2019-TIOL-2818-HC-JHARKHAND-GST

Godavari Commodities Ltd Vs UoI

GST - Petitioner is aggrieved by the letter of intimation for payment of interest on delayed payment of GST, whereby the liability of amount of Rs.11,58,643/- has been imposed upon the petitioner, as short paid interest for not depositing the tax within time - pursuant to the issuance of this demand, the bank account of the petitioner Company was freezed and upon the payment of the aforesaid amount, the account has now been defreezed - petitioner submits that the impugned action of the respondent authority is absolutely illegal and is in teeth of the Section 73(1) of CGST Act, which requires a show-cause notice to be given to the petitioner before issuing any such letter; that since admittedly no show-cause notice was given to the petitioner prior to issuance of the letter, all the subsequent actions are illegal and cannot be sustained in the eyes of law.

Held: A plain reading of section 73(1) shows that this provision shall be fully applicable in cases where the tax was not paid for any reason other than fraud - In the present case, though it is submitted by the counsel for Revenue that since the tax was paid, Section 73 (1) of the Act shall not be attracted in the case of the petitioner, but the fact remains that the tax was not paid by the petitioner Company in the Government account within the due date, and accordingly it is a case of tax not being paid, within the period prescribed, or when due - In that view of the matter, Bench is unable to accept the contention of revenue counsel for CGST that no show-cause notice was required to be given in this case - Even otherwise, if any penal action is taken against the petitioner, irrespective of the fact whether there is provision under the Act or not, the minimum requirement is that the principles of natural justice must be followed - In the present case admittedly, prior to the issuance of letter dated 6.2.2019, no show-cause notice or an opportunity of being heard was given to the petitioner and no adjudication order was passed - for the purpose of this case, the letter dated 6.2.2019 is to be treated to be a show-cause notice issued under Section 73(1) of the CGST Act - Petitioner shall be given an opportunity of being heard by the adjudicating authority, who shall give a hearing to the petitioner, whether the petitioner was liable to pay the short paid interest amount or not - In case, upon adjudication, it is found that the petitioner was not liable to make the payment of interest short paid, the said amount shall be refunded to the petitioner with statutory interest thereon - The adjudicating authority shall pass the reasoned order within a period three months from the date of communication of this order: High Court [para 7 to 10]

- Petition disposed of: JHARKHAND HIGH COURT

2019-TIOL-2816-HC-KERALA-GST

Sundharams Pvt Ltd Vs Assistant State Tax Officer

GST - Challenge is to the detention notice detaining the consignment of goods on the ground that validity of the E-way bill accompanying the goods had expired.

Held: Detention of the goods cannot be said to be unjustified - since the petitioner is prepared to furnish security for the release of the consignments, they are directed to furnish a bank guarantee for the tax and penalty amounts determined consequent to which the respondent shall release the goods - respondents shall thereafter refer the matter for adjudication - Petition is disposed of: High Court

- Petition disposed of: KERALA HIGH COURT

2019-TIOL-2811-HC-DEL-GST

Sales Tax Bar Association Vs UoI

GST - Petitioners submit that respondents have not fully implemented the isues which were resolved in earlier meetings - Respondent Counsel submits that in place of 'IT Grievances Redressal Mechanism' respondents are in the process of constituting Public Grievance Committees (PGC) at the local and commissionerate level, which would also redress IT Grievances - However, it is not stated as to how and when the said committees would be constituted; what would be the structure and qualification of the persons who would be part of the said grievance committees, and; the mechanism that these committees would adopt to ensure that the grievances are adequately addressed, and do not remain unaddressed - Bench notes that unless such committees have participation of the decision makers, their word may not matter and the grievance may remain unaddressed - Bench, therefore, directs respondents to file an affidavit within two weeks in this regard, listing all the particulars - In any event, till the constitution of the said committees at the local and commissionerate level, the grievances raised by the registered assessees cannot go un-redressed - In the meantime, till the constitution of PGCs, Bench directs that the Chairman and the CEO, GSTN shall be responsible to monitor, and they shall ensure the rederessal of all grievances relating to the GSTN, including IT related grievances in the working of the GSTN network, and to comply with our orders, as well as the aspects on which agreements have been reached and assurances have been given by the respondents; that a status report shall be filed by the Chairman and the CEO, GSTN on the next date with regard to the grievances tickets raised; grievances/tickets addressed and resolved, and; outstanding grievances/tickets - Matter to be listed on 18.12.2019: High Court [para 3 to 5]

- Matter listed : DELHI HIGH COURT

2019-TIOL-2803-HC-KOL-GST

Paharpur Cooling Towers Ltd Vs UoI

GST - S.140 of CGST Act, 2017 - Petitioner submits that in transition to the GST regime there was a clerical error made in TRAN-1 resulting in claim of short credit on transition; that being a clerical error and not a technical glitch, the credit was being denied; that the revised ST-3 return could not be filed and, therefore, filed manually; that several High Courts have taken the view in directing the Revenue to consider similar situations resulting from the error; that by notification dated 9th October 2019 there was an amendment to rule 117 of the CGST Rules, 2017 to extend the deadline for filing of GST TRAN-1 form till 31st December 2019.

Held: In view of notification 49/2019-CT , extending the time to file GST TRAN-1 till 31st December 2019, vires challenge to rule 117 is not pressed by the petitioner - going by the view taken by several High Courts and particularly in the case of Adfert Technologies Pvt. Ltd. - 2019-TIOL-2519-HC-P&H-GST , petitioner stands entitled to file revised GST TRAN-1 form up to 31st December 2019 - Since Revenue has not acted upon the law whereby CENVAT credit can be denied but is otherwise resisting claim for availing credit on omission by error on uploaded GST TRAN-1 form, resistance cannot be sustained - Petition is disposed of: High Court

- Petition disposed of : CALCUTTA HIGH COURT

2019-TIOL-2793-HC-RAJ-GST

Bharat Raj Punj Vs CGST

GST - Case of the department is that petitioner-Company has availed GST Input Tax Credit of Rs.40.53 crores on the basis of invoices issued by the bogus company without receipt of any goods and wrongly availed inadmissible input tax credit of more than Rs. 40.53 Crores involved on supply of goods valued at Rs.225.19 crores without receiving the goods - Petitioner seeks bail in the matter of complaint case dated 22.10.2019 registered at CGST Commissionerate, Alwar (Raj.) for the offences u/s 132(1)(b)(c) & (d) of the Act - It is submitted that the accused petitioner has been falsely implicated in this case as no offence under the said section has been made out; that the department has invoked s.132 without first determining the tax liability and thereby concluded that the petitioner has committed the alleged offence; that no SCN has been issued; that the petitioner was never involved in the day-to-day affairs of the Company and the same was managed by his father, Late Brij Raj Punj; that the petitioner was never aware of the commission of offence; that out of the alleged demand by the department, the company already revised the credit by way of issuing Credit Note and as a result the position has become neutral; that the Company has already paid an additional amount of Rs. 4 crore without there being any demand by the department; that the petitioner has no criminal antecedents and he is in custody for the last more than two months; that, therefore, bail is required to be granted - Counsel for Revenue submits if the amount of input tax credit wrongly availed or utilized exceeded Rs.5 crores, such offences are punishable with imprisonment for a term which may extend to five years and with fine and such offences are cognizable and nonbailable; that the investigation in the case is in progress and still not completed; that the petitioner being Deputy Managing Director of the Company at the relevant time is deemed to be involved in all activities of the Company; that the bail applications of the co-accused persons were dismissed earlier; that allegation made against the petitioner is of serious nature and affects overall economy of the country and in such matters, court should not be lenient.

Held: Looking to gravity of the offence especially the fact that there are serious allegations against the petitioner of wrong availment of input tax credit of more than Rs. 40.53 Crores involved on supply of goods, the matter is still at the stage of investigation and having regard to the seriousness of the offence and without expressing any opinion on the merits of the case, Bench is not inclined to grant benefit of bail to the accused-petitioner -Consequently, the bail application filed under Section 439 Cr.P.C. is dismissed: High Court

- Application dismissed : RAJASTHAN HIGH COURT

2019-TIOL-2780-HC-MUM-GST

Manekia Networks LLP Vs UoI

GST - Challenge is the inability of the Petitioners to correct / revise human errors made while filing monthly returns i.e. GSTR-1, GSTR-2A and GSTR-3B electronically filed, so also the inability to correct the mistakes in its annual returns in the form of GSTR-9C under the CGST, 2017 and the MGST, 2017 – Petitioners seek a direction to the Respondents to allow them to carry out the necessary amendments in their monthly and annual returns – At the hearing, the petitioner restricts his grievance to the Respondent No.5 - Commissioner of Goods Service Tax and Central Excise, Mumbai Central not disposing of the Petitioner's representation dated 8 July 2019 – Thus, the petitioner only seeks a direction to Respondent No.5 to dispose the same in accordance with law, after hearing the Petitioner.

Held: Revenue counsel, on instructions, states that if the Petitioners file a copy of representation dated 8 July 2019 within a period of three days, then the same will be disposed of after following the principles of natural justice, on or before 24 December 2019 – Petitions are, therefore, disposed of with a direction to Respondent No.5 to dispose of the representation dated 8 July 2019 in above terms: High Court [para 4]

- Petitions disposed of: BOMBAY HIGH COURT

2019-TIOL-2770-HC-P&H-GST

DLF Cyber City Developers Ltd Vs UoI

GST - ITC - s.17 of CGST Act, 2017 - Petitioner relies upon judgment in M/s Safari Retreats Private Limited - 2019-TIOL-1088-HC-ORISSA-GST - Bench makes it clear that in case the petition is allowed, the petitioner would be entitled to claim the credit even if the time limit for the same has lapsed - Notice of motion for 12.12.2019: High Court

- Notice issued : PUNJAB AND HARYANA HIGH COURT

2019-TIOL-2767-HC-KERALA-GST

2019-TIOL-70-NAA-GST

Director General Of Anti-Profiteering Vs Nestle India Ltd

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - DGAP is the applicant - Vide letter dated 02.04.2018, the respondent admitted that they had set aside an amount of Rs.12.6 crores on account of profiteering in respect of the rate reductions which had been notified w.e.f 15.11.2017 and accordingly, Office Memorandum dated 10.04.2018 was issued by the Secretary of NAA advising respondent to provisionally deposit the quantified profiteered amount set aside by them into the Consumer Welfare Fund - respondent vide letter dated 18.05.2018 stated that the total amount of the benefit of reduction in the GST rate w.e.f 15.11.2017 was Rs.13.8 crores for the period from November 2017 to March 2018 and they had incurred expenses of Rs.3.9 crores to give effect to passing on the GST rate reduction expeditiously and these expenses were required to be adjusted against the amount set aside - DGAP inter alia submitted that allegation of profiteering by way of either increasing the base prices of the products while maintaining the same selling prices or by way of not reducing the selling prices of the products commensurately, despite reductions in the GST rates from 28% to 18% or from 18% to 12% w.e.f 15.11.2017 and from 18% to 12% w.e.f 25.01.2018 stood confirmed against the respondent and the amount of profiteering by the respondent was Rs.100,98,03,096/- - respondent submitted that there were a total of 370 Stock Keeping Units (SKUs) of different products which were impacted by the rate reductions from 15.11.2017 and 39 SKUs which were effected by the rate reduction w.e.f 25.01.2018 and the benefit of which was passed is consistent with the law as these reductions were with immediate effect by adopting the following approach - (a) by passing on the benefit by way of reduction in MRPs through which most of the benefit was passed on (b) for price point products, where the MRPs were not changed, benefit was passed on by increasing the quantity of the products and (c) where there were operational and/or legal constraints to pass on the benefit on account of issues of coinage, taste preferences or manufacturing constraints, additional benefit was passed on other packs/SKUs in the same product category - to ensure benefit of rate reduction was passed on, computation for passing on the benefit of rate reduction was done at the aggregate product category level, communication was also sent to all the distributors reminding them of their obligation to pass on the benefit to their recipient i.e retailers - in addition, advertisements on GST benefits being passed on select products indicating the reduced MRPs of the products were also published in the national and regional newspapers; benefit was determined for each product category based on the sales contribution of the SKUs in that product category with due consideration to the lower priced SKUs; that the respondent being a law abiding corporate had on their own 'set aside' the amount to be passed on to the recipients wherever it was not practical to pass on the GST benefit on the existing stocks till the availability of the new stocks; that the 'set aside' amount was neither considered as sales nor as profit and was kept as current liability to be passed on to the consumers at the same product category level - DGAP vide report dated 08.10.2018 has concluded that the allegation of profiteering by way of either increasing the base prices or by maintaining the same selling prices and by not reducing the selling prices of the products commensurately, despite reduction in the GST rates stood confirmed against the respondent to the tune of Rs.100,98,03,096/-; profiteered amount is re-determined as Rs.89,73,16,384/- as per the revised Annexure-16 of the Supplementary report dated 15.03.2019.

Held: From the letters written to the distributors by the respondent, it is apparent that instead of commensurately reducing the MRPs of his impacted SKUs as per provisions of s.171(1) of the Act, respondent had claimed to have given discounts on them to pass on the benefit of rate reductions; however, the investigation carried out by the DGAP has found that the above claim of the respondent was not correct as the sample invoices submitted did not mention that the discounts were given due to rate GST reductions and on the other hand, the invoices revealed that the discounts offered were in accordance with the general discount pattern which was being followed by the respondent in the course of his business; that the pattern of discounts offered in the pre and post-GST rate reduction periods was the same and the discounts offered post-GST rate reductions were a continuation of the earlier discounts and, therefore, the said discounts cannot be construed to have been given due to the GST rate reductions; that the respondent claims to have passed on the benefit of rate reduction at the aggregate level of the SKUs or at the product level whereas he was required to pass it on every SKU so that the benefit could reach every buyer of the SKU; that passing on of the benefit to another customer at the expense of the customer who was legally entitled to receive it or complete denial of the above benefit to such customer amounts to violation of s.171(1) of the Act as well as Article 14 of the Constitution of India as the intent of the above provision is to pass on the benefit to every customer on his every purchase of a SKU; that the respondent has no discretion to pass on the benefit as per his own preference and he is bound to pass on the benefit uniformly and equitably on all the impacted SKUs, hence the methodology adopted by the respondent is illegal and cannot be accepted; that as per Rule 6 of the Legal Metrology Rules, 2011, the respondent was responsible for fixing MRPs, however, they had not re-fixed the MRPs after rate reductions as envisaged in the letter dated 16.11.2017 of the Legal Metrology Division, GOI; that the respondent had simply transferred his legal obligation to his distributors who had no power to re-fix the MRPs and stamp/re-sticker/print them on the impacted SKUS and since the MRPs were not reduced and affixed on the SKUs by the respondent there was no likelihood of their being sold to customers at the commensurate reduced rates; that the respondent has claimed that they had passed on the benefit of Rs.204 crores at the product category level against the benefit of Rs.192 crores but this claim is untenable as the benefit was to be passed on each SKU and not at the product category level - Passing on of the benefit at the product category level implied that the benefit has either not been passed on some SKUs which formed part of that product category or has been passed more than what could have been passed on some SKUs, for example, the respondent had not passed any benefit of tax reduction on the SKU of Maggi which forms part of the product category of Instant Noodles and Pasta, having MRP of Rs.5/- whereas he has claimed to have passed more benefit on the SKU of MAGGI which was being sold at the MRP of Rs.12/- by reducing its price to Rs.11/- - By no stretch of imagination, denial of benefit of tax reduction to a customer who had purchased SKU of MAGGI having MRP of Rs.5/- can be justified by claiming that he has passed on the benefit on that SKU of MAGGI which was being sold at MRP of Rs.12/- - Such arbitrary, inequitable and illegal passing of the benefit cannot be accepted as it violates the provisions of s.171 as well as Article 14 of the Constitution - respondent has also developed and applied his own methodology to compute the above benefit based on the sale contribution of all the SKUs in that product category with consideration of lower priced SKUs and also the financial year adopted starts from January and ends in December - it is apparent that the methodology adopted by the respondent was based on a number of parameters which had no impact on the benefit which was to be passed on due to rate reductions and no justification has been given as to why the actual sales from January to September 2017 should be compared with the planned sales of October to December 2017 with annualised impact price changes and new products by taking into account the sales contributions of all the SKUs in that product category with consideration of lower priced SKUs - respondent has also not furnished the actual mathematical calculations which they had adopted - The most simple and appropriate methodology required to be adopted by the respondent was to calculate the new MRP for each SKU as per the tax rate reductions and to charge it accordingly, therefore, the methodology adopted by respondent is illogical, arbitrary and illegal and cannot be approved - the claim of the respondent that they had passed on benefit of Rs.209 crores as against the benefit of Rs.204 is fallacious and cannot be accepted - the amount of Rs.12.6 crores set aside by the respondent has been arbitrarily calculated by following a methodology which has already been held to be illogical, arbitrary and illegal and, therefore, the above amount cannot be taken to be the only profiteered amount - claim of the respondents that they had spent an amount of Rs.3.9 crores on the unusable packing material, development of new cylinder for new packaging and advertisements and this amount should be adjusted is untenable as the respondent ought to have used the packaging material by fixing fresh stickers in terms of the letter dated 16.11.2017 (supra); expenditure incurred on new printing cylinder, advertisements cannot be adjusted against the profiteered amount as there is no such provision in the CGST Act, 2017 - contention of the respondent that in the case of MAGGI pack bearing MRP of Rs.5/-, to pass on the benefit of tax reduction, the MRP would have to be reduced to Rs.4.75 and the same was not a feasible option is not justified as it was for the customer to provide the required amount of price and not the respondent to draw any adverse inference on behalf of the customer; moreover, the customer could have paid the said amount through e-payment platforms; the above pack of MAGGI is purchased by the most vulnerable section of society who have been denied the benefit of tax reduction due to arbitrariness exercised by the respondent - such a strategy appears to be based on the respondent's intention to enrich himself at the expense of the customers and their claim that the cash transactions predominate and the e-commerce was less than 1% of the total FMCG sales as per the report published in Economic Times cannot snatch the benefit which was due to the general public - such a claim is also against the public policy which aims at encouraging online payments - claim of the respondent that in respect of single serve packs, adding more quantity was not a viable option as it would change the taste parameter is far fetched and is incorrect as the increase in quantity would have been minuscule and which would have not made much difference to the taste; in respect of KITKAT, the wafer length would be required to be changed and which would entail changing the mould and which would require 6 to 9 months is also not an acceptable claim; that the contention of the respondent that as per the Legal Metrology Rules, 2011, the retail sale price of a packaged commodity could only be in rupees or in fraction of 50 paise and any package having MRP which has fractions such as 15 paise, 25 paise etc. would be violation of the Rules is also unacceptable as the respondent has to act in consonance with the rules and in case MRP of any of his products is fixed in fractions he has to round off the same; the percentage benefit of grammage has been computed at the product category level whereas it was to be calculated at the SKU level, hence the methodology adopted by the respondent is incorrect and cannot be allowed - Methodology mentioned and adopted by the respondent runs contrary to the provisions of s.171(1) of the Act which required the respondent to pass on the benefit on each SKU whereas the respondent has not passed on the same SKU but instead passed it on as per his own convenience which amounts to contravention of the above section 171 as well as Article 14 of the Constitution - Reliance placed on the Malaysia Price Control and Anti-Profiteering Act, 2011 and Price Control and Anti-Profiteering Act, 2014 which has defined profiteering as 'making unreasonably high profits' should also be implemented in India to determine the 'commensurate reduction' is untenable as both the above Acts have been repealed by Malaysia as they were not found to be working properly - moreover, these Acts were promulgated to control prices after introduction of GST in Malaysia whereas no provisions for controlling prices has been made in the CGST Act, 2017 and also the Authority has not been mandated to work as a price controller or regulator and it is only empowered to ensure that the benefits of tax reduction and ITC are passed on to the customers - argument of the respondent that Rules 126, 127 and 133 of the CGST Rules, 2017 suffer from the vice of excessive delegation and hence were violative of the Constitution is unacceptable as the Rules have been framed under section 164 of the CGST Act, 2017 and which has the approval of the Parliament; that the said rules have been framed after thorough scrutiny and consultation at several levels and hence to claim that the rules amount to excessive delegation would be completely wrong and fallacious - argument of the Respondent that in the absence of a Judicial Member, the constitution of the Authority is improper is also untenable as all the proceedings are conducted by applying the principles of natural justice and all its orders are detailed, reasoned and speaking and are also subject to judicial review; that there is no judicial member in the AAR in GST or Income Tax and the TRAI etc.; that the Parliament, State Legislatures, the GST Council as well as the Central and State governments in their wisdom have not thought it fit to provide a judicial member in this Authority, therefore, absence of a Judicial member does not cause any prejudice to the respondent - Authority was competent to suo moto order investigation against the respondent once information of profiteering has been received and, therefore, no illegality has been done, moreover, respondent had himself subjected to the jurisdiction of the authority vide their letter dated 02.04.2018 and hence they cannot resile from their earlier stand - contention of respondent that 'profiteering' has not been defined in the CGST Act/Rules is incorrect as the word 'profiteered' has been duly defined in the Explanation attached to section 171 of the Act - contention of respondent to apply the methodology of 'netting off' as has been approved in the report of WTO is incorrect as the same would result in denial of benefit to certain customers and which would amount to violation of provisions of s.171 of the Act as well as Article 14 of the Constitution - the profiteered amount is determined as Rs.89,73,16,384/- as per the revised Annexure-16 of the Supplementary report dated 15.03.2019 - as the respondent has already deposited an amount of Rs.16,58,32,723/- in the Consumer Welfare Fund of the Central and State governments as the recipients are not identifiable, the balance amount of Rs.73,14,83,660/- is also required to be deposited along with interest @18% within three months failing which it shall be recovered by Commissioner CGST/SGST concerned - as the respondent has denied the benefit of tax reduction to customers in contravention of s.171(1) of the Act, they are liable for imposition of penalty u/s 171(3A) of the Act, SCN to be issued accordingly - Commissioners of CGST/SGST to monitor this order under the supervision of DGAP by ensuring that the profiteered amount is deposited in the CWFs of the Central and State Government as indicated in the order - compliance report to be furnished within a period of four months: NAA

- Application disposed of: NAA

2019-TIOL-69-NAA-GST

Director General Of Anti-Profiteering Vs Virgo Properties Pvt Ltd

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Applicant has alleged profiteering by the respondent in respect of purchase of flat in the respondent's project ‘Bounty Acres', Tamil Nadu - inasmuch as it is alleged that the respondent had not passed on the benefit of Input Tax Credit availed by him by way of commensurate reduction in the price of the above flat - DGAP in its report has submitted that during the pre-GST period the Input Tax Credit as a percentage of the total turnover was 0.42% and during the post-GST period (July 2017 to August 2018) it was 3.89% and which clearly confirmed that post-GST, the respondent had benefited from additional Input Tax credit to the tune of 3.47% of the total turnover; that accordingly, the profiteered amount was Rs.97,40,448/- which included GST @18%, 12% and 8% on the base profiteered amount of Rs.87,06,553/-; that this amount was inclusive of Rs.33,972/- (including GST @18%) which was the profiteered amount in respect of the applicant; that the construction services were supplied in the State of Tamil Nadu only; that the respondent had sold 119 flats out of which 90 homebuyers had made payments in the post-GST period till 31.08.2018 and the profiteering was computed in respect of these 90 flats only and the profiteering in respect of the remaining 29 homebuyers would be calculated when payments would be received from them; that the respondent had realised an additional amount of Rs.97,06,476/- from the other 89 recipients and who were not applicants in the present proceedings.

Held:  DGAP has in their reports addressed all the objections raised by the respondent and the explanation given by DGAP are correct and can be relied upon - insofar as the contention of the respondent that the credit of VAT paid on inputs had not been considered, the Authority observes that this claim is incorrect since though the respondent had claimed credit of VAT paid on inputs, but they had not discharged any output VAT liability; that the respondents also did not charge/paid VAT in the pre-GST period from the homebuyers; therefore, for determining the profiteering amount, neither the credit of VAT paid on inputs nor the output VAT liability had been taken into consideration by the DGAP and thus the computation made by DGAP is correct - insofar as the submission that the respondent had duly passed on ITC benefit of an amount of Rs.92,38,515/- till the date of submissions to the eligible customers, since the computation of the said amount is not forthcoming, the same cannot be accepted - in fine, the respondent had profiteered by an amount of Rs.97,40,448/- and the same is required to be pass on this amount to the homebuyers (who are identifiable) along with interest @18% within a period of three months - SCN is to be issued proposing imposition of penalty for contravention of the provisions of s.171 of the Act read with rule 133(3)(d) of the Rules - the Commissioners of CGST/SGST, Tamil Nadu are required to monitor this order under the supervision of DGAP by ensuring that the amount profiteered is passed on to all the eligible buyers and a compliance report is to be submitted within a period of four months: NAA

- Application allowed: NAA

2019-TIOL-67-NAA-GST

Director General Of Anti-Profiteering Vs S3 Buildwell Llp

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - 71 applicants have alleged profiteering in respect of construction service supplied by the respondent - inasmuch as the applicants submit that they had purchased flats in the respondent's project ‘Floridaa', Haryana and allege that the respondent had not passed on the benefit of Input Tax Credit to them by way of commensurate reduction in prices - DGAP in its report has submitted 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 2.60% and during the post-GST period (July 2017 to December 2018) it was 7.37% and, therefore, the respondent had benefited from additional ITC to the tune of 4.77%; that based on the aforesaid facts, the respondent was required to pass to the recipients, for the period 01.07.2017 to 24.01.2018, the amount of benefit of ITC of Rs.1,03,06,413/- for residential flats and shops which included 12% GST on the base profiteered amount of Rs.92,02,154/-; that for the period 25.01.2018 to 31.12.2018, they were required to pass on ITC benefit of Rs.1,66,71,248/- which included 12% GST on commercial shops and 8% GST on residential flats and thus the total benefit of ITC that was required to be passed to customers during the period 01.07.2017 to 31.12.2018 was Rs.2,69,77,661/- (which included GST @12% and 8%) on base amount of Rs.2,46,06,450/-; that the home buyer and unit no. wise break-up of this amount is computed accordingly; that in respect of the applicants the profiteered amount comes to Rs.11,24,124/- (including GST on base amount of Rs.10,24,023/-) and which is to be returned to the applicants - Respondent submitted that they had passed on the benefit of Rs.2,22,85,626/- to the buyers of flats and commercial shops, which the DGAP disputes inasmuch as the DGAP states that the amount passed to the 86 homebuyers was less by an amount of Rs.76,27,576/- and in respect of 27 commercial shops by an amount of Rs.9,67,826/-; that the excess benefit passed on to some recipients by the respondents cannot be set off against the additional benefit required to be passed on but it can be adjusted against any future benefit that may accrue. Held: Claims being made by the respondents are unwarranted and cannot be accepted - DGAP report is correct - Section 171 of the Act is aimed at ensuring that the recipients get the commensurate benefit, in the form of reduction in prices, in case of any tax rate reduction and/or incremental benefit of ITC which has become available to them due to sacrifice of revenue by the State and the Central Government from their own tax pool to provide accommodation to the vulnerable section of society under the Affordable housing scheme - Section 171 of the Act clearly links profiteering to be a function of each supply of goods or services or both hence, profiteering needs to be computed at the leval of each tax invoice - From a plain reading of s.171 of the Act, it is very clear that the total quantum of profiteering by a registered person is the sum total of all the benefits that stood denied to each of the recipients/consumers individually, therefore, respondent is under a legal obligation to pass on the benefit of ITC to his buyers and he cannot be allowed to appropriate the same - submission by the respondent that they had passed on the benefit of Rs.2,22,85,626/- to the homebuyers and commercial shop buyers has been refuted by the applicants who submit that no ITC benefit has been passed but instead the respondent has charged the extra amount for maintenance and other purposes; moreover, since the documentary proof of ITC benefit passed on to buyers has not been furnished by the respondent and DGAP has not made any mention of the same in its report, the said claim is unacceptable - the total ITC benefit for the period 01.07.2017 to 31.12.2018 of Rs.2,69,77,661/- (which includes GST @12% or 8% on the base amount of Rs.2,46,06,450/-) is required to be paid to the applicants and the other eligible house buyers along with interest @18% - that since the Occupation Certificate has been received on 09.01.2019 and there was no inventory of unsold units left on the date of issue of OC and since the present investigation is conducted only upto 31.12.2018, therefore, any additional benefit of ITC which may accrue subsequently needs to be also passed on to the eligible buyers and in case the same is not done, the applicants and other eligible buyers are at liberty to approach the Haryana State Level Screening Committee for initiating fresh proceedings u/s 171 of the Act -   SCN is to be issued proposing imposition of penalty for contravention of the provisions of s.171 of the Act read with rule 133(3)(d) of the Rules - the Commissioners of CGST/SGST, Haryana are required to monitor this order under the supervision of DGAP by ensuring that the amount profiteered is passed on to all the eligible buyers and a compliance report is to be submitted within a period of three months: NAA

- Application allowed: NAA

2019-TIOL-66-NAA-GST