Case Law Details
Karunakar Singh Vs Prasu Infrabuild Pvt. Ltd (NAA)
1. The present Report dated 29.10.2021 has been received by National Anti‑ Profiteering Authority (NAA or the Authority) from the Applicant No. 12 i.e. the DGAP after detailed investigation under Rule 129(6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the Standing Committee on Anti-profiteering, received an application under Rule 128 of the CGST Rules, 2017 filed by the Applicant No. 1 alleging profiteering in respect of construction service supplied by the Respondent. The Applicant No. 1 has submitted that he had booked Unit No. 2117 in the Respondent’s project “SKA Green Arch”, Greater Noida (West) under Prime Minister Awas Yojana (PMAY) and alleged that the Respondent had charged GST @12%. In his application, the Applicant No. 1 also submitted that MRP of the flat had increased and the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price on introduction of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017.
2. The DGAP in his Report dated 29.10.2021, inter-alia stated that:‑
i. The said application was examined by the Standing Committee on Anti-profiteering, in its meeting, the minutes of which were received in the DGAP’s office on 15.10.2020, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, investigation was initiated to collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to his customers in respect of construction service supplied by the Respondent.
ii. On receipt of the reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the Rules was issued by the DGAP on 06.11.2020, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to his customers by way of commensurate reduction in price and if so, to suo moto determine the quantum there of and indicate the same in his reply to the notice as well as furnish all supporting documents. Vide the said notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1, during the period 25.11.2020 to 26.11.2020. The Respondent availed of the said opportunity and inspected the said documents on 07.01.2021.
iii. Vide e-mail dated 24.09.2021, the Applicant No. 1 was also afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 27.09.2021. However, the Applicant No. 1 did not avail this opportunity.
iv. The period covered by the current investigation was from 01.07.2017 to 31.10.2020.
v. The time limit to complete the investigation was 14.04.2021 in terms of 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. Further, Hon’ble Supreme Court of India passed an Order dated 08.03.2021 in Suo Motu Writ Petition (Civil) No. 3 of 2020 wherein, it was stated that “in cases where the limitation would have expired during the period between 15.03.2020 till 14.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall have 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, is greater than 90 days, that longer period shall apply”. The above relief has been extended and the period from 14.03.2021 till further orders also stands excluded in computing the limitation period as per the Hon’ble Supreme Court’s 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 have 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. In response to the notice dated 06.11.2020 and subsequent reminders, emails and summons issued by the DGAP to the Respondent, the Respondent replied and submitted documents/information vide letters and e-mails dated 08.01.2021, 25.01.2021, 25.02.2021, 10.03.2021 16.03.2021, 06.04.2021, 28.06 2021, 14.07.2021, 15.07.2021, 23.07.2021, 29.07.2021, 09.08.2021, 18.08.2021, 19.09.2021, 21.09.2021 and 27.10.2021. The submissions of the Respondent were summed up as follows: –
a. The proceedings were initiated on the basis of an application received from the Applicant No. 1. The said Applicant No. 1 had purchased one flat in the project. Hence, the investigation could not go beyond the Applicant No. 1 and cover other customers also who had not questioned the benefit passed on to them.
b. The Applicant No. 1 had booked flat after more than one year of implementation of GST, so the provisions of Section 171 of the CGST Act, 2017 were not applicable.
c. Since, there was reduction in rate of GST from 12% (after abatement of Land cost) to 8% (after abatement of Land cost), vide Notification No. 01/2018 dated 25 01.2018 under provision of GST law, the Applicant No. 1 had been charged GST @ 8% only. So the benefit of reduction had already been given to the buyers. Hence, the provision of Anti-Profiteering did not apply in his case.
d. The project “SKA Green Arch” was not an approved affordable segment EWS category Project. The benefit of reduced rate of GST for the project was subject to individuals’ eligibility under the Credit Linked Subsidy Scheme (CLSS) announced by the Government. In the case of the Applicant No. 1, the flat was booked on 03.03.2018 and the benefit of CLSS was availed. Under this scheme, the beneficiary had to apply Housing loan with Primary Lending Institutions (PLI) after booking of a flat and Central Nodal Agencies (CAN) to verify the eligibility & terms of the policy. and after the satisfaction of the eligibility they could release interest subsidy amount to the PLI and then it would be credited to the loan account of the borrower. Further, the Ministry of Housing and Urban Affairs had told the PLI to issue a certificate addressed to the beneficiary with a copy to the builder, certifying that the borrower was a beneficiary of the CLSS. On the basis of the certificate, the Respondent might charge reduced rate of GST as applicable under PMAY. From the above fact, it was clear that while the Applicant No. 1 had booked the flat, the reduced rate of GST could not be charged until the CLSS certificate was received, as he was not fulfilling the conditions of the CLSS scheme at the time of booking of the flat. The Applicant No. 1 had received the subsidy in his loan account on 22.11.2019. This shows that the certificate was received after this date. The Applicant No. 1 was entitled to the benefit of reduced rate on or after 22.11.2019, therefore his allegation that he had booked the unit under PMAY was baseless and false. The Respondent had charged GST @ 12% till the approval of the benefit of CLSS to the Applicant No. 1 and as and when the certificate was issued by the PLI, the Respondent had started to charge GST @ 8% only which was reduced rate of GST applicable under PMAY. Accordingly, the Respondent had refunded through banking channel the difference of 4% of Rs. 1,39,932/- which was charged in excess of 8% of GST on or before the CLSS certificate.
e. The Respondent had been constructing a residential project “SKA Green Arch” in two phases with single RERA registration. In the project, there were four towers and commercial spaces.
f. In the first phase, there were two towers (Aster Tower and Orchid Tower) & commercial spaces which had been constructed by the Respondent and the completion certificate of phase one had been issued by the competent authority on 18.09.2019.
g. In the second phase, the Respondent was constructing two towers namely, Tulip Tower and Zinnia Tower and construction as well as booking of flat of these towers had been started after 31.12.2017 i.e., post GST regime. No completion certificate has been received for the said phase till date. Since, Phase-2 of the project consisting of two towers namely Tulip and Zinnia was not under construction on or before 01.07.2017 and no purchase, construction or sale activities were started for Phase-2, hence, there was neither any sale nor any ITC was available for the said phase on or before GST implementation i.e., 01.07.2017. The above fact could be verified from the documents uploaded by the Respondent from time to time on RERA website like progress report of the project, sales detail of the project and Chartered Engineers certificate etc., the contractor’s Work Order issued for the said phase and 1st RA bill provided by the contractor for those Towers and from the 1st booking for the Phase-2 where it was clearly mentioned in the payment plan which was part of the agreement that when raft work would be started, the buyer had to pay certain percentage of the total sale value. The Respondent had raised invoices for the same mile stone on 17.07.2018. The Contractors bill of the said work had been issued on 06.10.2018. This clearly showed that the raft work which was the foundation work of a Tower had started after 17.07.2018 which was post GST regime.
h. The Respondent had been providing service for construction of residential service and other services like sale of RMC, society maintenance services etc. during the period under consideration. The Respondent was availing input credit for the said services & sale.
i. The Respondent had taken input credit for services, which was used for providing taxable services under head construction of residential complex. Following were some examples of the services with rate of tax, pre-GST & post-GST.
In connection with the said services, the Respondent had paid taxes in excess of service tax leviable in GST regime and availed input tax credit. Therefore, excess tax paid must be considered from the Respondent’s cost and taken input credit as compared to service tax regime for calculating profiteering.
J. The Respondent had been paying VAT/Sales Tax on purchase of goods for which input credit was not available to the Respondent for providing services under head of construction of residential services but the Respondent had been claiming the said VAT/Sales Tax as expenditure of the Respondent and getting benefit of Income Tax at applicable rate for the Respondent. Now the Respondent was entitled to claim input credit for GST paid on purchase of good, so the Respondent was not eligible for claiming expenses of GST paid on purchase. Therefore, for calculation of profiteering, the income tax benefit forgone by the Respondent must be considered.
vii. Vide the aforementioned letters & emails, the Respondent submitted the following documents/ information:
a. Copies of GSTR-1 Returns for the period July, 2017 to October, 2020.
b. Copies of GSTR-3B Returns for the period July, 2017 to October, 2020.
c. Copies of Tran-1 Returns for period July, 2017 to December, 2017.
d. Copies of VAT & ST-3 Returns for the period April, 2016 to June, 2017.
e. Copy of Balance Sheets for FY 2016-17 to FY 2019-20.
f. Copy of project reports submitted to RERA.
g. Copy of registered deed for purchase of land.
h. Copy of Occupancy Certificate for Phase I.
i. Copy of allotment letters and demand letters issued to Applicant and other home buyers.
j. Details of sold and unsold units.
k. Details of applicable tax rates, pre-GST and post-GST.
l. Details of input and output VAT, Service Tax and GST for the project “SKA Green Arch” during the period April 2016 to October 2020.
m. Copies of cheques dated 14.09.2020 and 20.09.2020, issued by the Respondent to the Applicant No. 1 for refund of Rs. 1,39,932/-.
n. Summary of Input Tax Credit.
o. List of home buyers in the project “SKA Green Arch”.
viii. Vide the notice dated 06.11.2020, the Respondent was informed that if any information/documents was provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was required to be furnished. The Respondent claimed that all information/documents submitted by him were to be treated as confidential.
ix. The above said reference from the Standing Committee on Anti-profiteering along with subject application of the Applicant No. 1, various replies of the Respondent and the documents/evidences on record had been carefully examined.
x. Further vide Para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which should be treated neither as a supply of goods nor a supply of services) which reads as “Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building”. Further, clause (b) of Paragraph 5 of Schedule II of the CGST Act, 2017 reads as “(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after his first occupation, whichever is earlier. Thus. the ITC pertaining to the residential units which was under construction but not sold was provisional ITC which might be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the completion certificate, in terms of Section 17(2) & Section 17(3) of the CGST Act, 2017, which read as under:
Section 17 (2) “Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies”.
Section 17 (3) “The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building”.
Therefore, ITC pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate additional ITC available to him postGST.
xi. The Respondent was a Developer and was engaged in construction of building. He was earlier registered as an assessee with VAT & Service Tax Department, upto 30.06.2017. Thereafter he was registered with GST Department vide Registration No 09AAGCP9220N1ZVV for providing taxable service under the category of construction services. Vide his above submissions, the Respondent contended that the proceedings were initiated on the basis of an application received from the Applicant No. 1. The said Applicant No. 1 had purchased one flat in the Project. Hence, the investigation could not go beyond the Applicant No. 1 and cover other customers also who had not questioned the benefit passed on to them. In this regard, it was observed that Section 171 (1) of the CGST Act, 2017 envisage that Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.” It was clear from perusal of the above provision that it mentioned “benefit of ITC shall be passed on to the recipient” which did not mean that the benefit of ITC was to be taken only for the applicant or the complainant. Further, the above Section mentions any supply” i.e., each taxable supply made to each recipient thereby clearly indicating that every customer/recipient was eligible to get his due benefit. Therefore, it was clear that the intent of the statute was to ensure that the benefit of any reduction in the rate of tax or the benefit of ITC had to be passed on to the each and every recipient by way of commensurate reduction in price. In other words, every recipient of goods or services had to get the due benefit from the supplier and hence, this benefit had to be calculated for each and every recipient/customer and therefore, in the current investigation all the eligible home buyers were included.
xii. Further, the Respondent contended that the project “SKA Green Arch” was not an approved affordable housing project and therefore the benefit of reduced rate of GST for the project was subject to individuals’ eligibility under the Credit Linked Subsidy Scheme (CLSS) announced by the Government. In the case of the Applicant No. 1, the flat was booked on 03.03.2018 and the Applicant No. 1 had received the subsidy in his loan account on 22.11.2019 and hence the Applicant No. 1 was entitled to the benefit of reduced rate on or after 22.11.2019. Therefore, his allegation that he had booked the unit under PMAY was baseless and false. The Respondent had charged GST @ 12% till the approval of the benefit of CLSS to the Applicant No. 1 and when the certificate was issued by the PLI, the Respondent had started to charge GST @ 8% only which was reduced rate of GST applicable under PMAY. Accordingly, the Respondent had refunded through banking channel the difference of 4% of Rs. 1,39,932/- which was charged in excess of 8% of GST on or before the CLSS certificate. The contention of the Respondent appeared to be correct and it was also observed that the Respondent had returned the due amount to the Applicant No. 1 which had also been confirmed by the Applicant No. 1. Hence, the issue of charging GST @12% as alleged by the Applicant No. 1 stood complied with by the Respondent.
xiii. The Respondent contended that Phase II of the Project was launched after implementation of GST i.e., 01.07.2017 and booking of units was made only in the GST regime and also submitted various documents in support of his claim. On scrutiny of the documents, it appeared that the Phase II of the Project was launched in GST regime. However, it was also observed that the Respondent applied for single RERA registration in pre-GST period for the entire Project wherein the Respondent submitted details of both the Phases of the Project. Since, for both the Phases there was single RERA registration which was obtained in pre-GST period. Phase II could not be spared from the current investigation on the mere bais that the same was launched in post-GST period. Hence, the contention of the Respondent in this regard was not considered and investigation was carried out for both the phases of the Project.
xiv. The Respondent had also contended that he had paid taxes in excess in GST regime as compared to Service Tax regime. In this regard, it was observed that the Respondent had claimed that his cost has increased due to increase in rate of tax on his input services. However, the Respondent had not provided any data to quantify the extra cost incurred in GST period to be adjusted against the amount of profiteering.
xv. The Respondent had also claimed that he had been paying VAT/Sales Tax on purchase of goods for which input credit was not available to the Respondent for providing services under head of construction of residential services but the Respondent had been claiming the said VAT/Sales Tax as expenditure and getting benefit of Income Tax at applicable rate. Now, the Respondent was entitled to claim input credit for GST paid on purchase of good, so the Respondent was not eligible for claiming expenses of GST paid on purchase. Therefore, for calculation of profiteering, the income tax benefit forgone by the Respondent must be considered. In this regard, it was pertinent to mention that even the passing on of additional benefit on account of ITC to homebuyers in the GST period could also be reckoned as expenditure and commensurate benefit under the Income Tax Act be availed by the Respondent. Therefore, the contention of the Respondent was not acceptable.
xvi. As regards the allegation of profiteering, it was observed that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services (CENVAT credit of Central Excise duty was not available) in respect of the units for the Project “SKA Green Arch” sold by him.
However, it was also observed that the Respondent was not eligible to avail ITC of VAT paid on the inputs. Further, post-GST, the Respondent was eligible to avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April, 2016 to October, 2020, the details of the input tax credits availed by him, his turnovers from the Project “SKA Green Arch” the ratios of ITCs to turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to December, 2020) periods, are tabulated in Table-A below.
Table-A
From the above Table- ‘A’, it was clear 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 0.76% and during the post-GST period (July, 2017 to October, 2021), it was 9.13% in Project “SKA Green Arch”. This clearly confirmed that in post-GST, the Respondent had been benefited with additional ITC to the tune of 8.37% [9.13% (-) 0.76%] of the turnover.
xvii. The Respondent had claimed that the price quoted to the post GST customers was inclusive of the benefit of ITC under GST Laws. The application form which was signed by all home buyers mentions as the following:
“The Cost of Apartment/Unit was arrived after reduction on account of GST ITC Benefit.”
However, in order to examine this aspect, all application forms in respect to all the buyers who had booked flats in the post GST period were required to be scrutinized. As per the homebuyers list submitted by the Respondent it was observed that 642 number of buyers whose turnover was Rs. 1,84 , 83 ,74 ,531 had purchased the Apartments/Units from the Respondent in post-GST period. As such all the Application Forms in respect of said 642 home buyers, which were signed by the buyers had been submitted by the Respondent. All such Application Forms/Agreements are annexed as Annexure-22 with the Report.
Therefore, it was observed that the Respondent’s claim that the benefit of ITC provided as under Section 171 of CGST Act, 2017 was already considered in the consideration value which was mentioned in all the builder buyer’s agreement in respect of post GST buyers, was correct only to extent of 642 number of buyers whose documents were submitted by the Respondent and in which the aforesaid clause was clearly indicated. Accordingly, while computing the profiteering amount, only the turnover in respect of 642 buyers who had booked flats in the post-GST period and whose documents clearly mentioned the aforesaid clause, were excluded from calculation of profiteering as mentioned in Table-B below.
xviii. It was observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06. 2017. The effective GST rate was 12% for flats. Accordingly, on the basis of the figures contained in Table- ‘A’ above, the comparative figures of the ratio of ITCs availed/available to the turnovers in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, were tabulated in Table-B below:
Table-B
xix. From Table- ‘B’ above, it was clear that the additional ITC of 8.37% of the turnover should have resulted in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on to the recipients. It was evident from the above calculation explained in Table-B on the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the flat/home buyers in respect of the flats sold by the Respondent during the period 01.07.2017 to 31.10.2020, the benefit of ITC that needed to be passed on by the Respondent to the buyers of flats came to Rs. 4,75,87,468/- which included 12% GST on the base amount of Rs. 4,24,88.811/-. The flat buyers and unit no. wise break-up of this amount was given in Annexure-24 of the Report.
xx. The Respondent in his submissions stated that he had passed on the additional benefit of ITC of Rs. 2,41,18,611/- to 206 home buyers who booked the units before implementation of GST i.e., 01.07.2017, which had accrued after implementation of GST. He had also submitted details of home buyers and amount passed on to the individual home buyers. In order to cross check the claim of the Respondent, e-mails were sent to the 206 buyers. Replies from only 18 Homebuyers had been received and out of 18 homebuyers, 14 had confirmed that benefit of GST/Input Tax Credit had been received, 5 had denied that benefit of GST/Input Tax Credit had been received and in respect of 187 buyers, no reply was received. The details of confirmation of the receipt of payment received through e-mails were enclosed in Annexure-25 of the Report. Hence, the contention of Respondent that benefit to all the homebuyers had been passed on could not be accepted in respect of all homebuyers. A summary of benefit of ITC required to be passed on and the ITC benefit claimed to had been passed on to the Applicant No. 1 and other home buyers, was tabulated in Table- ‘C’ below: –
Table-C
From the above Table “C”, it was observed that the benefit was to be passed on by the Respondent to 206 homebuyers (Sr. 1, 2 & 3 of above Table-`C’) by an amount of Rs. 4,59,14,904/-. The details of these amounts were given in Annexures-26, 27 & 28 of the Report.
3. Therefore, the DGAP concluded that:‑
i. On the basis of above, it had been observed that the Respondent had profiteered an amount of Rs. 4,75,87,468/- (inclusive of GST), after implementation of GST. The profiteered amount was 8.37% of the turnover. The Respondent had also claimed that he had passed on the benefit of ITC amounting to Rs. 2,41,18,611/- to the home buyers. On verification, 14 buyers had confirmed that benefit of ITC of GST had been received, 5 had denied and rest 187 buyers did not respond. Therefore, after considering the response of the 14 buyers who had confirmed the receipt of benefit of ITC of GST from the Respondent, it was observed that the Respondent was yet to pass on an additional amount of Rs. 4,59,14,904/- as mentioned at Sr. 1, 2 & 3 of the Table-C which included both the profiteered amount @ 8.37% of the base price and GST on the said profiteered amount from the 206 flat buyers. These 206 recipients were identifiable as per the documents provided by the Respondent, giving the names along with unit allotted to such recipients and hence, the Respondent was required to pass on the benefit of ITC of GST to these buyers. Based on the details of the outward supply of Construction services submitted by the Respondent, it was also observed that the Respondent has supplied construction services in the State of Uttar Pradesh only.
ii. As aforementioned, the present investigation covered the period from 01.07.2017 to 31.10.2020. Profiteering, if any, for the period post October, 2020 had not been examined as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage, when the construction of the Project was yet to be completed.
4. The above Report was carefully considered by this Authority and it was decided to allow the Applicant No. 1 and the Respondent to file their consolidated written submissions by 15.03.2022. A notice dated 25.02.2022 was issued to the Respondent to explain why the Report dated 29.10 2021 furnished by the DGAP should not be accepted and his liability for profiteering in violation of the provisions of Section 171 should not be fixed and penalty under Section 171 (3A) of the CGST Act, 2017 read with Rule 133(3)(d) of the CGST Rules, 2017 should not be imposed.
5. Further, a number of complaints were received against the Respondent for the same Project i.e. “SKA Green Arch” and the complainants requested to be considered as Applicants in the present case. In this regard, the Authority ordered that all the complainants be added as Applicants in the present case. Accordingly, the Applicants No. 2 to 11 were added as the applicants in the present case.
6. The Respondent filed his written submissions vide letter dated 13 04.2022 in which, inter-alia, he submitted:‑
i. That the second phase of the project namely; `SKA Green Arch’ could not be included for the purpose of calculation of profiteering amount as no activity viz. construction, purchase, sale etc., had been done by the Respondent w.r.t. the said project during pre-GST regime. It was submitted that considering the submissions made above, the total profiteering amount as calculated by DGAP to the tune of Rs. 4,75.87,468/- would be reduced to Rs. 2,70,16,059/-.
ii. That the Respondent had rightly passed on the due benefit of commensurate reduction in prices to his buyers/customers to the tune of Rs. 2,41,18,611/-.
iii. That the confirmation regarding non-receipt of due benefit from the buyers/customers should be subjected to a proper verification and merely on the basis of negative confirmation it cannot be held that the Respondent had not passed on the due benefits to them. It was submitted that keeping in view the fact that Respondent had already passed on the eligible benefit to each and every buyer (as submitted above), the Authority must conduct a proper verification of the facts and relevant records related to the buyers/customers who did not respond/reply, so that it could be ascertained that whether they were in receipt of the due benefit or not.
iv. That comparison of ratios of ITCs to turnovers of pre-GST regime with GST regime was not the correct mechanism for calculation of the profiteering amount.
v. That in absence of specified procedure and mechanism of calculation of profiteering, the proceedings initiated against the Respondent were arbitrary and thus liable to be dropped. In this regard, reliance was placed on the cases of Eternit Everest Ltd. Vs. UOI, 1997 (89) E.L.T. 28 (Mad.).
vi. Without prejudice to above, investigation proceedings cannot go beyond the application submitted by the Applicant No. 1.
vii. Without prejudice to above, the alleged profiteering amount had been incorrectly inflated by adding GST and the same was not sustainable.
7. Copy of the Respondent’s submissions dated 13.04.2022 was supplied to the Applicants and the DGAP for their replies and clarifications under Rule 133(2A) of the CGST Rules, 2017. The Applicant No. 2 & 3 by e-mail dated 03.05.2022 have filed their submissions against the Respondent’s submissions dated 13.04.2022 vide which, inter-alia, they stated:‑
i. That with reference to page No. 6 of the Respondent’s submissions, the Respondent objected to ratios used in the DGAP’s Report for calculating profiteering amount, however if Respondent believed that it had applied accurate and logical method to compute amount of refund to customer, then why benefit was not received by all customers. The Applicants felt that the Respondent had been partial towards few customers only. It was also claimed that no amount was retained by the Respondent and same was paid to tax authorities, Either all amounts should have been refunded or all amounts should have been paid to authority. The Respondent’s policy seemed to be made in contradiction of CGST Act, 2017 and contained ambiguity, which failed to fulfil the purpose. Why advance ruling was not obtained from department, if the Respondent believed that no formulae/ratio or criteria was defined by law to compute the profiteered amount. Why wrong practice was followed and only few customers got benefit. There seemed malafied intention of the Respondent.
ii. That with reference to page No. 14 of the Respondent’s submissions, the Respondent claimed to have passed on the benefit by way of credit notes, but the Applicants had not received any credit note, the Applicants had paid entire amount as per agreement and did not receive any benefit in form of credit note and documents pertaining to this had been already submitted.
iii. That with reference to page No. 32 of the Respondent’s submissions, claiming that amount of GST was not retained by the Respondent and same was paid to the Revenue authority. Firstly, whether the amount had been actually paid or not was again matter of further investigation and what kind of ITC (eligible or ineligible) had been used to pay the outward tax liability in respect of concerned supply. Secondly, negligence at the end of the Respondent should not be borne by end customer, as intention of law was to benefit the end customer, hence the Respondent should be held liable to refund the hard earned money of customers.
iv. With reference to page No. 33 of the Respondent’s submissions, by referring to section 54, and shifting burden on to government to refund the taxes to customer was not tenable as burden to refund the taxes for reduction in prices lies on supplier of service/goods.
8. Further, the DGAP by letter dated 09.05.2022 filed his clarifications vide which the DGAP has clarified:‑
i. That in the erstwhile pre-GST regime, various taxes and cesses were being levied by the Central Government and the State Governments, which got subsumed in the GST. Out of these taxes, the ITC of some taxes was not being allowed in the erstwhile tax regime. For example, the ITC of Central Sales Tax, which was being collected and appropriated by the States, was not admissible. Similarly, in case of construction service, while the ITC of Service Tax was available, the ITC of Central Excise Duty paid on inputs was not available to the service provider. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST with effect from 01.07.2017, all these taxes got subsumed in the GST and the ITC of GST became available in respect of all goods and services, unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to those input taxes. the credit of which was not allowed in the pre-GST regime, but allowed in the GST regime. This additional benefit of ITC in the GST regime was required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 171 of GST Act, 2017. It was amply clear that the ITC which was related to inputs and taxable turnover which was related to outputs (payments of GST on amounts collected), was mutually dependent on each other. Hence it was incorrect to say that in Real Estate Sector. there was no correlation of turnover with cost of construction or development of project.
ii. That the methodology adopted by the DGAP in his Report was in line with the legal principles and this methodology of the DGAP had been consistent throughout in all his reports involving allegation of profiteering in similar cases and had been settled before the Authority. As regards methodology prescribed by the Authority, the procedure and methodology for determination of profiteering and intent thereof was determined by the Authority on case to case basis by adopting the most appropriate and accurate method based on facts and circumstances of each case as well as the nature of the goods and services supplied. Furthermore, the Authority had already notified the methodology and procedure under Rule 126 on 28.03.2018. The extent of profiteering had to be arrived at on a case to case basis, by adopting appropriate method based on the facts and circumstances of each case as well as the nature of goods or services supplied. There cannot be any uniform methodology for determination of the quantum of benefit to be passed on. The facts of each case were different, therefore the quantum of profiteering was determined by taking into account the particular facts of each case. Hence, there cannot be onesize-fits-all mathematical methodology. It was also submitted that the additional ITC which has accrued to the Respondent on account of the implementation of the GST was required to be passed on to the customers, but a straight jacketed approach was not justifiable as the facts and conditions of each case vary substantially. Therefore, the profiteering computed in the instant case was entirely based on the facts and circumstances of the case and the data/information provided by the Respondent.
iii. That Section 171 (1) of the CGST Act, 2017 stated that “Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.” It was clear from the perusal of the above provision that it mentioned “benefit of ITC shall be passed on to the recipient” which did not mean that the benefit of ITC was to be restricted only to the applicant or the complainant or to the alleged project. Therefore, the benefit of ITC had to be passed on to each buyer/recipient. Further, the above Section mentioned “any supply” i.e., each taxable supply made to each recipient thereby clearly indicating that every customer/recipient was eligible to get his due benefit. In other words, every recipient of goods or services had to get the due benefit from the supplier and hence, this benefit had to be calculated for each and every service supplied by the Respondent.
9. Further, the DGAP’s clarifications dated 09.05.2022 were supplied to the Respondent and the Applicants to file their rejoinder. Vide e-mail dated 14.06.2022, the Respondent has submitted his rejoinder against DGAP’s clarifications wherein beside reiterating earlier submissions dated 13.04 2022he has interalia stated:‑
i. That in DGAP’s Report dated 29.10.2021, the DGAP had not considered the amount of VAT credit while arriving at the ITC ratio to the total turnover and accordingly, the amount of VAT credit should be taken into consideration for arriving at such ITC ratio. Hence, the profiteering demand should be reduced accordingly.
ii. That the construction of 2nd phase of the Project namely, “SKA Green Arch” started well after the implementation of GST law and thus, the second phase of the said Project could not be included for the purpose of calculation of profiteering amount which also got support from the following points:
a. As per the consolidated progress report of the Project, no activity had been undertaken by the Respondent before 01.07.2017. Copy of consolidated progress report of project was collectively enclosed with this submission.
b. RERA registration of the Project was effective from 03.08.2017 to 20.09.2022 i.e post GST. To substantiate the copy of RERA Registration certificate was enclosed with this submission.
c. Copy of Chartered Engineer’s Certificate dated 15.03.2018 was enclosed with this submission.
In view of the above submissions, it was evident that by 10.10.2017 no work was done by the Respondent as well as the Respondent had not incurred even a single rupee towards construction of 2nd Phase (ie. Tulip & Zinnia towers). Thus, it could be concluded that the 2nd phase of the project was clearly started after coming in force of GST, hence the same could not be included for the purpose of calculation of a profiteering amount as there had been no additional benefit of ITC to the Respondent w.r.t. to the 2 phase and accordingly, the Respondent was not required to pass on the benefits to such extent.
iii. That conclude the ongoing proceedings on the basis of his submissions dated 13.04.2022 and 14.06.2022 and accordingly, he did not require any personal hearing in the matter.
10. Further, in the interest of natural justice, the Respondent and Applicants were given an opportunity for a personal hearing in the matter on 21.06.2022. The hearing, held on 21.06.2022 via video conferencing, was attended by the Applicants except the Applicant No. 1. During the hearing, Applicant No. 2 and 3 reiterated their earlier submissions dated 03.05.2022. Further, copy of the Respondent’s submissions dated 14.06.2022 was supplied to the Applicants and the DGAP for their replies and clarifications under Rule 133(2A) of the CGST Rules, 2017.
11. The Applicant No. 2 & 3 by e-mail dated 16.07.2022 have filed their submissions against the Respondent’s submissions dated 14.06.2022 vide which they stated that:‑
i. With reference to point No. 5- It was irrelevant when the Project started. The time of supply in GST regime is when GST was applicable. Hence its useless to create complexities by emphasizing on pre GST regime.
ii. Reply to part D of point No. 6- All individuals who had purchased the property and were demanding their right had invested hard earned money and secondly, the Respondent won’t be dishonest at giving incorrect information as to non-receipt of benefits.
iii. Reply to part F of point No. 6- The comparison of ratio of ITC to turnover was a very correct method as there were also other Rules on the same (Rule 42 and 43), where ratio of ITC to turnover was applied hence questioning the formulae was not viable in law.
iv. Reply to point No. 8- VAT credit 2022 was incorrect term, these taxes were subsumed into GST after GST applicability and to claim VAT there used to be form TRANS-1. Hence, proceedings should not go off the track.
v. Reply to point No. 11- Anti profiteering was any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit which had to be passed on to the recipient by way of commensurate reduction in prices.
12 Further, the DGAP by letter dated 19.07.2022 filed his clarifications vide which the DGAP has clarified:-
i. That during the course of investigation, the Respondent claimed before the DGAP that ITC of VAT was not allowed to him (Para 18 of the Report dated 29 10.2021). Further, as per VAT Returns submitted by the Respondent for the period from 01.04.2016 to 30.06 2017, the Respondent was paying VAT ©10% of the total VAT paid on the purchase of inputs. Hence, it was observed that the ITC of VAT was not allowed to the Respondent. Therefore, no ITC of VAT was considered for computation of profiteering.
ii. That the project was launched in pre-GST regime and the Respondent had obtained single RERA registration for the entire project. Since, for all the towers i.e., Aster Tower, Orchid Tower. Tulip Tower and Zinnia Tower, there was single RERA registration, the second phase i.e., Tulip Tower and Zinnia Tower, could not be spared from the current investigation on the mere basis that the construction of same commenced in GST regime.
13. This Authority has carefully considered the Report furnished by the DGAP, all the submissions and the other material placed on record, and the arguments advanced by the Respondent and the Applicants. On examining the various submissions, the Authority finds that the following issues need to be addressed:‑
i. Whether there was any violation of the provisions of Section 171 (1) of the CGST Act. 2017 in this case?
ii. If yes what was the additional benefit of ITC that has to be passed on to the recipients and whether various issues raised by the Respondent tenable in the given facts?
14. The Respondent has contended that the second phase of the Project namely; `SKA Green Arch’ cannot be included for the purpose of calculation of profiteered amount as no activity viz. construction, purchase, sale etc., has been done by the Respondent w.r.t. the said project during Pre-GST regime. It was claimed that considering the submissions made above, the total profiteering amount as calculated by DGAP to the tune of Rs. 4,75,87,468/- would be reduced to Rs. 2,70,16,059/-. In support of his submissions, the Respondent has enclosed copies of consolidated progress report of Project, RERA Registration certificate and Chartered Engineer’s Certificate dated 15.03.2018. In this regard, the Authority finds that the “SKA Green Arch” Project was launched in pre-GST regime. This Authority finds that, the Respondent has constructed this Project in two phases. In first phase, two towers i.e. Aster Tower and Orchid Tower and commercial spaces have been constructed and in the second phase two towers i.e., Tulip Tower and Zinnia Tower have been constructed. The Respondent has obtained single RERA registration for the entire “SKA Green Arch” Project. Since, for all the towers i.e., Aster Tower, Orchid Tower, Tulip Tower and Zinnia Tower, there is single RERA registration, the whole proceedings under the investigation should be considered as single case. It is obvious that financing of the whole project has been done as a single unit and considered financial statements have been submitted to RERA as a single unit. As such, they cannot be spared from the current investigation on the mere basis that the construction of second phase commenced in GST regime. The uniform practice of limiting the scope of investigation to the Project has been adopted by the DGAP/NAA, on the basis of RERA registration only, in respect of which the anti-profiteering application has been filed. Also, it is a fact that, Tulip Tower and Zinnia Tower which are constructed in second phase of the Project “SKA Green Arch” are located in the same premises of the Project for which no separate accounting of ITC is maintained by the Respondent. Therefore, the inputs and inputs services intended/meant for Tulip Tower and Zinnia Tower could be used for Aster Tower and Orchid Tower and also the ITC available in respect of Tulip Tower and Zinnia Tower might have been availed at the time of discharging his tax liability in respect of Aster Tower and Orchid Tower or vice versa. Therefore, investigation carried out by the DGAP considering second phase i.e., Tulip Tower and Zinnia Tower is correct, as per law and as approved by this Authority in other cases.
15. The Respondent has argued that comparison of ratio of ITC to turnover of Pre-GST regime with GST regime is not the correct mechanism for calculation of the profiteering amount. In this regard, the Authority finds that the benefit of additional ITC would depend on the comparison of the ITC/CENVAT credit which was available to a builder in the pre-GST period with the ITC available to him in the post GST period w.e.f. 01.07.2017. Without comparing the pre and post GST ratios of CENVAT/ITC to turnovers, the exact quantum of profiteering amount cannot be determined. The Authority holds that the DGAP has computed the profiteered amount by taking ITC to turnover ratios in the pre-GST & postGST periods into account which is correct, reasonable and logical and in accordance with the mandate of Section 171 of the CGST Act, 2017.
16. The Respondent has contended that in absence of specified procedure and mechanism of calculation of profiteering, the proceedings initiated against the Respondent were arbitrary and thus liable to be dropped. In this regard. the Authority finds that the above contention of the Respondent is without substance as the ‘Procedure and Methodology’ for passing on the benefits of reduction in the rate of tax and ITC or for computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” The Authority finds that it is clear from the plain reading of the above provision that it mentions “reduction in the rate of tax or benefit of ITC” which means that if any reduction in the rate of tax is ordered by the Central and the State Governments or a registered supplier avails benefit of additional ITC post-GST implementation, the same has to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their scarce and precious tax revenue. It also provides that the above benefits are to be passed on any supply i.e. on each product or unit of construction or service to every buyer and in case they are not passed on, the quantum of denial of these benefits or the profiteered amount has to be computed for which investigation has to be conducted in respect of all such products/units/services by the DGAP.
17. The term ‘profiteered amount’ is clearly defined in the explanation attached to Section 171 of the CGST Act. These benefits can also not be passed on at the entity/organization/branch/ invoice/ business vertical level as they have to be passed on to each and every buyer at each product/unit/service level by treating them equally. The above provision also mentions “any supply” which connotes each taxable supply made to each recipient thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer on a particular product therefore he would pass less benefit or no benefit to another customer than what is actually due to that customer, on another product. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him subject to his eligibility.
18. The term “commensurate” mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the price which has to be computed in respect of each product or unit or service based on the price and the rate of tax reduction or the additional ITC which has become available to a registered person. The legislature has deliberately not used the word ‘equal’ or ‘equivalent’ in this Section and used the word ‘Commensurate’. The benefit of additional ITC would depend on the comparison of the ITC/CENVAT credit which was available to a builder in the pre-GST period with the ITC available to him in the postGST period w.e.f. 01.07.2017.
19. Similarly, the benefit of tax reduction would depend upon the pre-rate reduction price of the product and the quantum of reduction in the rate of tax from the date of its notification. Computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product or unit to unit or service to service and hence no fixed mathematical methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a buyer. Similarly, computation of the profiteered amount is also a mathematical exercise that can be done by any person who has elementary knowledge of accounts and mathematics as per the Explanation attached to Section 171.
20. To further explain the legislative intent behind the above provision, this Authority has been authorized to determine the ‘Procedure and Methodology’ which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed mathematical formula. in respect of all the Sectors or the products or the services, can be set for passing on the above benefits or for computation of the profiteered amount, as the facts of each case are different. In the case of one real estate project, date of start and completion of the project, price of the flat/shop, mode of payment of price or instalments, stage of completion of the project, rates of taxes pre and post GST implementation, amount of CENVAT credit and ITC available, total saleable area, area sold and the taxable turnover received before and after the GST implementation would always be different from the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to the other project. Therefore, no set procedure or mathematical methodology can be framed for determining the benefit of additional ITC which has to be passed on to the buyers of the units.
21. This Authority under Rule 126 has been empowered to ‘determine’ Methodology & Procedure and not to ‘prescribe’ it. The facts of the cases relating to the sectors of Fast Moving Consumer Goods (FMCG), restaurant service, construction service, and cinema service are completely different from each other and therefore, the mathematical methodology adopted in the case of one sector cannot be applied to the other sector. Moreover, both the above benefits are being given by the Central as well as the State Governments as a special concession out of their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous, mandatory and legally enforceable. The above provisions also reflect that the true intent behind the above provisions, made by the Central and the State legislatures in their respective GST Acts, is to pass on the above benefits to the common buyers who bear the burden of tax and who are unorganized, voiceless and vulnerable. It is abundantly clear from the above narration of the facts and the law that no elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of ITC and computation of the profiteered amount. The Respondent cannot deny the benefit of ITC to his customers on the above ground and enrich himself at the expense of his buyers as Section 171 provides a clear-cut methodology and procedure to compute the benefit of ITC and the profiteered amount. Therefore, the Authority finds that the above contention of the Respondent cannot be accepted. The Respondent has also relied upon the judgement of the Hon’ble High Court of Madras passed in the case of Eternit Everest Ltd. Vs. UOI, 1997 (89) E.L.T. 28 (Mad.), wherein it was held that in the absence of machinery provisions to determination and adjudication upon a claim or objection, the statutory provision will not be applicable. On this aspect, this Authority finds that no tax has been imposed under the above measures and hence the law settled in the above case is not applicable. Section 171 (2) of the CGST Act, 2017 and Rule 122, 123, 129, and 136 of the CGST Rules, 2017 have provided elaborate machinery in the form of this Authority, the Standing and Screening Committees, the DGAP and a large number of field officers of the Central and the State Taxes to implement the anti-profiteering provisions. Therefore, the contention of the Respondent that, no machinery has been provided to implement the above measures is untenable.
22. The Respondent has also contended that without prejudice to his submissions, investigation proceedings cannot go beyond the application submitted by the Applicant No. 1. It is submitted that the Report should be restricted to the Applicant No. 1 only who has filed the application to concerned committee/officer. It is clear from the perusal of Section 171 (1) that “benefit of ITC shall be passed on to the recipient” which does not mean that the benefit of ITC is to be restricted only to the Applicant or the complainant. Therefore, the benefit of ITC has to be passed on to each buyer/recipient. Further, the above Section mentions “any supply” which expands the scope to cover all supplies; where tax reduction or ITC benefit has not been passed on. In other words, every recipient of goods or services has to get the due benefit from the supplier and hence, this benefit has to be calculated for each and every service supplied by the Respondent. In cases of Real Estate where it was alleged that provisions of Section 171 have been violated, the actual beneficiaries are identifiable as the details of home-buyers are available with the Respondent. Accordingly, the Report covers all the eligible beneficiaries and not just the Applicant No. 1 and the DGAP is justified in examining all the supplies made by the Respondent beyond the Application filed by the Applicant No. 1.
23. The Respondent has also contended that without prejudice to his submissions. the alleged profiteering amount has been incorrectly inflated by adding GST and the same is not sustainable. In this connection, the Authority holds that the Respondent has not only collected excess base prices from his customers which they were not required to pay due to the benefit of ITC but the Respondent has also compelled his customers to pay additional GST on these excess base prices which they should not have paid. By doing so, the Respondent has defeated the very objective of both the Central and the State Governments which aimed to provide the benefit of rate reduction to the general public. The Respondent was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the Act supra, as he has denied the benefit of ITC to his customers by charging excess GST. Had he not charged the excess GST the customers would have paid less price while purchasing houses from the Respondent and hence above amount has rightly been included in the profiteered amount. The profiteered amount could also not be paid from the GST deposited in the account of the Central and State Governments by the Respondent as the amount is required to be deposited in the CWFs as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017. Therefore, the contention of the Respondent is not sustainable.
24. The Respondent has averred that the DGAP has not considered the amount of VAT credit while computing the profiteering. In this regard, the Authority finds that the Respondent has not submitted any documentary evidence i.e. copy of VAT Assessment Order neither before the DGAP nor this Authority in support of his above claim. Therefore, the above contention of the Respondent is not acceptable.
25. Further, the Applicants No. 2 & 3 vide e-mails dated 03.05.2022 and 16.07.2022 have filed their submissions/arguments against the Respondent’s submissions dated 13.04.2022 and 14.06.2022 respectively. However, all the contentions raised by the Respondent in his submissions have already been addressed and replied in the above paras. The Authority finds that the Applicants have not submitted any argument against the DGAP’s Report. Further, this Authority finds that the DGAP after considering all facts and submissions of the Respondent has concluded that during the period 01.07.2017 to 31.10.2020, the Respondent has realized an additional amount of Rs. 4,75,87,468/- which includes both the profiteered amount @8.37% of the taxable amount (base price) and GST on the said profiteered amount from the 206 customers/buyers.
26. It is clear from the plain reading of Section 171 (1) that it deals with two situations:- one relating to the passing on the benefit of reduction in the rate of tax and the second on the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP’s Report that there has been no reduction in the rate of tax in the post-GST period; hence the only issue to be examined is whether there was any net benefit of ITC with the introduction of GST. On this issue, 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 0.76% and during the post-GST period (July-2017 to October-2020), it was 9.13% for the Project “SKA Green Arch”. This confirms that post-GST. the Respondent has benefited from additional ITC to the tune of 8.37% [9.13% (-) 0.76%] 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 as Rs. 4,75,87,468/- for the Project “SKA Green Arch”, the details of which are mentioned in Annexure-24 of the Report.
27. For the reasons discussed 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 31.10.2020, in the instant case, as Rs. 4,75,87,468/- for the Project “SKA Green Arch”. 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.
28. Given the above discussions, the Authority finds that the Respondent has profiteered by Rs. 4,75,87,468/- for the Project “SKA Green Arch” during the period of investigation i.e. 01.07.2017 to 31.10.2020. The above amount that has been profiteered by the Respondent from his home buyers/customers/recipients of supply in the above said Project shall be refunded 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.
29. The complete list of home buyers/customers/recipients of supply has been attached as Annexure – ‘A’ with this Order, containing the details of the amount of benefit of ITC to be passed on in respect of the Project “SKA Green Arch” of the Respondent.
30. This Authority also orders that the profiteered amount of Rs. 4,75,87,468/-for the Project “SKA Green Arch” along with the interest @ 18% from the date of receiving of the profiteered amount from the home buyers/customers/recipients of supply till the date of passing the benefit of ITC shall be paid/passed on by the Respondent within a period of 3 months from the date of this Order failing which it shall be recovered as per the provisions of the CGST Act, 2017.
31. It is also evident from the above narration of facts that the Respondent has denied the benefit of ITC to the customers/flat buyers/recipients in his Project “SKA Green Arch” in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. This Authority finds that Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 31 10.2020. therefore. the Authority finds that the Respondent is liable for imposition of penalty under the provisions of the above Section for the amount profiteered from 01.01.2020 onwards. Accordingly, notice be issued to him to explain why penalty should not be imposed on him.
32. The concerned jurisdictional CGST/SGST Commissioner is directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each home buyer/customer/recipient of supply as per Annexure- ‘A’ attached with this Order along with interest @18% as prescribed, if not paid already. In this regard an advertisement of appropriate size to be visible to the public may also be published in a minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of the builder (Respondent) – M/s Prasu Infrabuild Pvt. Ltd., Project- “SKA Green Arch”, Location- Greater Noida (West), Uttar Pradesh and profiteered amount i.e. Rs. 4,75,87,468/-so that the concerned home buyers/customers/recipients of supply can claim the benefit of ITC if not passed on. Homebuyers/ /customers/recipients of supply may also be informed that the detailed NAA Order is available on Authority’s website www.naa.gov.in. Contact details of the concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement.
33. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the compliance of this Order to this Authority and the DGAP within a period of 4 months from the date of this Order.
34. The present investigation has been conducted up to 31.10.2020 only. However, the Respondent has not obtained the Completion Certificate (CC) till that date. Therefore, he is liable to pass on the benefit of ITC which would become available to him till the date of issue of Completion Certificate. Accordingly, the concerned jurisdictional Commissioner CGST/SGST is directed to ensure that the Respondent passes on the benefit of ITC to the eligible home buyers/customers/recipients of supply as per the methodology approved by this Authority in the present case and submit his report to this Authority through the DGAP. The Applicants or any other interested party/person shall also be at liberty to file a complaint against the Respondent before the Uttar Pradesh State Screening Committee in case the remaining benefit of ITC is not passed on to them.
35. Since the Respondent has profiteered in the instant project, there is every likelihood that he has profiteered in other projects also under the GSTIN 09AAGCP9220N1ZVV. The Authority has reasons to believe that the Respondent may have resorted to profiteering in the other projects also and hence, it directs the DGAP under Rule 133(5) to investigate all the other projects of the Respondent under the same GST registration which have not yet been investigated from the perspective of Section 171 of the CGST Act, 2017 and submit complete investigation report for all the Projects under this single GST Registration.
36. The Hon’ble High Court of Delhi, vide its Order dated 10.02.2020 in the case of Nestle India Ltd. & Anr. Vs. Union of India has held that:-
“We also observe that prima facie, it appears to us that the limitation of period of six months provided in Rule 133 of the CGST Rules, 2017 within which the authority should make its order from the date of receipt of the report of the Directorate General of Anti Profiteering, appears to be directory in as much as no consequence of non-adherence of the said period of six months is prescribed either in the CGST Act or the rules framed thereunder.”
37. A copy of this order be sent, free of cost, to all the Applicants, the Respondent, Concerned jurisdictional Commissioners CGST/SGST and the Principal Secretary (Town and Country Planning), Government of Uttar Pradesh as well as Uttar Pradesh RERA for necessary action. File be consigned on completion.
