Smt. Naina Rani Vs Pivotal Infrastructure Pvt. Ltd. (NAA)
It has been revealed that the Respondent was given benefit of ITC on the supply of Construction Services after the implementation of GST w.e.f. 01.07.2017 and the Respondent was required to pass on such benefit of ITC to the homebuyers/shop buyers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act, 2017. It is observed from the DGAP’s Report dated 30.03.2021 that the benefit was not commensurately passed on by the Respondent to his recipients, taking into account the aforesaid Input Tax Credit availability post GST and the details of the amount collected from the customers during the period 01.07.2017 to 29.02.2020. The amount of benefit of ITC not passed on to the recipients or in other words, the profiteered amount comes to Rs. 2,73,04,997/- which includes GST on the profiteering amount. Further, The Respondent claimed that he had already passed on substantial amount of GST ITC in accordance with the requirements of Section 171 of the CGST Act, 2017 to the homebuyers/shopkeepers. The Respondent had also claimed that he had passed on the benefit of Rs. 1,29,17,507/- to homebuyers/shopkeepers.
This Authority finds that the Respondent vide his letter dated 12.04.2022 has accepted the DGAP’s Report dated 30.03.2021 and requested to conclude the case. The Respondent has also claimed that he has passed on major part of profiteered amount i.e 1,29,17,507/- and he will pass on the remaining ITC benefit soon after the order of this Authority.
For the reasons mentioned hereinabove and in the given facts and circumstances and also stated position of law, we find no reason to differ from the Report of the DGAP that the benefit of additional Input Tax Credit of 3.06% of the turnover has indeed accrued to the Respondent for the project “Riddhi Siddhi”. This benefit was required to be passed on to the recipients. However, the same was not done commensurately by the Respondent. Section 171 of the CGST, 2017 has been contravened by the Respondent, in as much as the additional benefit of ITC @3.06% of the base price has not been passed on by the Respondent to 1039 recipients of supply. These recipients were identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit no. of homebuyers/shopkeepers allotted to such recipients. Therefore, the total additional amount of Rs. 2,73,04,997/- was required to be returned to such recipients.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The instant Report dated 30.03.2021 had been furnished by the Applicant No. 2, under Rule 133 (4) of the Central Goods & Services Tax (CGST) Rules, 2017 (Rules) in response to the National Anti-Profiteering Authority’s (Authority) I0 No. 14/2020 dated 19.03.2020 which was passed to refer back to the Directorate General of Anti-Profiteering (DGAP) Report dated 16.09.2019.
2. Vide the Report dated 30.03.2021 the DGAP has made following submissions:-
I. The Applicant No. 1 vide her application dated 30.11.2018 filed before the Standing Committee on Anti-profiteering under Rule 128 of the CGST Rules, 2017, had alleged profiteering by the Respondent in respect of purchase of Flat in the “Ridhi Siddhi” project of the Respondent situated at Sector-99, Gurgaon.
II. Vide Authority’s IO No. 14/2020 dated 19.03.2020, the DGAP Report dated 16.09.2019 was referred back to the DGAP to further investigate the case for the period upto 29.02.2020 or till the date of Occupancy Certificate (0C), whichever was earlier.
III. A letter dated 11.05.2020 was issued to the Respondent to submit the documents required for investigation. As complete documents were not submitted by the Respondent even after repeated requests, Summons under Section 70 of the CGST Act, 2017 read with Rule 132 of the Rules were issued on 18.09.2020 to the Respondent to produce the relevant documents. In response to the Summons the Respondent submitted complete documents required for investigation only on 18.02.2021.
IV. The DGAP has also stated that the period covered by the current investigation was from 01.07.2017 to 29.02.2020.
V. The Respondent submitted his reply vide letter/e-mail dated 28.07.2020, 05.10.2020, 27.11.2020, 09.01.2021, 11.01.2021, 10.02.2021, 11.02.2021, 18.02.2021 which may be summarized as below :-
a. Documents related to ITC register from July, 2017 to March, 2020, details of Service Tax, CENVAT credit, VAT credit for the period Apr 16 to Jun 17 and output GST and Input Tax Credit (ITC) of GST for the period July, 2017 to February, 2020, Updated list of home buyers for the period from July, 2017 to February, 2020 and VAT Assessment Order for Assessment Year 2016-17 and 2017-18 were submitted.
b. He also submitted that he had been assessed under Normal Taxation Scheme and not under the Composition Scheme, therefore, he was eligible to avail the benefit of ITC of VAT. Also, he had collected VAT from the customers under the normal taxation scheme.
VI. The Point wise reply of the DGAP on issues raised by the Authority vide IO No. 14/2020 dated 19.03.2020 was as follows:-
(i) Whether the Respondent was eligible to claim ITC on the VAT, which he had paid during the period 2016-17 to June-2017 as per the provisions of HVAT Act, 2003:
DGAP Reply: The Respondent had submitted VAT Returns and VAT Assessment Order for the Assessment Year 2016-17 and 2017-18 (April-2017 to June- 2017), wherein the ITC on the purchase of Input was allowed to the tune of Rs. 2,14,55,660/- and Rs. 32,89,447/- respectively.
The Assessing Authority had allowed ITC of the VAT paid on purchase of inputs @5%, 5.25% and 13.125%. Thus, it appears that the Respondent was eligible to claim ITC of the VAT paid on purchase of Inputs as the same was reflected in VAT returns and had also been allowed in the Assessment Order.
(ii) Whether the Respondent was availing benefit of Composition Scheme under HVAT, 2003 or not:
DGAP Reply: As per the VAT returns and Assessment Order submitted by the Respondent, it was observed that the Respondent was not availing benefit of Composition Scheme under HVAT, 2003.
(iii) Whether the Respondent was eligible to charge VAT from the flat and shop buyers under Haryana Affordable Housing Policy, 2013:
DGAP Reply: Service of construction of affordable housing provided by the Respondent, was exempted from Service Tax w.e.f. 01.03.2016 vide Notification No. 25/2012-ST dated 20.06.2012, as amended by Notification No. 9/2016-ST dated 01.03.2016. However, there was no such exemption Notification issued under HVAT, 2003. Further, the credit of inputs in VAT scheme also was only allowed when the output sale / service was taxable (until and unless specifically restricted).Therefore, the Respondent was eligible to charge VAT from the flat and shop buyers under Haryana Affordable Housing Policy, 2013.
(iv) Whether the builder had collected VAT from the home buyers or not: DGAP Reply: The Respondent had submitted he had been assessed under the Normal Taxation Scheme and thus, had collected VAT from the customers under the normal taxation scheme.
(v) Whether the credit of VAT claimed by the Respondent was in accordance with the provisions of Section 42 of the HVAT, 2003:
DGAP Reply: Section 42 of the HVAT, 2003 was applicable in those instances where sub-contractor was appointed to execute a work. In the instant case, the Respondent had not given any evidence of appointment of sub-contractor nor was it reflected in the Assessment Order. Therefore, the provisions of Section 42 of HVAT were not attracted in the present case.
(vi) Whether the ITC claimed by the Respondent during pre-GST period had been allowed by the appropriate Assessing Authority as specified in HVAT, 2003:
DGAP Reply: The ITC had been allowed by the Assessing Authority, as specified in HVAT, 2003
(vii) Acknowledgement/ statements of at least 20% shop and home buyers was to be verified and DGAP to certify the receipt of benefit of ITC:
DGAP Reply: The Respondent had not provided the detail / emails of the shop owners therefore the benefit of passing of CENVAT in the case of shop owners could not be verified. As regards the 992 units of the residential complex, email ids of 754 home buyers were provided by the Respondent. All the 754 home buyers were requested vide emails to confirm the receipt of benefit.
VII. Before the GST was introduced, as the service of construction of affordable housing provided by the Respondent, was exempted from Service Tax w.e.f. 01.03.2016 vide Notification No. 25/2012-ST dated 20.06.2012, as amended by Notification No. 9/2016-ST dated 01.03.2016, the Respondent was not eligible to avail CENVAT credit of Central Excise Duty paid on the inputs or Service Tax paid on the input services, as per the CENVAT Credit Rules, 2004, which were in force at the material time. However, the Respondent was eligible to avail credit of Service Tax paid on the input services (CENVAT credit of Central Excise Duty was not available) in respect of the commercial shops sold by him. The Respondent was also eligible to avail ITC of VAT paid on the inputs. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. It was noted from the data submitted by the Respondent during current investigation as well as previous investigation, that the CENVAT of Service Tax Paid on Input Services was Rs. 58,10,860/-, which was inadvertently taken as Rs. 72,73,736/- in the previous Investigation Report dated 16.09.2019. Therefore, the total CENVAT of Service Tax paid on input services, as submitted by the Respondent was Rs. 58,10,860/- only and the same had now been considered while computing of profiteering in present Investigation Report.
VIII. On verification of the VAT Returns and VAT Assessment Order for the Assessment Year 2016-17 and 2017-18 (April-2017 to June- 2017), it is found that the ITC on the purchase of input was allowed to the tune of Rs. 2,14,55,660/- and Rs. 32,89,447/- and that such credit pertains to four projects of the Respondent. From such consolidated credits, credit pertaining to the impugned project has been calculated by the DGAP. The details of Credit of VAT, Service Tax and GST pertaining to the Project “Riddhi Siddhi”, turnover from the project “Riddhi Siddhi” and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to February, 2020) periods, was as furnished in Table-A below:
Table-‘A’
(Amount in Rs.)
