Sh. Puneet Bansal Vs Emaar MGF Land Ltd. (National Anti-Profiteering Authority)
It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 8.73% of the turnover during the period from July, 2017 to March, 2019 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 thus he has profiteered an amount of Rs. 19,23,01,682!- inclusive of GST @ 12% on the base profiteered amount of Rs. 17,16,97,930/-. Further, the Respondent has realized an additional amount of Rs. 4,06,859/- and Rs. 2,85,572 which includes both the profiteered amount @ 8.73% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1 and Applicant No. 2 respectively. He has further realized an additional amount of Rs. 19,16,83,441/- which includes both the profiteered amount @ 8.73% of the taxable amount (base price) and 12% GST on the said profiteered amount from the 907 flat buyers other than the Applicant No. 1 and 2. The details of the profiteered amount and the buyers have been mentioned by the DGAP in Annexure-14 of his Report dated 28.10.2019. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the amounts of Rs. 19,16 83,441/- Rs. 4,06,859/- and Rs. 2,85,572/- to the other flat buyers, the Applicant No. 1 and the Applicant No. 2 respectively along with the interest @ 18% per annum from the dates from which the above amounts were 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-14 attached with the Report dated 28.10.2019.
Accordingly, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realize from the buyers of the flats 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 31.03.2019 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 above Applicants or any other buyer shall be at liberty to approach the Haryana State Screening Committee to initiate fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 28.10.2019 has been received from the Applicant No. 3 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 their application dated 25.03.2019 filed before the Standing Committee on Anti-profiteering under Rule 128 (1) of the CGST Rules, 2017, the Applicant No. 1 and the Applicant No. 2 had alleged profiteering by the Respondent in respect of purchase of Flat No. EFP-A-T-GF-86 and Flat No. EFS-A-T-FF-86 respectively in “Emerald Floors Select-A” project of the Respondent. The above Applicants had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices of the above fiats. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meeting held on 11.04.2019, 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 above Applicants had furnished the following documents along with their application:-
(a) Copies of communication between the Applicants and the
(b) Letters of offer of possession and settlement of final dues issued by the Respondent to the Applicants.
(c) Copies of passports as proof of identity.
(d) Duly filled in APAF forms.
3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had found from the application filed by the Applicants that both of them had booked a flat each in the Respondent’s Project “Emerald Floor Select-A”, on 27.09.2011 i.e. in the pre-GST era. In terms of the instalment plan agreed upon, the above Applicants were to pay the consideration in 11 instalments each linked with different stages. Prior to the coming in to force of the GST the Applicants had already paid 7 instalments. As per the above Applicants, the Respondent had raised demands equal to Instalments Number 08, 09 and 10 without providing any benefit of additional ITC in the post-GST era.
4. The DGAP had issued Notice dated 13.05.2019 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 Applicants by way of commensurate reduction in the prices of the flats 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 The Respondent was given opportunity to inspect the non-confidential evidence/information furnished by the above Applicants during the period between 21.05.2019 to 23.05.2019 in accordance with Rule 129 (5) of the above Rules and he availed of the said opportunity and inspected the documents on 15.05.2019. Vide e-mail dated 23.09.2019, the above Applicants were also given opportunity to inspect the non-confidential documents/reply submitted by the Respondent on 01.10.2019 or 03.10.2019. However, the Applicant No. 1 and 2 did not avail of the said opportunity.
5. The DGAP has covered the period from 01.07.2017 to 31.03.2019 during the current investigation.
6. The DGAP has stated in his Report that the Respondent had submitted replies vide his letters/e-mails dated 14.06.2019, 18.07.2019, 25.09.2019, 26.09.2019, 30.09.2019 and 01.10.2019. The submissions of the Respondent have been summed up by the DGAP as under:-
a) That the flats referred to in the complaint were part of the Project “Emerald Hills” which had different categories of units therein namely “Emerald Floor Select”, “Emerald Hills Floors” and “Emerald Villa” along with other plots. The project “Emerald Hills” was registered with RERA, and the total saleable area of the impugned project was 20,93,260 Sq. ft. and had a total of 1234 units.
b) That the Respondent had been a duly compliant corporate citizen and had complied with the provisions of anti-profiteering as envisaged in Section 171 of the CGST Act, 2017. He had also provided a summary of ITC available to him and turnover of the project for the period under investigation. Based on the above, his estimated computation of additional benefit of ITC that had accrued to him in the aforesaid project was to the tune of 5.68%. The Respondent had also stated that he had passed on the above computed benefit to the both the Applicants through credit notes. He has further stated that this benefit had either been passed on or would be passed on to the customers of the project “Emerald Hills” by way of commensurate reduction in prices due to expected additional ITC accrued to him under the GST regime.
c) That the comparison of ratio of ITC to turnover for the pre-GST and the GST period would never yield the correct quantum a profiteering, if any since, the comparison was not appropriate for the reason that under the real estate there was no correlation of turnover with the cost of construction.
d) The Respondent vide his submission dated 30.09.2019 had submitted that the amount of profiteering as per the methodology of comparison of ratios of credit to turnover for the pre GST and the post GST period was less than the benefit already passed on to both the Applicants.
e) The Respondent vide his submission dated 30.09.2019 had also submitted that without prejudice to all the above contentions as raised by him; in the absence of specified procedure and mechanism of calculation of profiteering, the proceedings were arbitrary and liable to be dropped.
f) The Respondent vide his submissions dated 30.09.2019 had also contended that the investigation could not go beyond the application submitted by the above Applicants.
7. The Respondent has 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 March, 2019.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to March, 2019.
(c) Copies of Tran-1 and Tran-2 not filed.
(d) Electronic Credit Ledger for the period from July, 2017 to March, 2019.
(e) Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017.
(f) Copies of all demand letters, sale agreements/contracts issued in the name of the Applicants.
(g) Details of applicable taxes pre-GST and post-GST.
(h) Copies of Balance Sheets and Cost Audit Reports for FY 2016-17 and 2017-18,
(i) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit for the period from April, 2016 to June, 2017, Output GST and ITC for the period from July, 2017 to March, 2019 for the impugned Project.
(j) CENVAT/ITC register for the FY 2016-17, 2017-18 and 2018-19 reconciled with VAT, ST-3 and GSTR-3B Returns.
(k) List of home-buyers of the impugned Project.
8. 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 has passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not.
9. The DGAP has further stated that Para 5 of Schedule-Ill of the CGST Act, 2017, defining activities or transactions which would be treated neither as a supply of goods nor a supply of services, reads as “Sale of land and subject to clause (b) of paragraph 5 of Schedule-II, sale of building”. Further, Clause (b) of para 5 of Schedule-Il 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”. In the light of these provisions, the DGAP has contended that the ITC pertaining to the units which were under construction but were not sold was provisional ITC that would be required to be reversed by the Respondent, if such units would remain unsold at the time of issue of Completion Certificate (CC), in terms of Section 17 (2) & Section 17 (3) of the Central Goods and Services Tax Act, 2017 which read as under:-
“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.
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 11, sale of building.”
Therefore. the DGAP has claimed that the ITC pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling prices of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST.
10. The DGAP has also claimed that the Respondent’s contention regarding lack of methodology and procedure was not maintainable. Definition of Profiteering has been provided in Explanation to Section 171 (3A) of the CGST Act, 2017 which reads as “profiteered shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of ITC to the recipient by way of commensurate reduction in the price of the goods or services or both.” He has further claimed that the methodology and procedure for determination of profiteering would vary from case to case, depending on the facts and circumstances of the case as well as the nature of Goods and Services supplied.
11. The DGAP has also submitted that the present case pertained to supply of construction service and the investigation was limited to one project i.e. “Emerald Hills” only, in which both the above Applicants had booked their units, out of the total 23 projects under construction the details of which were provided by the Respondent himself.
12. The DGAP has further submitted that the Respondent’s Project “Emerald Hills” had different categories of units therein, namely “Emerald Floor Select”, “Emerald Hills Floors” and “Emerald Villa” along with other plots. In this regard, the Respondent vide Annexure-4 of his submissions dated 30.09.2019 had submitted CENVAT/ITC Register for the project “Emerald Hills” reconciled with the VAT, ST-3 and GSTR-3B Returns for the period under investigation. However, the Respondent had showed VAT & CENVAT/ITC credit on account of plots also. As per the provisions of the CGST Act, 2017, sale of plots amounted to transfer of immovable property and did not come under the purview of GST. Hence, the proportional apportionment of such ITC for plots was not admissible and the total CENVAT/1TC credit was on account of the supply of construction service only and had been accounted for the taxable portion only.
13. The DGAP has further submitted that the Respondent had claimed that he would pass on benefit of ITC to the tune of 5.68% to the customers and provide details of the benefit passed on. However, the Respondent had not submitted the details of the benefit passed on to the DGAP. The method of calculation used by the Respondent had also not taken into account the correct value of the ITC which was available for his project. The DGAP has further stated that in the light of the abovementioned two factors, there was no reason to admit the claim of the Respondent that he had already passed on the benefit of ITC to the home-buyers.
14. The DGAP has also stated that the Respondent had provided details of the calculations made by him and claimed that these calculations were in line with the methodology followed by the DGAP. However, the Respondent had wrongly claimed the credit of VAT and Rebate of WCT available to him. The DGAP has further stated that the turnover accounted for in the calculations of the Respondent had also included the negative values on account of cancellation of units which was evident from the data provided in the home-buyer’s details.
15. The DGAP has also intimated that prior to 01.07.2017 i.e. before the GST was introduced, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services. However, CENVAT credit of Central Excise Duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which were in force at the material time.
16. The DGAP has also intimated that the Respondent was paying VAT under the Haryana VAT Act, 2003 under the normal scheme and was eligible to avail ITC on VAT paid on the inputs purchased by him. The Respondent, in his submissions dated 30.09.2019 has claimed VAT credit of 55,48,809/- for the impugned Project for the period from April, 2017 to June, 2017. However, the Respondent had not provided any details regarding the applicability of VAT on the home-buyers and the rate of VAT applicable to the end-users. It has been observed by the DGAP that in total, VAT paid on the purchases made in the State amounted to a total of 2.67,07,322/- which was for the whole of the State, spread across all projects and not just for the impugned Project. This amount was different from the amount which was claimed in the
Respondent’s submissions and the Respondent did not submit breakup of the purchases made across projects to justify either the credit of VAT for the impugned Project or the VAT turnover. As, there was no direct relation between the turnover reported in the VAT Returns for the period from April, 2016 to June, 2017, filed by the Respondent and their reconciliation with the actual consideration collected from the home buyers, therefore, the ITC of VAT and the VAT turnover was not considered for computation of the ratio of ITC to the turnover for the pre-GST period.
17. The DGAP has also informed that the Respondent has claimed credit for rebate of VAT (WCT) paid to the registered contractors or sub-contractors claiming credit for the same in the pre-GST period. The DGAP has reported that there was no deduction claimed on account of payment to the works contractors to claim WCT credit for the Project in his VAT Returns submitted in his office. Moreover, in terms of Section 42 of the Haryana VAT Act, 2003 and the relevant Rules, liability to pay tax was jointly upon the developer (Respondent) and his sub-contractors. The Respondent was eligible to claim the ITC of VAT (WCT), if it was not paid directly by him, only if, the following conditions were fulfilled:-
a. Tax had been paid by his sub-contractor on the sale of goods involved in execution of the works contract.
b. The assessment of such tax had become final and
c. ITC of such VAT had not been availed by his sub-contractor.
The DGAP has alleged that the Respondent had not submitted any evidence in this regard to substantiate his claim of ITC of WCT (VAT). Therefore, the Respondent was not eligible to claim this amount as ITC.
18. The DGAP has further informed that post-GST the Respondent could avail the ITC on GST paid on all the inputs and input services including the sub-contracts. The Respondent vide his submission dated 09.2019 had submitted reconciliation of turnover and CENVAT/ITC for all his projects, as in the pre-GST era, the Respondent had a centralized registration for Service Tax. In the post GST era, the GSTR Returns reflected turnover and the ITC for the whole State of Haryana and not just the impugned project. Further vide his submissions dated 30.09.2019, the Respondent had submitted the detailed calculations regarding appropriation of common ITC on the basis of proportionate area of the impugned Project with the total area of active projects across the State in the corresponding period.
19. The DGAP has also stated that the Respondent vide his e-mail dated 10.2019 has submitted his home-buyers data wherein he has mentioned several entries which were either negative or were having very petty figures. Clarifications were sought from the Respondent regarding the same and he was asked to submit details of such demands raised vide invoices of such low value and reasons thereof The Respondent vide his reply dated 17.09.2019 had submitted that such petty demand notes as reflected in the home-buyers list were due to rounding off of the adjustments and the amount did not pertain to demand notes raised from the customers. Further, other petty demands were on account of services such as delayed payment charges or transfer charges and not on account of the basic cost of the unit. Hence for the purpose of investigation, all such negative values and petty demands upto 5,000/- have been excluded from the demands raised in the relevant period to get a more accurate figure of turnover. From the information submitted by the Respondent for the period from April, 2016 to March, 2019, the details of the ITC availed by him with respect to the impugned Project, his turnover from the Project Emaar Hills”, the ratio of ITC to the turnover, during the pre-GST period from April, 2016 to June, 2017 and the post-GST period from July, 2017 to March, 2019), has been furnished by the DGAP in the Table-A’ given below:-
Table — A
(Amount in Rs.)
