The Present Report dated 28.08.2020 received on 31.08.2020 by this Authority, has been furnished by the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017 The brief facts of the present case are that an application dated 30.07.2018 filed by the Applicant No. 1 alleging profiteering by the Respondent in respect of purchase of Flat No E-1302 in the Respondent’s project ‘Rise’, Ramprastha City, Sector-37D, Gurugram. The above Applicant No. 1 had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price after implementation of GST w.e.f 01.07.2017. in terms of Section 171 of the Central Goods and Services Tax Act, 2017. This complaint was examined by the Standing Committee on Anti-profiteering in its meeting held on 13.09.2019 and upon being prime facie satisfied that the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017, forwarded the said application with its recommendation to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017 The above reference of the Standing Committee on Anti-profiteering had been received by the DGAP on 09.10.2019.
The Respondent has further contended that there was no uniformity in the ratio of billed amount and the expenditure incurred While in pre-GST regime, the billing was far higher, the construction was not carried out commensurate to the same. The speed of the work increased tremendously in post GST regime, and the construction cost incurred after the CST regime was far higher in proportion to the billings In that period. as compared to the pre-GST period taken by the DGAP as the basis When the construction cost incurred by the Respondent has substantially increased it was quite natural that that ITC relatable to the said cost has seen sharp surge.
With respect to the above contention of the Respondent, we perused Para 12 of the DGAP’s Report doled 28 08 2020 which stated that in the construction service, the payment plans were linked with the different stages of the construction Therefore, if 40% construction has been completed then the payments would have also been received 40% (approx ) of the total payment It implies that if ITC was accumulating to the Respondent then it could definitely be utilized whenever payments would be received The Respondent as positing an imaginary situation in which most of the payments from the home buyers are received in the pre-GST regime and very less amount was pending for collection in GST regime whereas on the other hand most of the construction of the project was taking place in GST regime only on which huge ITC was accumulating but same could not be utilized as the Respondent had very meagre GST liability due to less receipts in GST regime. This at best, is imaginary and based on assumptions of the Respondent which are impractical
It has also been contended by the Respondent that the DGAP has not given any opportunity to him to either controvert or respond to the methodology adopted by the DGAP for determining profiteering We observe that the mandate of DGAP is to conduct investigation as per the directions and recommendation of the Standing Committee on Anti-profiteering. The DGAP submits report of its findings based on the information/data and documents provided, to this Authority under Rule 129 of the CGST Rules, 2017. There rs no provision/stipulation in the law to grant any opportunity of hearing by the DGAP during or after the investigation. Since the DGAP s merely an investigating agency, the adjudication to establish profiteering or the absence of rt is done by this Authority During the proceedings of adjudication this Authority afforded ample opportunity of hearing following the principles of natural justice Hence, the above contention of the Respondent is not correct.
The Respondent has further claimed that he has already passed on the ITC benefit amounting to Rs 17,37,958/- till date In this context, we find that the Respondent has only submitted the list showing the details i.e Name of the Owner, Flat No and Amount of ITC benefit passed on However no supporting documents i e Credit Notes/Cheque/Cash Voucher issued to the customers, bank statement showing debit of the amount passed on acknowledgement receipts from the customers claiming that they had received the benefit of ITC from the Respondent etc have been submitted by the Respondent to support his claim that he has passed on the benefit of ITC amounting to Rs. 14,37,958/- to his customers/flat buyers Therefore, in the absence of any supporting documents. the above claim of the Respondent cannot be accepted
It has also been contended by the Respondent that benefit of ITC could only be computed at the end of the project because of the nature of the contracts i.e long term, and also the requirement of law to reverse the unutilised ITC in respect of unsold units once the completion certificate was issued. Therefore until the protect was complete and competition certificate was issued, the Respondent was not in a position to calculate accurate quantum of ITC benefit. In this regard it is mentioned that the Respondent is required to pass on the benefit of ITC as soon as he was availing the above benefit to discharge his GST output liability. The Respondent cannot employ different yardsticks while utilising the above benefit every month himself and by asking his buyers to wait for the benefit tilt the project was completed after a lapse of a long period. In case the Respondent proposes to pass on the benefit to his recipients after completion of the project he should also avail the benefit himself after completion of the project. The Respondent cannot misappropriate the amount of ITC and enrich himself at the expense of the common buyers by denying them the benefit which he is not to pay from his own pocket. Therefore the above contention of the Respondent is frivolous and hence, the same cannot be accepted.
It is clear from the plain reading of Section 171(1) mentioned above that, it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to 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 as to 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 5.23% and during the post-GST period (July-2017 to September-2019), it was 13.15%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 7 92% (13.15%-5.23%) of his turnover and the same was required to be passed on to the Applicant No 1 and the other customers/ flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to all the customers/flat buyers/recipients as Rs 33,41,006/- on the basis of the information supplied by the Respondent The above amount is inclusive of Rs 19,805/- which is the profiteered amount in respect of the Applicant No 1.
We find that the additional benefit of ITC availed by the Respondent during the period July 2017 to September 2019 which is required to he passed on to his home buyers/customers/recipients. has been correctly calculated by the DGAP which is based on the factual records/information furnished by the Respondent and according to the Methodology which has been approved by this Authority in all the cases where benefit of ITC is required to be passed on under the provisions of Section 171 of the CGST Act, 2017.
In view of the above discussions, the Authority finds that the Respondent has profiteered by an amount of Rs. 33,41,006/ during the period of investigation i.e. July, 2017 to Sept-2019. The above amount that has been profiteered by the Respondent from his customers/flat buyers/recipients shall be refunded/returned/passed on by him. along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules, 2017
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 customers/flat buyers/ recipients commensurate with the benefit of ITC received by him as has been detailed above
The Respondent is also liable to pay interest as applicable on me entire amount profiteered. i.e Rs 33,41,006/- Hence the Respondent rs directed to also pass on interest @18% to the customers/flat buyers/recipients on the entire amount profiteered. starting from the date from which the above amount was profiteered till the date of passing on! payment, as per provisions of Rule 133 (3) lb) of the CGST Rules, 2017
We also order that the profiteering amount of Rs 33,41,006/ along with the interest @18% from the date of receiving of advance horn the customers/flat buyers/recipients 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 receipt of this order failing which it shall be recovered as per the provisions of the CGST Act, 2017