Sh. Deepak Naik Vs Prestige Estates Projects Ltd. (NAA)
Authority funds that the Respondent has gained the 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/customers by way of commensurate reduction in prices in tents of Section 171 of the CGST Act, 2017. However, it is observed that the benefit was not commensurately passed on by the Respondent to his recipients.
The Authority finds that, taking into account the aforesaid Input Tax Credit availability post GST and the details of the amount collected from the home buyers during the period 01.07.2017 to 30.09.2019, the amount of benefit of ITC not passed on to the recipients or in other words, the profiteered amount comes to Rs. 7,90,95,475/- (i.e. 7,06,20,959/- Rs. 84,74,515/- i.e. OST thereon) in respect of 452 homebuyers.
The Respondent has claimed that be had already passed on a substantial amount of GST ITC per the requirements of Section 171 of the CGST Act, 2017 to the homebuyers. The Respondent had submitted that he had passed on the benefit of Rs. 8,28,91,520/- to all the homebuyers/customers. The Respondent has also claimed that he has passed on excess ITC benefit to his buyers/customers. The DGAP has responded to such claims as tabulated at Table A above and fund that Respondent has not passed commensurate benefit to all homebuyers/customers. The Authority agrees with such verification report of the DGAP as such verification has been conducted in accordance with the directions of this Authority.
The Authority finds that, provisions of law i.e. Section 171 of the CGST Act, 2017 mentioned herein above provide that benefit of the ITC needs to be provided to each and every supply in the commensurate manner. As such, the excess of the ITC benefit provided to some of the homebuyers/customers cannot be offset against others to whom less ITC benefit has been provided or no benefit have been provided at all. The Authority finds that the verification as done by the DGAP in terms of this Authority’s Order No. 01/2021 dated 16.03.2021 does not substantiate the submissions and contentions of the Respondent that they have passed on the profiteered amount along with interest to each recipient of supply. The Authority finds that, the DGAP has made all efforts towards verification in terms of the said Order No. 01/2021 dated 16.032021 of the Authority, but, the Respondent was unable to provide the requisite evidence which was directed in the said Order. Hence, the Authority determines that the Respondent has profiteered an amount of Rs. 7,90,95,475/- (i.e. Rs. 7,06,20,959/- Rs. 84,74,515/- i.e. GST thereon). The details of all eligible homebuyers/customers and the amount of the benefit to be passed on to each of them is enclosed as the Annexure-A to this Order.
Therefore, given the above facts, the Authority under Rule 133(3)(a) of the CGST Rules orders that the Respondent shall reduce the prices to be realized from the buyers of the Flats/customers commensurate with the benefit of ITC received by him. The details of the recipients and benefit which is required to be passed on to each recipient/homebuyer along with the details of the unit arc contained in the Annexure ‘A’ to this order. The Authority directs that the profiteered amount as determined shall be passed on/returned by the Respondent to the recipients of supply along with interest (4)18%, as prescribed under Rule 133(3)(b) of the CGST Rules, 2017, from the date such amount was profiteered by the Respondent up till the date such amount is passed on/returned to the respective recipient of supply (if not already passed on) within a period of three months form the date of this order.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 18.11.2021 has been received from the Director General of Anti-Profiteering (DGAP) after a detailed investigation as per the directions contained in this Authority’s Internal Order No. 01/2021 dated 16.03.2021 in relation to Project- “Prestige Lake Ridge”, Location- Bengaluru, Karnataka of M/s Prestige Estates Projects Ltd.
2. In the said Internal Order No. 01/2021 dated 16.03.2021 this Authority had determined that additional ITC benefit @3.86% had been available to the Respondent during the GST regime, during the period of investigation from 1.07.2017 to 30.09.2019, as compared to the pre GST period as per the computation done in Investigation Report dated 28.08.2020 of the DGAP. Such computation in Investigation Report dated 28.08.2020 of the DGAP was not contested by the Respondent. The Respondent has also not contested the said Internal Order No. 01/2021 dated 16.03.2021 of this Authority. The total profiteered amount calculated in such Investigation Report dated 28.08.2020 of the DOAP and Interim Order of this Authority was Rs.7,90,95,474/-(i.e. Rs. 7,06,20,959/- + Rs. 84,74,5151- i.e. GST thereon).
3. The brief facts of the case are that the DGAP had submitted an Investigation Report dated 28.08.2020 before this Authority in the case of the Respondent. This Authority, vide Order No. 01/2021 dated 16.03.2021 referred the matter back to the DGAP to reinvestigate the case on the following issues:-
a. The Respondent’s claim of having passed on the benefit of ITC of Rs. 8,28,91,520/- was required to be verified against third party evidence in the form of written acknowledgment receipts Lim the home buyers evidencing the receipt of ITC benefit, including the quantum and also evidencing that the said benefit was passed on in terms of Section 171 of the CGST Act, 2017. For this, acknowledgments from the homebuyers along with their contact details i.e. emails, Mobile Nos. were to be produced by the Respondent to the DGAP.
b. To verify whether the applicable interest on the profiteered amount has been paid or not.
4. The DGAP, on receipt of the above mentioned I. 0. No. 01/2021 dated 16.032021, reinvestigated the matter as per the directions of this Authority and submitted his Investigation Report dated 18.11.2021, wherein, he had, inter alia, stated that:-
a. The Authority went through the aforesaid Investigation Report submitted by the DGAP in the subject case and passed an Interim Order No. 01/2021 dated 16.03.2021 which was received in the DGAP on 22.03.2021. Vide pars 36 of the aforesaid order, the Authority made the following observation:
36. We were of the considered opinion that once the Respondent had claimed that he had passed on the benefit of ITC to his customers/fat buyers/recipients, and claimed the benefit of such amount, the onus to prove that the benefit of ITC WO3 actually passed on to the eligible buyers was on the Respondent The sample checking of the evidence by the DGAP by contacting the customers could at best give provisional Indication of passing on the benefit of ITC, however, It would not provide true and complete picture. In the present case the amount of ITC benefit claimed to had been passed on was huge — Rs 8,28,91,520/-, Hence it was the responsibility of the Respondent to submit proper and complete evidence. The evidence should had included the details of payments, how such payments were made (through cheque/draft/credit note etc.), that it was relatable to GST benefit (because of additional ITC) and a third party verification certificate validating such claim.
b. Further, vide pare 39 and 40 of the aforesaid order, the Authority issued following directions:
“39. On the basis of the above reasons and without going info the merits of the other submission filed by the Applicants and the Respondent at this stage, we find this to be a fit case where the Respondent’s claim of having passed on the benefit to his recipients/home buyers requires to be verified against third party evidence in the form of written acknowledgments receipts from the home buyers evidencing the receipt of the benefit. including his quantum and also evidencing that the said ben* is in terms of section 171(1) of the CGST Act, 2017 which states that “Any reduction in the 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”. Needless to state that the claim made by Respondent of having passed on the benefit had to be supported by acknowledgments which the Respondent shall procure from the home buyers along with his contact details i.e., e-mail and Phone/Mobile No., failing which his claim had to be considered as not established. The Respondent shall submit the home buyer wise evidence, as detailed above within a period of 30 days of this Order and the same shall then be verified by the DGAP. Accordingly, the matter is sent back to the DGAP for further investigation as per the provisions of Section 171 (2) of the CGST Act, 2017 read with Ride 133(4) of the CGST Act, 2017. This Authority directs the DGAP to verify the evidences submitted by the Respondent to evidence the passage of 17C benefit from the Respondent to the home brow, and submitted his Report, along with all the relied upon documents/evidence. The DGAP is accordingly directed to reinvestigate the above issue and furnish his report under Rule 129(6) of the CGST Rules, 2017.
40. It had also been observed that the Report of the DGAP is silent on the issue whether the Respondent had paid applicable interest to all the eligible recipients/flat buyers/ customers or not. In view of the above, we direct the DGAP to investigate and verify whether applicable interest on the profiteered amount, which the Respondent had already claimed to had been passed on to his customers/flat buyers, had been paid by him or not from the date from the above amount was profiteered till the date of passing on/payment, as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017.
c. On the basis of above reasons, the Authority, sent back the matter to DGAP for further investigation as per the provisions of Section 171(2) of the CGST (hereinafter referred to as “the CGST” Act, 2017 read with Rule 133(4) of the CGST Rules, 2017 and directed the DGAP to reinvestigate on the issues/directions contained in pare 39 and 40 of the above said Order and furnish the report under Rule 129(6) of the CGST Rules, 2017.
d. Under Rule 129(1) of the Rules, the DOAP received a reference from the Standing Committee on Anti-profiteering on 09.10.2019. to conduct a detailed investigation under Rule 129(6) of the Rules on the basis of an application received by the Standing Committee against the Respondent.
e. On the basis of above, the DGAP had investigated and submitted his Investigation Report dated 28.082020 to the Authority which was further examined by the Authority wherein the Authority observed some deficiencies and directed the DGAP for further investigation in the said matter vide his Interim Order No. 01/2021 dated 16.03.2021.
f. On perusal of the aforesaid Order received from the Authority on 23,03,2021, it was observed that the DGAP was required to verify the claim of the Respondent of having been passed on the benefit of Fit and also to verify whether applicable interest on the profiteered amount had been passed on or not. Therefore, vide letter dated 31.05.2021, the Respondent was requested to provide the contact details i.e., and Phone/Mobile No. of the home buyers and details of payments of ITC benefit and applicable interest along with documentary evidences as per the directions contained in the aforesaid order of the NAA.
g. The period covered by the current reinvestigation is the same as covered in Investigation Report dated 28.08.2020 i.e., from 01.07.2017 to 30.09.2019.
h. As directed by this Authority in I.O. No. 01 of 2021 dated 16.03.2021, all rho issues as mentioned above, had ban duly covered in this report within the confines of the data/information supplied by the Respondent and home buyers.
i. The time limit to complete the investigation was 21.09.2021 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 had expired during the period between 15.03.2020 till 14.03.2021, notwithstanding the actual balance period of limitation remaining, all persons shall had 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 had been extended and the period from 14.03.2021 till further orders shall also stand 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. Prather, the above relief had been extended and the period from 02.10.2021 shall had limitation period of 90 days from 03.102021 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.
j. In response to the DGAP letter dated 31.05.2021 and subsequent reminders and emails issued by the DGAP to the Respondent, the Respondent replied and submitted documents/information vide e-mails dated 29.09.2021, 20.10.2021, and 28.10.2021. The submissions of the Respondent were summed up as follows: –
i. As directed in the order, he was in the process of collating e-mail ID’s and contact details of the customers of the project Prestige Lake Ridge’.
ii. The Prestige Lake Ridge project had been completed and apartment/ units had already been handed over to the respective customers. Hence, the Email ID’s of customers that were available with him had been provided. Further, he did not have email ID’s of rest of the customers.
iii. The Respondent had already passed on ITC GST benefit as per the provisions of the Act by way of issuing credit note to customers wherein, balance due from customer was reduced to the extent of GST benefit Under these circumstances, it was not possible to provide bank statement evidencing passing of GST benefit Copies of the credit notes of all the customers evidencing the ITC GST benefit passed on of Rs. 8,28,91,520 along with interest @ 18% per annum had already been provided in his earlier submissions.
iv. Based on the above, he had provided copies of credit notes, customer ledger accounts to an independent Chartered Accountant who had examined in details the books of accounts of the company and confirmed that the company had paid and credited to customers a total amount of Rs. 8,28,91,520 towards input tax benefit received by the company under Section 171 of the Central GST Act/ Karnataka GST Act in the project ‘Prestige Lake Ridge’ along with interest at 18% per annum. Copy of the CA certificate was enclosed for ready reference.
K. Vide the aforementioned mails, the Respondent submitted the following documents/information:
(i) Copies of confirmation (e-mails) from 4 customers acknowledging the receipt of input tax credit
(ii) Certificate from Chartered Accountant certifying the total amount of input tax benefit received by the Respondent and passed on to the customers along with applicable interest
(iii) E-mail Ids of 174 home buyers.
1. As per the directions of this Authority vide 1.0. No. 01/2021 dated 16.03.2021, the DGAP initiated reinvestigation of the case. At the time of submission of earlier investigation report dated 23.08.2020. the Respondent had submitted the copies of Credit Notes, Ledgers, Customer’s communication letter and Customers Master List only which were found insufficient by the Authority to corroborate his claim of having been passed on the benefit of rm. Accordingly, during the reinvestigation, vide letter dated 31.05.2021, the Respondent was requested to provide the contact details i.e., e-mail and Phone/Mobile Nos. of the home buyers and details of payments of ITC benefit and applicable interest along with documentary evidences as per the directions contained in the aforesaid order of this Authority. Further, reminders were issued on 08.07.2021, 10.08.2021, 23.09.2021, 06.10.2021, 14.10.2021 and 22.10.2021 to the Respondent. A letter was also sent to the jurisdictional Central GST Authorities on 27.10.2021, requesting him to collect the requisite information/data/documents from the Respondent and forward the same to this office. However, no reply was received. The main issues to be examined/verified were:
i. As per the directions contained in pare 39 of the aforesaid order of this Authority, the Respondent’s claim of having been passed on the benefit of ITC of Rs.8,28,91,520/- was required to be verified against third party evidence in the form of written acknowledgments receipts from the home buyers evidencing the receipt of the ITC benefit, including his quantum and also evidencing that the said benefit is in terms of section 171(1) of the CGST Act, 2017. For this, the Respondent was required to procure the acknowledgements from the home buyers along with his contact details i.e., email and Phone/Mobile No. The Respondent was also required to submit these evidences to the DGAP which were further required to be verified by the DGAP.
ii. As per the directions contained in pars 40 of the aforesaid order of this Authority, the DGAP had to investigate and verify whether the applicable interest on the profiteered amount had been paid or not.
m. Now, as regards the first issue that the Respondent was required to procure and submitted the acknowledgements/receipts along with contact details, it was observed that the Respondent had again submitted the acknowledgements (in the form of mails) from the 4 home buyers which the Respondent had already submitted at the time of initial investigation which had already been submitted to the Authority along with Investigation Report dated 28.08.2020. The Authority, vide pare 37 of the aforesaid order, had noticed several discrepancies in these acknowledgements and therefore did not consider the same. Further, it was observed that the Respondent had claimed that the benefit of ITC was passed on to all the home buyers by issuing Credit Notes and he had already submitted the copies of Credit Notes along with Ledges of the home buyers. Hence, it was not possible for the Respondent to provide any bank statement evidencing payments/passing on ITC benefit of GST to the home buyers. Furthermore, the Respondent had also claimed that the ‘Prestige Lake Ridge’ project had been completed and the possession had been handed over to the home buyers of the project. Hence, the Respondent had showed his inability in procuring acknowledgments/receipts and contact details from the home buyers. However, the Respondent had provided the Chartered Accountant’s Certificate as third-party verification certificate, certifying his claim of having been passed on the benefit of ITC (GST) of Rs.8,28,91,52131- along with interest @18%.
n. Further, it was observed that out of the 454 home buyers, profiteering of Its.7,90,95,474/- was computed in respect of 452 home buyers (As reported in Pant 27 of the Investigation Report dated 28.08.2021) only. In respect of remaining two home buyers, no profiteering could be computed as no demands were raised from these two home buyers in post-GST period. However, out of these two, the Respondent had claimed to be passed on an amount of Its.6,482/ to one home buyer. Further, the Respondent had provided the email ids of 174 (including Applicant No. 1) home buyers only. In order to verify the claim of the Respondent, c-mails were sent to these 173 buyers. In respect of remaining 1 home buyer, e-mail was not sent as no profiteering could be computed in respect of this home buyers as no demands were raised by the Respondent to this home buyer during post-OST period. Out of 173 emails, replies from only 32 home buyers had been received. Out of these 32 home buyers, 30 had continued that the benefit of GST Input Tax Credit had beat received, 2 had denied that benefit of GST/Input Tax Credit had not been received by him from the Respondent. It is pertinent to mention here that the email II) of the Applicant No. 1 was available in the Application Form (APAF-l) and email was sent to him by the DGAP at the time of initial investigation. The Applicant No. 1 had already confirmed the receipt of 1ts.1,75,850/- from the Respondent vide email dated 28.08.2020. Further, in respect of remaining 140 home buyers to whom emails were sent by this office, no reply had been received so far. Also, in respect of remaining 279 home buyers whose e-mails ids were not provided by the Respondent, no verification could be done by the DGAP. A summary of benefit of ITC claimed to bad been passed on to the Applicant No. I and other home buyers and the benefit of ITC passed on and duly verified by the DGAP on the basis of confirmation entails received, is tabulated in Table- ‘A’ below: –
