Shri Deepak Kumar Khurana Vs M/s Sattva Developers Pvt Ltd. (National Anti-Profiteering Authority)
The Respondent has himself admitted that there has been benefit of ITC derived and the benefit has been passed on by him to all his customers with whom agreements were entered on or before 30.06.2017. According to him the benefit has been computed at Rs. 9/-per sq. ft. and based on this calculation he has passed on benefit of Rs. 22,83,426/- to 221 flat buyers. To arrive at this derived benefit the Respondent has provided worksheet (annexure-1 to his reply) showing that the pending work orders with his sub-contractors were renegotiated and were reduced by Rs. 49,85,249/- which works out to Rs. 9/- per sq. ft. However no documents have been submitted to establish the credentials of the worksheet filed by him. Moreover a project includes common area and the facilities provided in the common area are also eligible for the benefit of the ITC. Other factors such as CST benefit have also not been taken into account for arriving at this calculation. Therefore the right methodology would be to take into account the ITC ratio to the turnover and accordingly arrive at the benefit of ITC to be derived by the Respondent. The DGAP has correctly analysed the ITC ratio as 2.66% and applying this ratio to the payments made on or after 01.07.2017 the profiteered amount is determined as Rs. 99,20,246/-. This amount includes profiteered amount of Rs. 18,563/- to be paid to the Applicant No.1 and Rs. 80,37,392/- to all the other 231 buyers. The Respondent has also to pass on the benefit of profiteered amount of Rs. 18,64,290/-to the land owner who will in turn pass on the benefit to his buyers.
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. The Authority hereby determines the profiteered amount as Rs. 99,20,246/- and directs the Respondent to pass on the benefit of Rs. 18,563/- to the above Applicant, Rs. 80,37,392/- to the 231 buyers as given in the Annexure-16 of the DGAP report and Rs. 18.64.290/- to the land owner, along with interest @18% per annum to these 232 flat buyers from the dates from which the above amount was collected by him from the buyers till the payment is made.
It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project ‘Laurel Heights’ in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than what he was entitled to collect and has also compelled them to pay more GST on the additional realisation than what they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of the CGST Act, 2017 and therefore. he is 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 as to why the penalty prescribed under Section 122 of the above Act read with Rule 133 (3) (d) of the CGST Rules. 2017 should not be imposed on him. Since a specefice allegation of issuing incorrect invoices has been levelled against the Respondent he would have sufficient opportunity to state his defence on the above charge.
The Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST Karnataka to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to all the eligible buyers. A report in compliance of this order shall be submitted to this Authority by the Commissioners CGST/SGST Karnataka through the DGAP within a period of 4 months from the date of receipt of this order.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present report dated 28.02.2019 and subsequent reports dated 03.04.2019. 08.04.2019 and 15.04.2019, have 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 the Applicant No. 1 had booked Flat No. 0702, Block-F, in the Respondent’s project “Laurel Heights” situated at off Tumkur road, Bangalore and alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price, on introduction of GST w.e.f. 01.07.2017. The Karnataka State Screening Committee on Anti-profiteering on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC forwarded the said application with its recommendation, to the Standing Committee on Anti -profiteering on 04.07.2018 for further action in terms of Rule 128 of the Rules.
2. The above reference was examined by the Standing Committee on Anti-profiteering and vide its minutes dated 08.08.2018 it had forwarded the same to the DGAP for detailed investigation. The application was forwarded to the DGAP along with the payment details as is given in the Table A below:-
3. The DGAP on receipt of the application issued a notice dated 10.09.2018 to 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 the supporting documents. Further the Respondent was also given an opportunity to inspect the non-confidential evidences/information submitted by the above Applicant which was not availed by him. The above Applicant was also given an opportunity to inspect the non-confidential documents/reply furnished by the Respondent which was not availed by him.
4. The DGAP on account of voluminous documents had sought extension of time for completing the investigation which was extended by this Authority vide its orders dated 27.11.2018 and 29.01.2019 in terms of Rule 129 (6) of the CGST Rules, 2017. The period of the investigation is from 01.07.2017 to 31 08 2018.
5. The DGAP in his report has stated that the Respondent had furnished the following documents.-
(a) Copies of GSTR-1 returns for the period July. 2017 to August, 2018.
(b) Copies of GSTR-3B returns for the period July, 2017 to August, 2018.
(c) Copies of VAT & ST-3 returns for the period April. 2016 to June. 2017
(d) Copies of all demand letters issued to the Applicant No. 1.
(e) Tax rates- pre-GST and post-GST.
(f) Copy of Balance Sheet and cost audit report for FY 2016-17.
(g) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.08 2018.
(h) Details of VAT & Service Tax during the period from April, 2016 to June, 2017 and GST and ITC of GST for the period July. 2017 to August, 2018 for the project –Laurel Heights”.
(i) List of home buyers in the project “Laurel Heights”.
Based on these documents filed by the Respondent the DGAP submitted that the Applicant had purchased Flat No. 0702, Block F in his project ‘Laurel Heights’ measuring 1027 sq. ft. at the basic sale price of Rs. 3,850/- per sq. ft. The payments made by the above Applicant along with the taxes are shown in the Table B below:-
6. The DGAP has submitted that in the present case the project was complete and the completion certificate was also received by the Respondent on 07.03 2018. It was also noticed that the Respondent had availed ITC till June 2018 only and therefore the exact amount of ITC available to the Respondent was known and based on these facts the net ITC benefit to be passed on was to be calculated taking into account the fact that the credit on the unsold flats needed to be reversed since the completion certificate was already available. Accordingly the DGAP based on the total saleable area and the total ITC availed by the Respondent and the joint developer (Land Owner) arrived at proportionate credit of Rs. 2,56 93,110/- as shown in the Table C below:-
Table – C
