Sh. Abhishek Singh Vs Aparna Constructions and Estates Pvt. 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 4.04% of the turnover during the period from 01.07.2017 to 31.03.2019 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 by commensurate reduction in the prices of the flats. Accordingly, the profiteered amount is determined as Rs. 22,59,91,979/- inclusive of GST @ 12% on the base profiteered amount of Rs. 20,17,78,553/- in terms of Rule 133 (1) of the CGST Rules, 2017. Further, the Respondent has realized an additional amount of Rs. 4,74,865/- which includes both the profiteered amount @ 4.04% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1. He has further realized an additional amount of Rs. 22,55,17,114/- which includes both the profiteered amount @ 4.04% of the taxable amount (base price) and 12% GST on the said profiteered amount from the flat buyers other than the Applicant No. 1 as has been mentioned in Annexure-18 of the DGAP’s Report dated 30.08.2019. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of Rs. 22,55,17,114/- and the amount of Rs. 4,74,865/- 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, as per the details mentioned in Annexure-18 attached with the DGAP’s Report dated 30.08.2019.
In view of the above facts 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. 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 Applicant No. 1 or any other buyer shall be at liberty to approach the Telangana State Screening Committee to initiate fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017.
It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present Report dated 30.08.2019 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 vide his application dated 26.02.2018 filed before the Standing Committee on Anti-profiteering under Rule 128 (1) of the CGST Rules, 2017, the Applicant No. 1 had alleged profiteering by the Respondent in respect of purchase of a 3BHK Flat No. 806, H-Block, 8th Floor in “Aparna Serene Park” project of the Respondent. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him, by way of commensurate reduction in the price of the above flat. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meetings held on 11th March, 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 Applicant had furnished the following documents along with his application:-
(a) Copy of booking application form along with receipts.
(b) Copies of e-mails sent to the Respondent, requesting to pass on the benefit of appropriate input tax credit.
3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued Notice dated 04.04.2019 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 Applicant by way of commensurate reduction in the price of the flat 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 documents. The Respondent was given opportunity to inspect the non-confidential evidence/information furnished by the above Applicant during the period between 10.04.2019 to 12.04.2019 in accordance with Rule 129 (5) of the above Rules and he availed of the said opportunity and inspected the documents on 22.04.2019. Vide e-mail dated 23.08.2019, the above Applicant was also given opportunity to inspect the non-confidential documents/reply submitted by the Respondent on 27.08.2019 or 28.08.2019. However, the Applicant expressed his inability to do so due to medical emergency in his family and requested to provide copies of non-confidential documents which were sent to him by the DGAP vide e-mail dated 28.08.2019. The Applicant acknowledged the same vide e-mail dated 28.08.2019 and requested the DGAP to proceed further.
5. The DGAP has covered the period from 01.07.2017 to 31.03.2019 during the current investigation. The time limit to complete the investigation was extended by this Authority, vide its order dated 19.06.2019 in terms of Rule 129 (6) of the above Rules.
6. The DGAP has further stated that the Respondent had submitted replies vide his letters/emails dated 12.04.2019, 24.04.2019, 26.04.2019, 29.04.2019, 06.05.2019, 07.05.2019, 10.05.2019 and 04.07.2019. The submissions of the Respondent were summed up by the DGAP as under:-
a) That the Respondent stated that he was engaged in the activity of Real Estate Business by way of developing the building properties since the financial year 1996-97, with consistent track record and there were several complexities in construction business and he was in the process of computing the benefit of additional input tax credit available after implementation of GST and had already informed his customers and assured that any benefit which would accrue to him post-GST over the period of completion of the project, would be duly passed on at the time of completion of the project, so that accurate benefit could be passed on to the customers, as there might be certain units which would not be sold before issuance of completion certificate and in terms of Para 5 of Schedule III of the Central Goods and Services Tax Act, 2017, such units would not attract GST. In such cases, Respondent would be required to reverse the proportionate input tax credit attributable to unsold units on the date of issue of Occupancy certificate by the competent authority. Further, where the entire consideration would be received after issuance of completion certificate, in terms of Section 17 of the Central Goods and Services Tax Act, 2017 read with Rule 42 of the Central Goods and Services Tax Rules, 2017, the Respondent would have to reverse the input tax credit proportionately. Therefore, input tax credit which formed part of the cost of construction of such unsold units would be reversed and the exact input tax credit attributable to units sold prior to receiving of completion certificate would be known only at the end of the project and after issue of occupancy certificate. Accordingly, the Respondent would pass on the net benefit of input tax credit to the customers.
b) That the Respondent had also mentioned a term in booking application form which reads as “(za) The Company is agreeable to pass the net benefit of input tax credit for the projects under construction as per methodology & procedure to be determined by GST Standing Committee & Screening Committee under relevant Sections & Rules of GST Act, 2017”
In this regard it was submitted by the Respondent that the method of arriving or modus operandi to arrive at the benefit had not been provided in the statute and therefore this provision had not become workable at that time and hence the validity of the Rules and methodology adopted, without any guidelines or criteria in the statute, was subject matter of several Writ Petitions pending before the Hon’ble High Courts of Delhi and Bombay. Therefore, Respondent requested to await the decision in the said Writ Petitions before proceeding further in this matter.
c) That the Project “Aparna Serene Park” was a joint development project where development agreements were entered on 20.12.2012, 28.2.2013, 02.5.2013, 23.8.2013, 04.3.2013, 27.8.2013, 19.9.2013 and 05.5.2016 respectively with various land owners to develop the project. The Joint Development Agreements were signed after the approval for construction of project was obtained on 11.8.2016. The project consisted of 1679 Residential Units out of which the Respondent’s share was 1173 Residential units (19,64,355 sq. ft.) and balance 506 Units (8,37,985 sq. ft.) pertained to around 58 land owners. The Respondent informed that he had discharged the appropriate Service Tax Liability under the works contract on Card rate/FMV as per the Sub Registrar’s Office on the taxable value of land owner’s exchanged flats during the period December, 2015 to March 2016. Further, in post-GST period, neither any tax invoice was raised nor GST was charged to land owners by the Respondent.
d) That the impugned project Serene Park did not come under the ambit of RERA in the state of Telangana as construction approvals from HMDA (state authority) had been issued prior to the state RERA notification (January 2017). Hence the project need not be registered under RERA.
6. The Respondent had 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 VAT & ST-3 Returns for the period from April, 2016 to June, 2017.
(d) Copies of all demand letters, Sale Agreement, Contract issued to the above Applicant.
(e) Tax rates – pre-GST and post-GST.
(f) Copies of audited Balance sheets and cost audit reports for financial years 2016-17 & 2017-18.
(g) Copy of Electronic Credit Ledger for the period from 01.07.2017 to 31.03.2019.
(h) Reconciliation statement of ITC with VAT, ST-3, GSTR-3B for the financial years 2016-17, 2017-18 and 2018-19.
(i) Sample copy of supplementary agreement of Serene Park with Land Owners along with details of flat allotment share details.
(j) Details of turnover, output tax liability, GST payable and input tax credit availed for the project “Aparna Serene Park”.
(k) List of home buyers in the project “Aparna Serene Park”.
7. 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 investigation 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 had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not.
8. The DGAP has further stated that the Respondent, vide his letter dated 24.04.2019 had submitted the copies of the Sale agreement dated 28.08.2018, booking application form dated 17.06.2018, demand letters and payment receipts for the sale of Flat No. 806, H Block, 8th Floor to the Applicant, measuring 1,710 square feet, at total basic sale price of Rs. 1,05,49,290/- (Rs. 5,599/- basic sale price per square feet and Rs. 50,000/- for Gas Pipeline, Rs. 75,000/- for Air conditioner conducting & Copper wiring and Rs. 8,50,000/- for car parking, water drainage, electricity, D.G. Set etc). The details of amounts and taxes paid by the Applicant to the Respondent are mentioned in Table-A’ below:-
Table-A (Amount in Rs.)
