MPHIDB guilty of Profiteering in EWS Housed in its Project at Kamayani Nagar

Janki Prasad Pandey Vs Madhya Pradesh Housing and Infrastructure Development Board (NAA)

The brief facts of the present case are that a reference was received from the Standing Committee on Anti-profiteering on 16.12.2020 under Rule 129 of the CGST Rules, 2017 to conduct a detailed investigation in respect of an application filed by the Applicant No. 1 under Rule 128 of the Rules, alleging that he purchased an EWS House in the Project at Kamayani Nagar at Rau, Indore from the Respondent in May, 2019 and the Respondent charged GST @ 12% from him instead of 1%.

It has been revealed from the DGAP’s Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 0% and during the post-GST period (July, 2017 to November, 2020), it was 5.92% for the Project at Kamayani Nagar at Rau, Indore. This confirms that post-GST, the Respondent has benefited from additional ITC to the tune of 5.92% [5.92% (-) 0%] of his turnover for the said Project, and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers/customers/recipients as Rs. 26,33,536/- for the Project of the Respondent at Kamayani Nagar at Rau, Indore, the details of which are mentioned in Annexure-16 of the Report, which includes the amount of Rs. 52,873/- of the Applicant No. 1.

For the reasons and discussions made hereinabove, 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. 26,33,536/- for the Project of the Respondent at Kamayani Nagar at Rau, Indore. 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 commensurate with the benefit of ITC received by him as has been detailed above.

Given the above discussions, the Authority finds that the Respondent has profiteered by Rs. 26,33,536/- for the Project at Kamayani Nagar at Rau, Indore 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/customers/recipients in the above said Project shall be refunded/returned/passed on by him, along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, under the provisions of Rule 133 (3) (b) of the CGST Rules, 2017.

The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 26,33,536/- for the Project at Kamayani Nagar, Rau, Indore. 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 the provisions of Rule 133 (3) (b) of the CGST Rules, 2017.

FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY

1. The present Report dated 15.12.2021 has been received in National Anti-Profiteering Authority (NAA or Authority) on 17.12.2021 from the 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 a reference was received from the Standing Committee on Anti-profiteering on 16.12.2020 under Rule 129 of the CGST Rules, 2017 to conduct a detailed investigation in respect of an application filed by the Applicant No. 1 under Rule 128 of the Rules, alleging that he purchased an EWS House in the Project at Kamayani Nagar at Rau, Indore from the Respondent in May, 2019 and the Respondent charged GST @ 12% from him instead of 1%.

2. The DGAP in his Report dated 15.12.2021, inter-alia stated that :-

i. The said complaint of the Applicant No. 1 was earlier received by the Authority, which was forwarded by Authority to Commissioner of State Tax, Indore for necessary action with the remarks “Since, the issue doesn’t seem to be pertaining to profiteering but might involve wrong charging of GST”. However, the Madhya Pradesh State Level Screening Committee examined the said application and observed that since the Applicant’s No. 1 house was an EWS House, the applicable GST rate levied on EWS Houses was 8% under affordable Housing Scheme whereas the Respondent had charged 12% GST from the Applicant No. 1 and hence forwarded the matter to the Standing Committee on Anti-profiteering for further investigation. The Standing Committee on Anti-profiteering being satisfied by the State Screening Committee report, decided to forward the said application to the DGAP for further action, in terms of Rule 128 of the Rules.

ii. On receipt of the reference from the Standing Committee on Anti-profiteering, a notice for initiation of investigation under Rule 129 of the Rules was issued by the DGAP on 22.01.2021, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 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 supporting documents.

iii. Vide the said notice dated 22.01.2021, the Respondent was given an opportunity to inspect the non-confidential evidences/information which formed the basis of the said Notice, during the period 01.02.2021 to 03.02.2021, which the Respondent did not avail.

iv. Vide e-mail dated 09.11.2021, the Applicant No. 1 was also afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent, on 10.11.2021 or 11.11.2021. However, the Applicant No. 1 also did not avail the said opportunity.

v. The time limit to complete the investigation was 15.06.2021, as per Rule 129(6) of the Rules. 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. As per Hon’ble Supreme Court Order in Suo Motu Writ Petition (Civil) No. 3 of 2020 dated 08.03.2021 in cases where the limitation for any suit, appeal, application or proceeding had expired during the period between 15.03.2020 till 14.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall have had 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, was greater than 90 days, that longer period shall apply. The above relief had been extended and the period from 14.03.2021 till further orders shall also stand excluded in computing the limitation period as per the Hon’ble Supreme Court Order dated 27.04.2021 passed in Miscellaneous Application No. 665/2021 in SMW(C) No. 3/2020. Further, the above relief had been extended and the period from 02.10.2021 shall had 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.

vi. The period covered by the current investigation was from 01.07.2017 to 30.11.2020.

vii. The Respondent replied vide letter and e-mail dated 08.09.2021 and among other documents, furnished the copy of agreement entered by him with the developer M/s. Shekhar Construction, Flat No. 3, 5 Geeta Bhawan Road, Indore and submitted that in the Project at Kamayani Nagar, the development work of the Project was assigned to M/s. Shekhar Construction.

viii. On the basis of the above submission of the Respondent, an addendum to the notice of initiation of investigation was issued on 30.09.2021 for including M/s. Shekhar Construction as a Co- Respondent in the ongoing investigation.

ix. In response to the notice dated 22.01.2021 and subsequent reminders/summons/e-mails, the Respondent submitted the following documents/information/reply vide his letters/e-mails dated 08.09.2021 14.10.2021, 30.11.2021 and 03.12.2021.

a. Copies of GSTR-1 and GSTR-3B Returns for the period July, 2017 to November, 2020.

b. Electronic Credit Ledger for the period July, 2017 to November, 2020.

c. ST-3 returns for the period April, 2016 to June, 2017.

d. Copies of allotment letters issued to Applicants.

e. Details of applicable tax rates, pre-GST and post-GST.

f. Copy of Balance Sheet for FYs 2017, 2018, 2019, 2020 and Trial Balance Sheet for the period April, 2020 to November, 2020.

g. List of home-buyers for the Project at Kamayani Nagar.

h. Project details submitted to RERA.

i. Copy of Agreement between Respondent and Co-Respondent for the project at Kamayani Nagar.

j. 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 for the Project at Kamayani Nagar.

k. Final Completion Certificate dated 26.02.2019

x. The Respondent’s reply was summed up as follows:

a. Total units in the Project at Kamayani Nagar of Respondent was having following categories of units:

A. Phase one

2. Phase two

b. The Respondent had given the contract of development of Project at Kamayani Nagar, Rau, Indore to Co-Respondent.

c. The work of the Respondent was generally carried out through contractor. All of the tax liability in regard to the work assigned to the contractor was carried out by the contractor. Under Section 7 of VAT Act it was specified that if the liability of VAT was discharged either by the contractor or sub-contractor then other party shall not be responsible for the said amount of tax. Since the liability of VAT Tax was discharged by the contractor so the Respondent was not required to pay any VAT Tax, so no return of VAT was filed by the Respondent. Further, no amount was recovered by the Respondent from his customers on account of VAT.

d. During the period from April, 2016 to June, 2017, as Service Tax was applicable, so the Respondent had collected the Service Tax and paid to the Service Tax department.

e. The Respondent had not taken any CENVAT/ITC, so there was no ITC Register maintained by the Respondent.

f. During the period from July, 2017 to November, 2020, GST was applicable so the Respondent collected the same and paid to the GST Department. However, he had not taken any ITC of GST paid by the contractor, as the work was issued during the pre-GST regime and contract was given inclusive of tax and the contractor had not issued any separate GST invoice due to which the Respondent was not able to take credit of the same.

g. About availment of GST, in pre-GST regime, the Respondent was having practice of giving tender/contract to the developer on inclusive basis, but under GST regime, he was giving contract on tender value plus GST i.e., the development work was given to the contractor at the rate exclusive of GST and ITC of the GST paid was duly taken by his Head Office and competent authority at the time of determining the value of unit had taken due care of Input Tax Credit. In the previous reply the fact of non-taking of ITC was mentioned, as earlier he was not having practice of paying any tax separately i.e., contract value was inclusive of all taxes.

h. Regarding booking of unit on 22.12.2016, the amount which was received by the Respondent was not booking but just amount received by the Respondent along with application for registration for allotment in the project of the Respondent. That of initial amount for registration was not an allotment of unit. That being a Government organisation, the Respondent before launching any new scheme, make survey of respective area to ascertain the actual housing need of the area in which house scheme was proposed. That for ensuring actual need of the area, the Respondent usually invite pre booking of the proposed Project. The Respondent launched and started any new project only after having sufficient number of booking. If there was no sufficient number of booking then the Respondent, dropped the project and refund the amount to the allottee/customers who had deposited during pre-booking. That after making initial enquiry and by calling interest of people in the project of the Respondent, if there was sufficient number of booking then only respective division of the Respondent, request the competent authority for seeking approval for launching of such scheme. That respective division of the Respondent only after obtaining the approval of the competent authority of the Respondent could apply to the local authority for taking the development permission under local law.

i. In regard to some booking which was taken by the Indore Division of the Respondent before taking the development permission was the booking for ensuring the potential demand of housing accommodation so that it could be decided whether or not housing project should be launched in that area and how many units, the Respondent had to construct or develop for the purpose of ensuring that only so much of units was developed for which people had shown interest so that there would be no liquidity crunch. That at the time of registration of unit value of unit was also not fixed as development cost was also not available at that time so only a tentative value was shown or disclose the allottee/customers.

j. After receiving some registration, the competent authority had accorded consent for development of project vide his letter dated 08.12.2017, wherein he had specified that tender could be called and it was further specified that before start of work all necessary permission was required to be taken from the competent authority.

k. After receiving the permission of competent authority of the Respondent, his division had obtained the development permission of local authority for development of project. Local Authority had granted the development permission for development of the project on 01.01.2018. Development work was assigned to different contract in the GST regime where in it was clearly mentioned that GST would be separately paid.

l. In the application form for seeking allotment of unit in the project, it was clearly mentioned that the allottee was required to make the payment of GST separately and in the present case the GST had been charged accordingly.

m. The Respondent was being a Govt. Organisation keeping its record systematically and entire amount of GST collected from the allottee had been properly deposited along with GST Return.

n. Determination of price of unit was made in the GST regime and at the time of fixing price of units, the Respondent was considering the effect of input tax available on input services taken for the development of the Project, so there was no issue of anti-profiteering against the Respondent.

o. Regarding non-availment of ITC, in the previous letter, older working pattern was mentioned but during GST regime, the Respondent was giving contract on contract price plus GST i.e., he was paying GST separately and taking ITC of GST paid and at the time of determination of prices due impact of ITC was also given.

p. During Pre-GST regime all the Returns and other compliances were made in his division only but after post-GST regime all the compliances were made at HO Level, so his previous letter might please be treated as amended in the light of information provided in his letter dated 29.11.2021, submitted through email dated 30.11.2021.

q. The condition of anti-profiteering was not applicable in the present case on the basis of gist of above discussion, as under:

i. Approval of competent authority of the Respondent to launch scheme was given in the year 2018 i.e., approval was given in the post GST Regime.

ii. Development permission of competent local authority was taken in the year 2018 i.e., development permission was obtained in the post GST regime.

iii. Contract to the developer was given in the post GST regime and amount of GST was paid separately and ITC had been taken of the same. Those prices of units were fixed keeping in mind availability of ITC on the input supply.

iv. The Project was of Post GST regime and no tax was recovered during the pre-GST regime so there was no question of anti-profiteering.

As per section 171 of CGST Act, 2017 anti- profiteering measure could be taken in any of the following situation:

i. If benefit of reduction in rate of tax on supply of goods was not pass on.

ii. If benefit of ITC was not passed on the allottee.

r. Reduction in rate of tax was not applicable: The condition of reduction in rate of tax was not applicable in the present case as all the necessary permission of development and development work and allotment of units was started in the GST regime only.

s. Effect of ITC was already taken in the account as GST was paid separately to the developer. So, the ITC of GST paid to the developer was taken by his head office and if for any reason if ITC was not taken then it would be loss of THE RESPONDENT but in any case, it does not create any additional burden on the allottee, so in that case also there was no case of any profiteering to the Respondent.

t. In the interest of justice and in order to avoid any uncalled litigation, it was requested to this Authority to provide an opportunity of hearing by via virtual mode so that his case could be decided on merit considering all the facts and figures.

xi. In response to the addendum to notice dated 30.09.2021 and subsequent reminders/e-mails, the Co-Respondent submitted the following documents/information/reply vide his letters/e-mails dated 01.11.2021 02.11.2021 and 11.11.2021.

a. Copy of all agreements and tender documents for the construction of 02 HIG 13′ Type Duplex, 11 MIG & 17 EWS houses at “Kamayani Nagar”.

b. Copy of Electronic Credit Ledger for the period July, 2017 to November, 2020.

c. Copy of Tran-1.

d. Details of applicable tax rates, Pre GST and post GST.

e. Copies of GSTR-1 for the period July, 2017 to November, 2020 and GSTR-9 Returns for the period July, 2017 to December, 2019.

f. Balance Sheet, P & L with all schedule for FY 2016-17, 2017- 18, 2018-19, 2019-20.

g. All Invoice/Bills related to “Kamayani Project” and Completion Certificate.

h. Status of Project at “Kamayani Nagar” – project completed and handed over to the Respondent on 26^th Feb 2019.

i. Copy of Assessment Order for FY 2016-17 and VAT return summary of FY 2017-2018.

j. 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 for the project at Kamayani Nagar.

xii. The Co- Respondent’s reply was summed up as follows:

a. The Co-Respondent obtained the tenders from the Respondent for construction of residential houses situated at Kamayani Nagar, Rau in the year 2018.

b. While filing the tender, the project amount was already decided and hence the rates cannot be changed.

xiii. The Respondent & Co-Respondent did not claim confidentiality of any of the details/information furnished by them, in terms of Rule 130 of the Rules.

xiv. The subject application, the various replies of the Respondent & Co-Respondent and the documents/evidences on record had been carefully examined. The main issues for determination was whether there was any reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent /Co- Respondent after implementation of GST w.e.f. 01.07.2017 and if so, whether such benefit was passed on by the Respondent /Co- Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017.

xv. From the Respondent’s submissions, it revealed that the project at Kamayani Nagar at Rau, Indore was constructed in two phases. Both the phases were separately registered with Madhya Pradesh Real Estate Regulatory Authority (MPRERA). The phase having 17 EWS, 11 MIG Junior and 02 HIG Type ‘B’ houses was registered under Registration No. P-IND-18-1569 valid from 10.01.2018, whereas the second phase having 63 houses was registered under Registration No. P-IND-18-1738 valid from 11.04.2018. Further, the Applicant No. 1 had mentioned in his application that he had booked an EWS House and there was no complaint with regard to second phase having different registration No. P-IND-18-1738. Accordingly, the present investigation had been restricted to the phase registered under Registration No. P-IND-18-1569 involving construction of the 17 EWS, 11 MIG Junior and 02 HIG Type ‘B’ houses at Kamayani Nagar at Rau, Indore only.

xvi. As per the copy of Agreement dated 01.01.2018 entered between Respondent and Co- Respondent, it revealed that the Co-Respondent agreed to construct 02 H.I.G B type complex, 11 M.I.G and 17 E.W.S houses at Kamayani Nagar (23.35 Acre land). Also, Work Order dated 01.01.2018 was issued to the Co-Respondent by the Respondent for commencement of construction work. Further, the allotment letters for flats had been issued by the Respondent and Respondent had raised the demands (including Service Tax/GST) from the Applicant No. 1 and other buyers of the Project at “Kamayani Nagar”. Hence, the Co-Respondent was the sub-contractor while the Respondent was the actual owner of the Project.

xvii. The Respondent had contended that during the period from April, 2016 to June, 2017, as Service Tax was applicable, so the Respondent had collected the Service Tax and paid to the Service Tax department. However, on perusal of Service Tax Returns (ST-3) for the period April, 2016 to June, 2017, it was noticed that the Respondent had not shown any taxable turnover therein. However, it was also pertinent to mention here that on perusal of home buyers list provided by the Respondent, it had been observed that the Respondent had raised demands of Rs.6,88,000/- from 4 home buyers during the period April, 2016 to June, 2017. Therefore, the contention of the Respondent was incorrect.

xviii. Further, the Respondent had also contended that the Respondent had not taken any CENVAT/Input Tax Credit, so there was no ITC Register maintained and during the period from July 2017 to November 2020, GST was applicable so the Respondent collected the same and paid to the GST department. In this regard, on perusal of GSTR-3B returns for the period July 2017 to November 2020, it was observed that the Respondent had availed ITC of GST to the tune of Rs. 53,74,91,787/-, out of which the Respondent had also utilized ITC of GST to the tune of Rs. 29,26,06,703/- for payment of GST. However, later on vide his email dated 30.11.2021, the Respondent asserted that the ITC was duly taken by his Head Office. Hence, the contention of the Respondent that he had not taken ITC of GST was incorrect by his own admission.

xix. Further, the contention of the Respondent that he had not taken any ITC of GST paid by the contractor, as the work was issued during the pre-GST regime and contract was given inclusive of tax, appeared to be incorrect. As per the work order dated 01.01.2018, the Agreement between the Respondent and Co- Respondent was executed on 01.01.2018. Hence, it was established that the work contract was issued in post-GST period only. Further, it was also revealed from the tender documents submitted by the Co-Respondent, specifically at Point (iv) of Financial Bid, it was mentioned that:

“Except GST, all duties, taxes of Central and State Governments, local bodies and authorities and other levies payable by the bidder shall be deemed to be included in the rate quoted by the bidder.”

Therefore, it was clear that the amount of GST payable by the Respondent to Co-Respondent was not included in the contract amount of Rs. 2,23,19,780/-. Hence, the contention of the Respondent that contract was given inclusive of tax was also incorrect. However, it was revealed from the submission made by the Co-Respondent that the amount of Rs. 2,23,19,780/- (exclusive of GST) was estimated cost of the work/Project whereas the actual amount paid by the Respondent to the Co-Respondent for work as completed was Rs. 1,95,88,052/-(exclusive of GST).

xx. Further, it was pertinent to mention here that the Respondent vide his reply dated 30.11.2021, also confirmed that the development work was given to the contractor at the rate exclusive of GST and ITC of the GST paid was duly taken by his Head Office and also during Pre-GST regime all the Returns and other compliances were made in his division only but after post-GST regime all the compliances were made at HO Level, so he requested that his previous letter might please be treated as amended in the light of information provided in his letter dated 29.11.2021, submitted through email dated 30.11.2021. Therefore, the contention of the Respondent that he had not taken any ITC of GST paid by the contractor, as the work was issued during the pre-GST regime and contract was given inclusive of tax, was incorrect in entirety.

xxi. Furthermore, the Respondent had also contended that he was unable to avail the ITC of GST because the Co-Respondent had not issued any separate GST invoice. This contention of the Respondent was also incorrect. In this regard, it was observed that the Co-Respondent had issued GST invoices to the Respondent for the Project work at Kamayani Nagar, Rau, Indore and the copies of which had been submitted by the Co-Respondent and details of which were given below in the Table-A below:

Table-`A’ (Amount in Rs.)