Case Law Details
DGAP Vs Shrivision Towers Pvt. Ltd (Shriram Greenfield) (GSTAT)
The present case before the Goods and Services Tax Appellate Tribunal arose from a complaint alleging profiteering under section 171 of the Central Goods and Services Tax Act, 2017. The Karnataka State Screening Committee received a complaint from a homebuyer alleging that the developer had not passed on the benefit of input tax credit (ITC) by way of commensurate reduction in the price of a flat booked in the project “Shriram Greenfield” after the introduction of GST with effect from 01.07.2017. The complaint was examined by the Standing Committee and referred to the Director General of Anti-Profiteering (DGAP) for detailed investigation.
During investigation, the DGAP examined documents submitted by the respondent and noted that the project consisted of two phases. Phase-I commenced in March 2015 and was completed in August 2019, while Phase-II commenced on 03.10.2017 and was completed on 30.09.2021, entirely in the post-GST period. As Phase-II was fully post-GST, it was excluded from the scope of investigation. The complainant had booked his flat in Phase-I during the post-GST period, and therefore the investigation was confined to Phase-I.
The DGAP analysed the purchase value of inputs and services and the tax credits availed during the pre-GST and post-GST periods for Phase-I. It was found that the total purchase value of inputs and services in the pre-GST period was ₹1,78,88,70,090, while in the post-GST period it was ₹1,36,55,05,946. During the pre-GST period, the respondent availed service tax credit of ₹12,70,01,316 and VAT credit of ₹14,58,21,139. In the post-GST period, GST ITC availed amounted to ₹19,89,66,636. The ratio of credit availed to purchase value was 15.25% in the pre-GST period, which reduced to 14.57% in the post-GST period. Since the ITC ratio declined after the introduction of GST, the DGAP concluded that there was no additional benefit or saving accruing to the respondent on account of GST implementation. On this basis, the DGAP held that there was no contravention of section 171 of the CGST Act.
The complainant filed objections to the DGAP report, contending that the respondent had confirmed at the time of booking that ITC benefits would be passed on, that there was inconsistency because an earlier DGAP report had identified profiteering which was later reduced to zero, and that homebuyers were entitled to ITC benefits irrespective of whether booking was done before or after GST. The respondent replied that any assurance regarding ITC benefit was conditional, that the separation of phases was factually and legally correct as Phase-II commenced entirely post-GST, and that the methodology adopted by the DGAP was in accordance with law.
The Tribunal noted that an earlier DGAP report had computed profiteering, and the matter was pending before the Competition Commission of India, which directed re-investigation under Rule 129 of the CGST Rules, 2017. The re-investigation was carried out in light of the Delhi High Court judgment in Reckitt Benckiser India Pvt. Ltd. v. Union of India, which clarified that no fixed or uniform formula exists for determining profiteering and laid down guiding principles. One such guideline provides that where a flat is constructed and sold in the post-GST period, with the price fixed after taking into account available ITC, no benefit of ITC is required to be passed on to the buyer.
The Tribunal observed that the flat in question was booked in the post-GST period. Applying the High Court guidelines and the factual analysis showing a reduction in ITC ratio post-GST, the Tribunal held that no profiteering was established. It further held that a mere confirmation or communication stating that ITC benefit would be passed on does not create a legal right to claim such benefit when statutory conditions are not satisfied.
Accordingly, the Tribunal accepted the revised DGAP report dated 03.02.2025, rejected the objections raised by the complainant, and held that the respondent had not contravened section 171 of the CGST Act. Directions were issued to communicate the order to the concerned CGST/SGST Commissionerate for record and necessary action.
FULL TEXT OF THE JUDGMENT/ORDER OF GSTAT
1. The Karnataka State Screening Committee received a complaint made by Shri Rajiv Kumar Aggarwal resident of J-402, Rohan Vasantha, Varthur, Main Road, Marathahalli, Bengaluru, Karnatak, alleging profiteering against the respondent in respect of the flat D-206 in their project named “Shriram Greenfield” It was alleged that the respondent did not pass on the benefit of input tax credit to the complainant by way of commensurate reduction in the prices on purchase of said flat on introduction of GST w.e.f. 01.07.2017.
2. On the basis of above complaint, the matter was examined by the Standing Committee and the same was referred to the Director General of Anti-profiteering, hereinafter DGAP. Detailed investigation was conducted by the DGAP in the light of the observations made by Hon’ble High Court of Delhi in the Judgement in Reckitt Benckiser India Pvt. Ltd Vs. Union of India (2024) 14 Centex 374.
3. The Respondent provided some relevant documents for investigation to DGAP which are duly considered.
4. The DGAP, in its Report, mentioned that the project had two phases such as phase-I and phase-II respectively. Phase-I started in the month of March 2015 and got completed in August 2019 while Phase-II was started on 03.10.2017 and completed on 30.09.2021, the post-GST period, therefore, Phase-II was out of the purview of the investigation. The applicant/complainant has booked his flat in phase-I, in post GST period. The present investigation pertains to phase-I of the project.
5. During the investigation, the DGAP scrutinised the relevant documents submitted by the respondent and found that during the pre- GST period total purchase value of the inputs and services of the project “Shriram Greenfield phase-I” was Rs. 1,78,88,70,090 while in post – GST period the purchase value of the inputs and services was Rs. 1,36,55,05,946. During the Pre-GST period the respondent avail credit of Service Tax to the tune to Rs. 12,70,01,316. Credit of VAT availed was Rs. 14,58,21,139. During Pre-GST period ITC of GST availed by respondent was Rs. 19,89,66,636. The ratio of credit availed to purchase value as per pre- GST period was 15.25% while it was 14.57% was in post GST period. The ratio of ITC as a percentage of expenses incurred on purchase of inputs Goods and Services in the post GST period was reduced as against the percentage during pre-GST period. Therefore, there was no saving made by respondent on account of implementation of GST.
6. On the basis of the above finding, the DGAP arrived at the conclusion that the respondent did not contravene the provision under section 171 of the Central Goods and Service Tax, 2017.
7. Notice was issued to complainant Shri Rajiv Kumar Aggarwal. He filed his objections against the report of DGAP to the effect that; –
a. That at the time of booking the respondent confirmed that the benefit of input tax credit would be passed to him.
b. There is inconsistency in project definition. Earlier the DGAP identified the profiteering of approx. Rs 2.32 lakh but in the revised report the amount of profiteering reduced to zero.
c. If the complainant was not entitled to any benefit of ITC since he booked the flat in January 2018, the builder would not have send a subsequent e-mail making a promise to pass benefit of ITC to him
d. The home buyers are entitled for ITC benefit regardless to the fact that they booked flat before or after GST period
8. The respondent submitted its reply against the objection of the complainant that the condition mentioned in the mail that benefit of ITC could be passed to the customers was conditional. The allegation of inconsistency in treating both phases separately is factually incorrect and legally misconceived because the construction of Phase II was commenced entirely in post GST period.
9. Further it is stated that as per the paragraph 128 (d) of the Judgement passed by Hon’ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. Vs. Union of India (Supra), the DGAP has excluded phase-II for determination of profiteering. The DGAP has correctly adopted the methodology during investigation. Since pre- GST, ITC to purchase ratio was 15.25% and post- GST ITC it was 14.57% therefore, ITC ratio got reduced in post- GST period. As a result of it no cost savings was made to the respondent.
10. The representative of the DGAP argued in support of the report submitted by DGAP.
11. I have heard learned representative of the DGAP and learned Chartered Accountants appeared on behalf of respondent. The complainant did not appear in spite of giving opportunity for personal hearing.
12. Perused the record.
13. The perusal of the record goes to show that earlier the DGAP had submitted its report calculating an amount 14,48,44,274 as profiteering against respondent and profiteering calculated in respect of the complainant was Rs. 2,32,982. The matter was pending before Competitive Commission of India, hereinafter CCI, the erstwhile authority. The CCI vide its letter dated 20.03.2024 directed the DGAP for re- investigation of this matter under rule 129 of the CGST Rules, 2017. As per the Judgement passed by Hon’ble High Court, Delhi, no fixed/ uniform method or mathematical formula can be laid down for determining profiteering. The Hon’ble High Court in para 128 of the Judgement, laid down certain guidelines for computation of profiteering.
14. The Hon’ble High Court Delhi in Reckitt Benckiser India Pvt. Ltd. Vs. Union of India (supra) in para 128 laid down certain guidelines for computation of profiteering such as; –
“128. There is no dispute with regard to the methodology to be adopted in the following four scenarios; –
(a) …..
(b) ……
(c) ……
(d) If the flat is constructed in the post-Goods and Services Tax period and it is purchased after construction being complete by making upfront payment of the full price, no benefit of Input Tax Credit would be available as the price of the flat would have been fixed after taking into account the Input Tax Credit which has become available to the builder in the post-Goods and Services Tax period and which was not available to him in the pre-Goods and Services Tax.”
15. Admittedly, in the present matter the flat was booked by applicant in post-GST period. As per the Judgement of High Court of Delhi, since the price of the flat would have been fixed after taking into account the ITC which has become available to the builder in the post-GST period and which was not available to him in pre-GST period no benefit of ITC to home buyer would be available.
16. During the investigation the DGAP, after scrutinizing the relevant documents and considering the reply submitted by the respondent, arrived at the conclusion that the respondent has not contravened the provision under section 171 of the Central Goods and Services Act 2017. The DGAP has taken into consideration the ITC availed, and the purchase value of Goods and Services during pre and post GST period.
17. So far as the objection made by the complainant are concerned, I am of the view that merely by making a confirmation, that benefit of ITC would be passed, does not create any legal right to the applicant to claim benefit of the ITC. In view of the Judgment passed by Hon’ble High Court of Delhi, the DGAP submitted its revised report which is based on relevant data and documents.
18. In view of the above the objections raised by applicant does not carry any weight, therefore, they are liable to be rejected.
19. The report of the DGAP dated 03.02.2025 deserves to be accepted.
ORDER
20. The report of the DGAP dated 03.02.2025 is accepted.
21. The objections made by the complainant, against the report of the DGAP, are rejected.
22. Let the copy of the Judgement be communicated to concerned CGST/ SGST Commissionerate for record and necessary action, if any.
23. Judgement pronounced in open court today.
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