29.10.2021 before the Hon’ble High Court, when the Court was pleased to issue notice on the aforesaid Writ Petition and the accompanying application for interim relief. The Writ Petition has been re-notified by the Hon’ble Court for further hearing to 06.12.2021.
c) That the Respondent was incorporated in the year 1963 and is one of the Largest Real Estate Developers of the country. He has various commercial and residential projects in the state of Haryana. Delhi, and Uttar Pradesh etc. His operations spanned all aspects of real estate, from the identification and acquisition of land, to planning, execution, construction and marketing of projects. He is also engaged with other services such as leasing. maintenance etc. The development business of the Respondent is involved in the sale of residential spaces, select commercial offices and commercial complexes.
d) The main projects executed by the Respondent from 01.07.2017 along with the Occupancy Certificates (00) for these projects were received is as follows :-
e) That the Respondent has reported turnover on account of other activities i.e. Rent, Maintenance, Scrap Sale, Assets sale and Other Miscellaneous activities. Further, he is maintaining project wise accounting including ITC for all projects and ITC is being availed accordingly. None of the above projects namely “The Camellias’, “The Sky Court’, “The Crest” & “The Ultima” are registered under RERA, since the same do not qualify for registration criteria under RERA.
f) That the Respondent has only one GST registration for the state during the migration from VAT/Services Tax regime to GST regime hence there is only one Electronic Credit Ledger. He has kept project wise record/accounting of all inputs and input services and output services/ supplies etc. and all the purchase orders, work orders, other orders as well as demand letters to property buyers are being issued project wise only. Project wise details are compiled/consolidated GSTIN wise i.e., state wise to file the monthly GST return in form GSTR-1 & GSTR-3B.
g) That the project wise record of all inputs/outputs is necessarily required to be kept for the purpose of reversal under Rule 42 since all the projects are having different OC dates, different areas and the reversal is mandatorily required to be made project wise only on the basis of area sold vs. area unsold on the date of receiving of OC. The reversal cannot be made and would be impossible in absence of project wise record/ accounting. Further, for the post implementation period of GST the Respondent submitted he had already passed the available benefit to the property buyers on account of reduction in cost due to increase in tax credits or for any other reasons. Such benefit can be passed project wise only and has been passed accordingly.
h) That only Ultirna Phase-2 project was registered under RERA and there was no agreement/registry between the land owners and the developer for these three projects namely “The Camellias”, “The Crest” & ‘The Ultima”.
i) That there are down payment plans, construction linked payment plans, periodic payment plans etc. and the customers have opted for payment plans as per their convenience and the same are mixed.
9. Further the DGAP has reported that the Respondent vide the aforementioned letters/e-mails had submitted the following documents/information:
a. GSTR-1 & GSTR-3B returns for the period from July, 2017 ,\ to November, 2020
b. GSTR-9 for the year 2017-18, 2018-19 and 2019-20.
c. Trans-1 for the period July, 2017 to December, 2017.
d. VAT and ST-3 Returns for the period April, 2016 to June, 2017.
e. Details of applicable tax rates, Pre-GST & Post-GST.
f. Balance sheet for the FY 2016-17. 2018-19 & 2019-20.
g. Cenvat/Input Tax Register for the F.Y 2016 -17, April, 2017-June. 2017, July, 2017-March, 2018, 2018-19, 2019-20 and April 2020 to November, 2020.
h. List of all Construction projects of the Noticee in the State of Haryana other than The Sky Court” on which the Noticee is availing ITC from common pool, along with RERA Registration No’s. that is, all the projects covered under GSTN:06AAACD3494N1ZC.
i. Copy of demand letters/Sale agreement/contract issued to the home buyers for Ultima, Crest & Camellias project. (Sample basis).
j. Copy of the RERA Certificate for the project Ultima Phase-II.
k. Tower-wise status of all projects as on 30-11-2020 having sold & unsold units with respective area in sq. ft. along with the copies of occupancy certificates.
l. Details of VAT, Service Tax, ITC of VAT, Cenvat Credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to November, 2020.
m. Project wise list of all homebuyers of the project “Camellias, Crest & Ultima”.
10. The Respondent has sought confidentiality of all the details/information submitted by him under Rule 130 of the CGST Rules, 2017.
11. The DGAP in his report has stated that as per the directions of this Authority vide I.O. No. 38/2020 dt. 11.12.2020, fresh investigation in respect of all the three projects of the Respondent has been initiated. Accordingly. during the investigation the Respondent was asked to submit the information and data up to 30.11.2020, which the Respondent submitted. Hence the case has been investigated again on the basis of fresh information/data submitted by the Noticee. 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 the Respondent has passed on such benefit to the recipients of all three projects by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017 and;
(iii) To comply with the directions contained in the Interim Order No. 38/2020 dated 11.12.2020 of this Authority.
12. The DGAP has further reported that in 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 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 has been received after issuance of completion certificate. where required, by the competent authority or after its first occupation. whichever is earlier”. Thus, the ITC pertaining to the residential units and commercial shops which were under construction but not sold was provisional ITC which might have been required to be reversed by the Respondent, if such units remained 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 are 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 exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies”.
Section 17 (3) “The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is 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 the 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.
13. Further the DGAP has submitted that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail CENVAT of Service Tax paid on input services only (no credit was available in respect of Central Excise Duty paid on the inputs) and also Input Tax Credit (ITC) of VAT paid on inputs was not available to the Respondent as he was paying VAT under composition scheme of the Haryana VAT. Further, post-GST, the Respondent could avail input tax credit of GST paid on all the inputs and the input services including the sub-contracts. From the project-wise data submitted by the Respondent covering the period April, 2016 to November, 2020, details of the input tax credit availed by him, his turnover from the project “The Camellias“, and the ratios of input tax credits to turnovers, during the pre-GST (April. 2016 to June, 2017) and post-GST (July, 2017 to November, 2020) periods, have been furnished by the DGAP in Table-A below:-
From the above Table-`A’, it was observed that the ITC as a percentage of the turnover that was available to the Respondent in respect of the project “The Camellias” during the pre-GST period (April, 2016 to June, 2017) was 0.67%, and during the post-GST period (July, 2017 to November, 2020), it was 1.84%. Hence, post-GST. the Respondent has been benefited from additional ITC to the tune of 1.18% of the turnover in respect of the project “The Camellias
14. The DGAP has further submitted that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Since the Respondent was eligible for 1 /3rd abatement on land value. the effective GST rate was 12%. Accordingly, on the basis of the figures contained in Table ‘A’, 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 in respect of project “The Camellias”. has been furnished by the DGAP in Table-B below:-
15. Similarly the details of the ITCs availed by the Respondent, his turnovers from the project “The Crest”, and the ratios of ITC to turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to November, 2020) periods, from the project-wise data submitted by the Respondent covering the period April, 2016 to November, 2020, has been furnished by the DAP in Table-C below:-
It is clear from the above Table ‘C’ that the ITC as a percentage of the turnover that was available to the Respondent in respect of the project “The Crest” during the pre-GST period (April, 2016 to June, 2017) was 2.64%, and during the post-GST period (July, 2017 to November, 2020), it was 14.40%. This clearly confirmed that post-GST, the Respondent has benefited from additional ITC to the tune of 11.76% of the turnover in respect of the project The Crest”.
16. Similarly on the basis of the figures contained in Table ‘C’, above, the comparative figures of the ratios of ITCs availed/available to the turnovers in the pre-GST and post-GST periods as well as the turnovers, the recalibrated base price and the excess realization (profiteering) during the post-GST period in respect of project “The Crest” have been furnished by the DGAP in Table-D below:-
