Mool Chand Mittal Vs Elan Ltd. (NAA)
The brief facts of the case are that an application was filed under Rule 128 of the Central Goods and Services Tax Rules, 2017 by the Applicant No. 1, alleging profiteering by the Respondent in respect of purchase of Shop No. GF-0131-A, in the Respondent’s project “Mercado” situated in Sector-80, Gurugram. The above Applicant had also alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price of the Shop and had also charged GST @12% on the instalments paid by him.
Held by NAA
It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 5.91% of the turnover during the period from July, 2017 to June, 2019 as is evident from Table-B supra. It is also apparent from the above that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the benefit of ITC to his buyers. Accordingly, the profiteered amount is determined as Rs. 2,44,80,835/- inclusive of GST @ 12% as has been mentioned in Table-C supra, in terms of Section 171 (1) read with Rule 133 (1). The Respondent has realized an additional amount of Rs. 66,463/-which includes both the profiteered amount @ 5.91% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1. He has also realized an additional amount of Rs. 2,44,14,372/- which includes both the profiteered amount @ 5.91% of the taxable amount (base price) and 12% GST on the said profiteered amount from the 228 shop buyers other than the Applicant No. 1. The details of the profiteered amount and the buyers have been mentioned by the DGAP in Annexure-14 of his Report dated 23.03.2020. These buyers are identifiable as per the documents placed on record. Therefore, as per the provisions of Section 171 (1) read with Rule 133 (3) (b) the Respondent is directed to pass on an amount of Rs. 2,44,80,835/- and an amount of Rs. 66,463/- 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 a per the details mentioned in Annexure-14, attached with the Report dated 23.03.2020.
Accordingly, 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 shops of the above project commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 30.06.2019 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The Commissioner CGST/SGST Haryana are directed to ensure that the Respondent passes on the benefit of ITC till the Completion Certificate is received by the Respondent.
It is also evident from the above narration of the facts that the Respondent has denied the benefit of ITC to the buyers of the shops being constructed by him in his above project w.e.f. 01.07.2017 to 30.06.2019, in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017, and therefore, he is liable for imposition of penalty under the provisions of the above Section. However, perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent.
The Respondent in his submissions made before the DGAP, which have been mentioned in Para 9 of the Report of the DGAP dated 23.03.2020, has himself admitted that he has been constructing one more project namely “Epic”. The Respondent vide his e-mail dated 13.11.2020 sent to this Authority has also admitted that difference in the turnovers pertaining to the post-GST period as depicted in the Home-Buyer’s List and the GST Returns furnished by him in respect of his “Mercado” project, which is subject matter of the present proceedings, has arisen due to the turnovers of another project of the Respondent namely “Epic” being included in them. Keeping in view the above self-admissions of the Respondent, the liability of the Respondent to pass on the benefit of additional ITC as per the provisions of Section 171 of the above Act, is required to be investigated in respect of his “Epic” project, as there are sufficient reasons to believe that the Respondent is required to pass on the benefit of additional ITC to the eligible buyers which he may not have passed on, as has been established in the present case. Accordingly, this Authority is bound to examine and take suo moto cognizance of the benefit of ITC which the Respondent is apparently liable to pass on to the buyers of the “Epic” project, as per the provisions of Section 171 (2) of the CGST Act, 2017, once it has been brought to its notice. Accordingly, the DGAP is directed to investigate the “Epic” project being executed by the Respondent and submit his Report under Rule 129 (6) stating whether the Respondent is liable to pass on the benefit of ITC to the buyers of the above project and their entitlement thereof. The Respondent is directed to extend full co-operation to the DGAP during the course of the investigation.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present Report dated 23.03.2020 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 an application was filed under Rule 128 of the Central Goods and Services Tax Rules, 2017 by the Applicant No. 1, alleging profiteering by the Respondent in respect of purchase of Shop No. GF-0131-A, in the Respondent’s project “Mercado” situated in Sector-80, Gurugram. The above Applicant had also alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price of the Shop and had also charged GST @12% on the instalments paid by him.
2. The above Applicant had also submitted copies of the Notices issued by the Central Board of Excise and Customs (CBEC) and Commercial Taxes Department of the State, published on 16th September, 2017 in leading English & Hindi Newspapers along with his application.
3. The aforesaid application was examined by the Standing Committee on Anti-Profiteering in its meeting and it had forwarded the same to the DGAP for detailed investigation in the matter.
4. Accordingly, the DGAP had issued notice dated 08.07.2019 after receipt of the aforesaid reference from the Standing Committee on Anti-profiteering under Rule 129 (3) of the above Rules 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 prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the above Notice as well as furnish all documents in support of his reply. The DGAP has further stated that the Respondent was afforded opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period from 15.07.2019 to 17.07.2019 but he did not avail of the said opportunity. The DGAP also gave opportunity to the above Applicant to inspect the non-confidential documents/reply furnished by the Respondent on 04.03.2020 or 05.03.2020. However, the Applicant No. 1 did not avail of the said opportunity.
5. The period covered by the DGAP during the current investigation is from 01.07.2017 to 30.06.2019. The time limit to complete the investigation was extended up to 27.03.2020 by this Authority vide order dated 12.12.2019 in terms of Rule 129 (6) of the above Rules.
6. The DGAP has stated that the Respondent replied to the above Notice vide various letters/e-mails but did not furnish the complete and relevant documents required for investigation. Hence, the DGAP had issued Summons dated 09.10.2019 under Section 70 of the Central Goods and Services Tax Act, 2017 read with Rule 132 of the above Rules to Sh. Ravish Kapoor, Director of the Respondent, asking him to appear before the DGAP on 16.10.2019. In response to the Summons of the DGAP, Sh. Gaurav Khandelwal appeared before the DGAP on 16.10.2019 and submitted partial information vide letter dated 16.10.2019. Sh. Khandelwal asked the DGAP for some time to furnish the remaining documents.
7. The DGAP had issued another summons dated 23.12.2019 to Sh. Ravish Kapoor asking him to appear before the DGAP on 30.12.2019 and produce the remaining documents. In response to the Summons, the Respondent did not appear, however, he submitted details vide letter/e-mail dated 30.12.2019 & 07.01.2020.
8. In response to the above Notice dated 08.07.2019 of the DGAP and various reminders and summons, the Respondent replied vide letters/e-mails dated 19.07.2019, 05.08.2019, 16.08.2019, 26.09.2019, 16.10.2019, 05.12.2019, 30.12.2019, 07.01.2020 and 19.02.2020 and submitted the following documents/information:
(a) Copies of GSTR-1 Returns for the period from July, 2017 to June, 2019.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to June, 2019.
(c) Copies of ST-3 Returns for the period from April, 2016 to June, 2017.
(d) Copies of VAT Returns for the period from April, 2016 to June, 2017.
(e)TRAN-1 and TRAN-2 Statements not filed.
(f) Co pies of demand letters and receipts issued to the Applicant No. 1.
(g) Tax rates – pre-GST and post-GST.
(h) Copy of Balance sheets for FY 2016-17 & 2017-18.
(i) Copy of Electronic Credit Ledger for the period from July, 2017 to June, 2019.
(j) CENVAT/Input Tax Credit Register for the period from April, 2016 to June, 2019.
(k) Details of turnover, output tax liability, GST payable and input tax credit availed for the project “Mercado”.
(I) List of home buyers in the project “Mercado”.
(m) Copies of VAT Assessment Order Nos. 285/2016-17 & 286/2017-18 dated 27.09.2019.
9. The Respondent submitted before the DGAP that he was engaged in development of two Commercial projects i.e. “Mercado” and “Epic”. Project “Mercado” was launched in the pre-GST regime whereas “Epic” was launched in the post-GST regime. The Respondent had further submitted that the project “Mercado” consisted of total 531 units (comprising total area of 3,11,000 sq. ft.) out of which 409 units having an area of 2,15,457 sq. ft. had been sold as on 30.06.2020.
10. The DGAP has also stated that he has carefully scrutinised various replies of the Respondent and the documents/evidence placed on record. The DGAP has found the following issues which needed to be determined:
(i) Whether there was benefit of reduction in the rate of tax or input tax credit 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 Central Goods and Services Tax Act, 2017.
11. The DGAP has further stated that the Respondent had submitted the payment plan (part of Builder Buyer agreement), demand letters and payment receipts for the sale of Shop No. GF-0131-A, to the above Applicant, measuring 210 sq. ft. (super area), at total basic sale price of Rs. 21,33,285/- (Rs. 8,500/- basic sale price per sq. ft., Rs. 637.50/-per sq. ft. for PLC Courtyard facing, Rs. 425/- per sq. ft. for PLC Corner, Rs. 446/- for EDC/IDC per sq. ft. and Rs. 150/- for IFMS per sq. ft.). The details of the amount and taxes paid by the above Applicant to the Respondent have been furnished by the DGAP as is given in Table-A’ below:
Table-`A‘
(Amount in Rs.)
