Case Law Details
Shri Diwakar Bansal Vs M/s Horizon Projects Pvt. Ltd. (National Anti-Profiteering Authority)
The Respondent has also submitted that vide Notification No. 3/2019-Central Tax (Rate) dated 29.03.2019 the rate of tax on the construction service had been changed without benefit of ITC and any such benefit availed by a registered person would have to be reversed in case he opted for the new rate of tax and therefore, all the credit availed w.e.f. 01.07.2019 could not be passed on to the customers and it might also result in excess release of the benefit. However, the above plea of the Respondent is incorrect as the provisions of the above Notification will come in to force w.e.f. 01.04.2019 only and any benefit of ITC which has been availed by the Respondent before the above date will have to be passed on to the home buyers. There is also no question of reversal of the ITC except when it pertains to the unsold flats on which he has not been asked to pay ITC benefit. There is also no issue of excess payment of ITC benefit as he can always adjust the same in the future instalments.
Based on the above facts the excess collection or the profiteered amount is determined as Rs. 3,20,49,507/- which includes GST @ 12/8% on the base profiteered amount of Rs. 2,90,55,908/-, as per the provisions of Rule 133 (1) of the above Rules as has been computed vide Table D of the Report dated 10.12.2018 @ 3.51% of the taxable turnover which is required to be passed on by the Respondent to the flat buyers. The profiteered amount in respect of the Applicant No. 1 is held to be Rs. 1,00,232/- including the GST on the base profiteered amount of Rs. 90,709/-. The DGAP has contended in para 18 and 24 of his Report dated 10.12.2018 that he has verified that the Respondent has suo-moto passed an amount of Rs. 84,896/-, accordingly, the profiteered amount in respect of the above Applicant is held to be Rs. 15,336/-. It would be pertinent to mention here that the DGAP vide his revised Report dated 11.03.2019 as per Serial No. 1 of Table C has claimed that the Respondent has profiteered an amount of Rs. 98,808/-from the Applicant No. 1 and has suo-moto passed on the benefit of ITC of Rs. 93,875/- to him and hence the balance amount of Rs. 4,933/-only was required to be passed to him. However, since the details of the computations of the benefit of ITC given in the revised Report have not been held to be correct and hence the above Applicant is held entitled to an amount of Rs. 15,336/- as benefit of ITC. Accordingly, the balance amount of Rs. 3,19,49,275/- is directed to be passed on to the flat buyers, who are identifiable as per the details given in Annexure-27 of the Report dated 10.12.2018, without taking in to account the benefit of ITC which has been claimed to have been passed on by the Respondent to his recipients except in the case of the above Applicant in respect of whom the benefit of ITC passed has been duly verified by the DGAP. Needless to mention that the above amount of benefit of ITC shall be passed on along with interest @ 18% per annum payable from the date from which the additional amount was collected by the Respondent from the flat buyers till the payment is received by them. The above amount shall further be passed within a period of 3 months from the date of this Order failing which the same shall be recovered by the concerned Commissioner CGST/SGST as per the provisions of the CGST/SGST Act.
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 30.06.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The Commissioners CGST/SGST shall ensure that the above benefit is passed on to the eligible buyers. The Applicant No. 1 as well as the other flat buyers will also be at liberty to maintain proceedings against the Respondent for violation of the provisions of Section 171 of the CGST Act, 2017, in case the benefit of additional ITC is not passed on to them.
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 ‘Runwal My City’ Project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered an amount of Rs. 3,20,49,507/- from his customers, hence he has committed an offence under section 171 (3A) 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 why the penalty prescribed under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Accordingly, the notice dated 12.12.2018 issued to the Respondent vide which it was proposed to impose penalty under Section 29 and 122-127 of the above Act is hereby withdawn to that extent.
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12. THE RESPONDENT HAD CONTENDED BEFORE THE DGAP THAT NEITHER THE GST ACT NOR THE RULES HAD PROVIDED ANY MECHANISM FOR COMPUTATION OF THE ABOVE BENEFITS, IN THE ABSENCE OF WHICH, NATURE OF HIS BUSINESS WAS REQUIRED TO BE CONSIDERED FOR COMPUTING THE RELEVANT BENEFITS. However, the DGAP has stated that the provisions of Section 171 were very clear which provided that any reduction in the rate of tax or the benefit of ITC had to be passed on to the recipients by way of commensurate reduction in the prices, which implied that every person who was a recipient of supply of goods or services must get such benefit and the same had to be calculated for every supply of goods or services. It was also for the suppliers of the goods and services to determine the benefit to be passed on by reducing their prices.
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REaction: FONT < The builder's stance so taken is, in essence, prima faicie phoney; patently tantamount to re-writing and / or over-writing what is clearly envisaged / mandated by the law; by deliberately acting in breach of the very legal concept of ITC intended to prevent the otherwise objectionable 'cacading effect'. Premised so, the only alternative/ option left to builder is not to decide and adopt the old rate of 12 % with ITC, but , instead, adopt the reduced rate of 5% without ITC.
The DGAP has rightly / justifiably rejected the builder's stance; as otherwise builder would have had the unintended benefit of having the proverbial cake(in hand) even after having eaten it !
If critically viewed, does not the builder's stance have the consequence of an unjust enrichment of the government as well ?!
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