Sh. Hasmukh Daftary Vs K D Lite Developers Pvt. Ltd. (NAA)
The brief facts of the present case are that Applicant No. 1 had filed an Application before the Standing Committee stating that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of Flat No. C-1004 purchased from the Respondent in the Respondent’s project ‘Ruparel Orion’, situated at Chembur, Mumbai on the introduction of GST w.e.f. 01.07.2017, in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
The Respondent has contended that as per DGAP’s report, ITC of GST availed from July 2017 to December 2019 was Rs. 5,82,71,633/-, however, the Respondent submitted his reworked figure of Rs. 5,82,74,633/-. The Authority finds that figure mentioned in the DGAP’s report has been taken from the GST returns filed by the Respondent and have been ascertained as correct. Therefore, the above contention of the Respondent cannot be accepted.
As discussed above, this Authority concurs with the DGAP’s report dated 28.10.2020. The Authority determines that the Respondent has profiteered by Rs. 1,45,87,404/- in respect of the project “Ruparel Orion” during the period from 01.07.2017 to 31.12.2019 which includes Rs. 86215/- of the Applicant No. 1 and orders refund/return/passing on of the profiteered amount, if not already done, along with the interest @18% thereon, from the date, when the above determined profiteered amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. The names of such homebuyers/customers/recipients, along with the unit number, are enclosed with this order as Annexure-A.
This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from homebuyers/customers/recipients commensurate with the benefit of ITC received by him as has been detailed above.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 28.10.2020 has been received from Applicant No 2. i.e. the Director General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that Applicant No. 1 had filed an Application before the Standing Committee stating that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of Flat No. C-1004 purchased from the Respondent in the Respondent’s project ‘Ruparel Orion”, situated at Chembur, Mumbai on the introduction of GST w.e.f. 01.07.2017, in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
2. The DGAP in its report dated 28.10.2020, inter-alia, has stated that:-
i. The Standing Committee on Anti-profiteering examined the application filed by Applicant No. 1 in its meeting held on 10.01.2020, the minutes of which were received by DGAP on 24.01.2020, whereby it was decided to forward the same to the DGAP office to conduct a detailed investigation in the matter. Accordingly, the investigation was initiated to collect the evidence necessary to determine whether the benefit of the Input Tax Credit had been passed on by the Respondent to Applicant No. 1 in respect of the construction service supplied by the Respondent.
ii. After receipt of the reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129(3) of the Rules was issued by the Director General of Anti-profiteering on 28.01.2020, calling upon the Respondent to reply 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 price and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all documents in support. The Respondent was also allowed to inspect the relied upon non-confidential evidence/information furnished by Applicant No. 1 during the period 04.02.2020 to 07.02.2020. However, the Respondent did not avail of this opportunity. The above Applicant was allowed to inspect the non-confidential documents/reply furnished by the Respondent between 10.08.2020 and 12.08.2020 which was not availed by Applicant No. 1. vide email dated 30.09.2020 was once again requested to inspect the non-confidential documents on any working day between 01.10.2020 to 07.10.2020. He was also requested to inform whether he had requested for cancellation of his allotment of flat to the Respondent. Applicant No. 1 vide e-mails dated 30.09.2020 and 01.10.2020 informed that he had never requested for cancellation of the flat and he along with his wife was the owner of the flat as of date hence, the contention of the Respondent was incorrect.
iii. The period covered by the current investigation was from 07.2017 to 31.12.2019.
iv. The time limit to complete the investigation was up to 24.07.2020. However, in terms of Notification No. 35/2020-Central Tax dated 03.04.2020 vide which where it was provided that, any time limit for completion/furnishing of any report, had been specified in, or prescribed or notified under the Central Goods and Service Act,2017 which falls during the period from the 20th day of March 2020 to the 29th day of June 2020, and where completion or compliance of such action had not been made within such time, then, the time limit for completion or compliance of such action, shall be extended up to the 30.06.2020. Further, vide Notification No. 55/2020-Central Tax dated 27.06.2020 and by Notification No.65/2020- Central Tax dated 01.09.2020 the time limit for compliance was extended up to 30.11.2020. The National Anti-Profiteering Authority, vide its, order dated 26.08.2020, in terms of Rule 129(6) of the Rules allowed a further extension of three months. Accordingly, the time limit to complete the investigation stands extended up to 28.02.2021.
v. In response to the Notice dated 28.01.2020, the Respondent submitted his reply vide letters and e-mails dated 11.02.2020, 03.07.2020, 24.07.2020, 28.07.2020, 30.07.2020, 31.07.2020, 05.08.2020 and 15.10.2020. The detailed submissions of the Respondent to the DGAP have been summed up below wherein, inter-alia, it was stated that:-
a. He had already informed his customers in writing that the GST benefit would be passed upon completion of the project.
b. Applicant No. 1 had booked his flat in the year 2012-13 i.e. on 23.05.2012 and the Respondent had received around 40% of the payment in the service tax regime and the Service Tax was duly paid into the government treasury during that period.
c. The Respondent had also sent a letter to the above Applicant and informed him that GST benefit shall be passed on to him upon completion of the project.
d. Applicant No. 1 had then requested for cancellation of his said booking vide email dated 21.01.2020 and the same had been duly accepted by him. Process of cancellation, at the instance of Applicant No. 1, would be completed in due course.
vi. Vide the aforementioned letters, the Respondent had submitted the following documents/information:
(a) Copies of GSTR-1 Returns for the period July 2017 to December 2019.
(b) Copies of GSTRB Returns for the period July 2017 to December 2019.
(c) Electronic Credit Ledger for the period July 2017 to December 2017.
(d) Copies of VAT returns (including all annexures) for the period April 2016 to June 2017.
(e) Copies of all demand letters issued and sale agreement made with the Applicant.
(f) Copy of Balance Sheet for FY 2016-17, 2017-18& 2018-19.
(g) 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 December 2019 for the project “Ruparel Orion”.
(h) Cenvat/Input Tax Credit Register for the Financial Year 2016-17, 2017-18, 2018-19, and for the period April 2019 to November 2019. List of home buyers in the project “Ruparel Orion” along with details of the benefit passed on.
(i) Service tax payment challans for the period April 2016 to June 2017.
(j) Details of the project report submitted to RERA including all periodic progress submitted till December 2019.
(l) GSTR-9 & 9C for the F.Y. 2017-18.
(m) Details of Applicable tax rates, Pre-GST and Post-GST.
vii. Vide the Notice dated 28.01.2020, the Respondent was informed that if any information/documents were provided on a confidential basis in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was required to be furnished. The Respondent, vide letter dated informed that the confidential details were as follows
(a) GST Returns,
(b) GST Electronic Ledger
(c) VAT Returns
(d) CENVAT and ITC Registers
(e) List of Home Buyers.
viii. The subject application, various replies of the Respondent and thedocuments/evidence on record had been carefully examined. The main issues for determination are:
a. Whether there was the benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so,
b. Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
ix. Another relevant point in this regard was para 5 of Schedule III of Central Goods and Services Tax 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 II, sale of building”. Further, clause (b) of Paragraph 5 of Schedule II of the Central Goods and Services Tax 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 had been received after issuance of the completion certificate, where required, by the competent authority or after his first occupation, whichever was earlier”. Thus, the ITC on the residential units which were under construction but not sold was provisional ITC which may be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the completion certificate, in terms of Section 17(2) & Section 17(3) of the Central Goods and Services Tax Act, 2017, which read as under:
section 17 (2) “Where the goods or services or both was 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 exempted supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as was attributable to the said taxable supplies including zero-rated supplies”.
Section 17 (3) “The value of exempted supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient was 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 on the unsold units may not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST.
x. after the issuance of the Notice of Initiation of Investigation, the Respondent did not submit the documents required for the investigation on the due date. Hence several reminder letters were issued but the Respondent did not submit the documents. As the investigation of Anti-profiteering was time bound, Summons dated 17.07.2020 under Section 70 of the CGST Act, 2017, to submit the documents, had to be issued. The Respondent submitted the relevant documents subsequently.
xi. The Respondent vide letter dated 03.07.2020 submitted copies of demand letters issued to the above Applicant. The details of the schedule of payment in the installment plan was furnished in Table-A below.
Table- ‘A’
