ORDER

1. The Present Report dated 27.11.2020 had 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 was that a reference was received from the Standing Committee on Anti-Profiteering on 17.07.2020 to the DGAP for conducting a detailed investigation in respect of an application filed by the Applicant No. 1 alleging profiteering by the Respondent in respect of purchase of a Flat in the Respondent’s project “Swati Florence”, Ahmedabad, Gujarat. The Applicant No. 1 has alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price after the implementation of GST w.e.f. 01.07.2017.

2. The DGAP has stated that receipt of the reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the Rules was issued on 04.08.2020. calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all supporting documents. Further, in terms of the said notice dated 04.08.2020, the Respondent was also given an opportunity to inspect the nonconfidential evidences/information between 18.08.2020 to 20.082020. However, the Respondent did not avail of the said opportunity.

3. The DGAP has submitted that vide e-mail dated 08.10.2020, the Applicant No. 1 was given an opportunity to inspect the nonconfidential documents/reply furnished by the Respondent on 14.10.2020 to 16.10.2020, which the Applicant No. 1 did not avail of.

4. The DGAP has mentioned that the period covered by the current investigation was July, 2017 to July, 2020 and that the time limit to complete the investigation was upto 16.01.2021,

5. The DGAP has repotted that the Respondent submitted his replies to the said notice, vide letters and e-mails dated 26.08.2020, 07,09.2020, 03.102020, 07.10.2020. 15.10.2020 06.11.2020 and 2411.2020. Vide the aforementioned letters/e-mails, the Respondent submitted:

i) That he was engaged in the business of construction of residential complexes.

ii) That he had units which was allotted/ acquired under Credit Linked Subsidy Scheme.

iii) That he had executed project “Swati Florence” in firm Swati Realty, situated at South Bopal. Ahmedabad. Out of total 265 units in the project, 217 units were booked before receipt of Occupation Certificate (OC) and 48 units were booked after receipt of OC.

iv) That he had already passed on the benefit of ITC to all 217 customers including the Applicant @2.80% for the Advances received during the period 01.07.2017 to 31.03.2019 by mode of banker’s cheque and it had been communicated via email. However, the Applicant had not accepted the same.

6. Vide the aforementioned letters/e-mails, the Respondent submitted the following documents/information:-

(a) copies of GSTR-1 returns for July, 2017 to July, 2020.

(b) copies of GSTR-3B returns for July, 2017 to July, 2020.

(c) GSTR-9 returns for the period July, 2017 to March, 2018.

(d) Copy of Tran-1.

(e) Copies of VAT & ST-3 returns for April, 2016 to June, 2017.

(f) Electronic Credit ledger for the period July, 2017 to July, 2020.

(g) Copies of receipt vouchers and sale agreement in the name of the Applicant.

(h) Details of applicable tax rates- pre-GST and post-GST.

(i) Copy of Balance Sheet (including all Annexures and profit/ loss account) and Income Tax Audit Report for FY 2016-17, 2017-18 and 2018-19.

(j) Copy of project Report submitted to the RERA including all periodic progress report.

(k) Status of the project “Swati Florence”. as on 31.07.2020 in terms of sold and unsold units along with copy of OC.

(l) CENVAT/ ITC register for the FY 2016-17, 2017-18, 2018-19, 2019-20 and 2020-21 (upto July, 2020), reconciled with VAT, ST-3 and GSTR-3B returns.

(m) Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to July, 2020 for the project “Swati Florence” along with documentary evidence.

(n) Details/ List of home buyers of the project “Swati Florence”.

7. The DGAP has also stated that the subject application, the various replies of the Respondent and the documents/evidences on record had been carefully examined. The main issues for determination were:

i) Whether there was benefit of reduction in rate of tax or input tax credit on the supply of construction service by the Respondent after the introduction of GST w.e.f. 01.07.2017 and if so,

ii) Whether such benefit was passed on to the recipients in terms of Section 171 of the Central Goods and Services Tax Act, 2017.

8. The DGAP has also mentioned that the Respondent vide letter dated 07.09.2020, submitted copy of OC dated 28.09.2018, wherein it had been mentioned that the impugned project was Residential Affordable Housing. The Respondent vide reply dated 24.11.2020 submitted that he had sold 24 units under Credit Linked Subsidy Scheme (CLSS) in the FY 2019-20 and 2020-21. The Respondent had also submitted the copies of Certificate issued by the banks to the home buyers, evincing payment of subsidy under CLSS Scheme of Government of India.

9. The DGAP has submitted that the Government of Gujarat, Urban Development and Urban Housing Department, vide Resolution No. AFH/102013/808/Th-I dated 15.01.2014 had specified parameters for affordable housing, which was stated as:-

Also, as per Pradhan Mantri Awas Yojana (Urban), in order to avail credit linked subsidy scheme, the carpet area of the houses being constructed should be 30 sq. mtr. and 60 sq. mtr. for EWS and LIG respectively. However, in the present case, as per the home buyer list submitted by the Respondent none of the above parameter was complied with. Therefore, the above project was being considered as Residential Real Estate Project (RREP) and not affordable housing project.

10. The DGAP has also contended that the Respondent had accepted that there was benefit of ITC which was required to be passed on and the same had been passed on to the homebuyers as per the details mentioned in the homebuyer list submitted by the Respondent. The Respondent also submitted that GST benefit of 2.80% on advances received during the period 01.07.2019 to 31.03.2019 was passed on to all the homebuyers. However, the correctness of the amount of benefit so passed on by the Respondent had to be determined in terms of Rule 129(6) of the Rules. Therefore, the ITC available to the Respondent and the taxable amount received by him from the Applicant No. 1 and other recipients post implementation of GST had to be taken into account for determining the benefit of ITC required to be passed on.

11. The DGAP has also contended that it was found 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 input services and credit of the VAT amount paid on the purchase of inputs. However, the CENVAT credit of the amount of Central Excise Duty paid on inputs was not admissible as per the CENVAT Rules in force at the material time. It was found that the Respondent had not availed any credit of VAT in the monthly VAT returns filed. Therefore, the credit of the VAT amount paid on the purchase of inputs and the VAT turnover was not considered for computation of the ITC ratio to taxable turnover for the pre-GST period, as mentioned above. Further post-GST, the Respondent could avail ITC of GST paid on inputs and input services including the sub-contracts. From the information submitted by the Respondent duly verified from the GSTR-1 and GSTR-3B Returns for the period July, 2017 to July, 2020, the details of the ITC availed by him and his taxable turnover for the project “Swati Florence” during the said periods has been furnished by the DGAP in Table-B below:-

Table-‘B’

(Amount in Rs.)

12. The DGAP has also claimed that as per Table-‘B’ mentioned above, it was clear that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 2.31% and during the post-GST peri0d (July, 2017 to July, 2020), it was 8.64%. This clearly confirmed that post-GST, the Respondent had been benefited from additional ITC to the tune of 6.33% [8.64% (-) 2.31%] of the taxable turnover.

13. The DGAP has mentioned that the matter of profiteering had been examined by comparing the applicable tax and ITC available for the pre-GST period (April, 2016 to June, 2017) when Service Tax @4.5% was payable with the post-GST period (July, 2017 to July, 2020) when the effective GST rate was 12% (GST @18% along with 1/3rd abatement on value) on construction service, vide Notification No. 11/2017-CentraI Tax (Rate), dated 28.06.2017. On the basis of the figures contained in Table-‘B’ above, the comparative figures of ITC availed/available during pre-GST period and post-GST period has been furnished by the DGAP in the Table-‘C’ below:-

Table-‘C’

(Amount in Rs.)

14. The DGAP has intimated that from the Table-‘C’ above, it was clear that the additional ITC of 6.33% of the taxable turnover should have resulted in 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 the additional ITC was required to be passed on to the recipients. The Respondent had not contested that any such benefit would eventually have to be passed on to the recipients. In fact, the Respondent had submitted that he had issued cheque of Re 28,101/- to the Applicant No. 1, which was not accepted by the Applicant No. 1. The Applicant No. 1 vide email dated 29.07.2020 had informed that the Respondent had offered 2.8% as ITC benefit and if this benefit was to be accepted, an affidavit had to be signed with the Respondent wherein it was specified that the home buyers agreed that on receipt of this GST benefit, there was no other amount remaining outstanding to be paid by the Respondent. Hence, the Applicant No. 1 did not accept the cheque.

15. The DGAP has also argued that having established the fact of profiteering, the next step was to quantify the same. 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 Applicant No. 1 and other home buyers during the period 01.07.2017 to 31.07.2020. the amount of benefit of ITC not passed on, or in other words, the profiteered amount came to Rs.4,52,79,754/- which included 12% GST on the base profiteering amount of Rs.4,04,28,352/-. The home buyer and unit no. wise break-up of this amount was given in Annex-12 of the report. This amount was inclusive of Rs. 71.031/- which was the profiteered amount in of the Applicant No. 1, mentioned at serial no. 29 of the report.

16. The DGAP has further submitted that the basis of the details of outward supplies of the construction service submitted by the Respondent it was observed that the service had been supplied in the State of Gujarat only.

17. The DGAP has stated that it was pertinent to mention here that the Respondent had claimed that he had passed on the benefit of Rs.1,78,71,200/- to the home buyers. On-going through the home buyers list, it was observed that the cheque was not cleared for 04 home buyers, including the Applicant No. 1, who had not accepted the benefit passed on by the Respondent. Thus, the benefit of Rs.2,36,217/- to these 04 home buyers had not been passed on by the Respondent and hence, this amount was reduced from the total benefit claimed to be passed on by the Respondent.

18. The DGAP has claimed that to substantiate the Respondent claim, the Respondent was asked to provide email addresses of the home buyers. The Respondent vide reply dated 06.11.2020 submitted that he was not maintaining the records of email address, hence, was unable to provide the same. Therefore, the Applicant No. 1 vide email dated 19.11.2020 was requested to provide email address of home buyers, if available The Applicant No. 1, vide email dated 19.11.2020 submitted email address of 177 home buyers. An email dated 19.11.2020 was written to these 177 home buyers to confirm the receipt of benefit of ITC. Out of the sent 177 emails, 36 emails were received. Out of 36, 32 confirmed the receipt of benefit of ITC from the Respondent and 04 home buyers (other than applicant) denied the receipt of any benefit. Out of 04 who had denied the receipt of benefit, 02 units had been sold post OC, as per home buyers list submitted by the Respondent Out of remaining 02, 1 had not accepted the benefit passed on by the Respondent and had not received the cheque, as discussed in para 19 supra. The other one had not been passed on any benefit, as claimed by the Respondent. Thus, the amount of Rs.1,18,873 was also to be passed on to this home buyer.

19. A summary of category-wise ITC benefit required to be passed on and the benefit claimed to had been passed on by the Respondent was furnished by the DGAP in Table-‘D’ below:-

Table-‘D’

(Amount in Rs.)

20. The DGAP has also mentioned that as per above Table “D”, it was also observed that the benefit already passed on by the Respondent was less than what he ought to had passed on in case of 217 residential flats by an amount of Rs.2,77,63,643/-. The details of this amount was given in Annex-12. To support his claim of benefit already passed on, the Respondent had submitted sample copies of 05 agreements sign d by the customers regarding receiving of the benefit.

21. The DGAP has also stated that the basis of above discussions, it was found that the benefit of additional ITC of 6.33% of the taxable turnover had in fact accrued to the Respondent and the same was required to be passed on to the Applicant No. 1 and other recipients. Thus, the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017 in as much as the additional benefit of ITC @ 6.33% of the base price received by the Respondent during the period 01.07.2017 to 31.07.2020, had not been passed on to the Applicant No. 1 and other recipients. On this account, the Respondent had realized an additional amount to the tune of Rs.4,52,79,753/- from the Applicant No. 1 and other home buyers. which included both the profiteered amount @6.33% of the taxable amount (base price) and GST on the said profiteered amount, However, the Respondent had suo-moto passed on total of Rs.1,75,16,110/- to his home buyers. Therefore, the Respondent had profiteered by an amount of Rs.2,77,63,643/- (4,52,79,753/- (-) 1,75,16,110/-) which included profiteered amount of Rs. 71.301/- in respect of the Applicant No. 1. This amount (Rs.2,77,63,643/-) included both the profiteered amount of the taxable amount (base price) and GST on the said profiteered amount from other recipients as well who was not applicant in the present proceedings. These recipients were identifiable as per the documents on record provided by the Respondent giving the names and addresses along with unit no, allotted to such recipients. Therefore, this additional amount of Rs.2,77,63,643/was required to be returned to such eligible recipients.

22. The above Report was carefully considered by this Authority and a notice dated 04.12.2020 was issued to the Respondent to explain why the Report dated 27.11.2020 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. The Respondent was also directed to file his written submissions by 17.12.2020. In reply to the notice dated 04.12.2020, the Respondent filed his submissions dated 21.01.2021, 25.03.2021 and 16.09.2021.

23. The Respondent and the Applicant No. 1 were also granted hearing by way of video conferencing on 29.03.2022. The Applicant No. 1 appeared for the hearing, Sh. Sanket Garg, Chartered Accountant appeared on behalf of the Respondent and during the course of hearing the Respondent requested the Authority to supersede all the existing replies. documents, information or clarification filed earlier and allow him to file his final submissions. The request of the Respondent was considered by this Authority and he was directed to file his consolidated written submissions by 06.04.2022. The Respondent vide e-mail dated 06.04.2022 filed his consolidated written submissions vide which he has stated:-

a. That he had already passed on the benefit of ITC to 261 homebuyers including the Applicant No. 1 @ 2.80%.

b. That while calculating the profiteered amount, the DGAP has not considered the Cess on Service Tax amounting to Rs. Rs.3,00,902/- in the pre-GST period. Considering the above fact, the Ratio of CENVAT to turnover would increase from 2.31% to 2.38% and profiteering may reduce from 6.33% to 6.26%. Further, the DGAP has also accepted the above and reduced the profiteering ratio from 6.33% to 6.26% in their letter dated 12.02.2021.

c. That internally he has calculated that an amount of Rs.1,80,71,648/- was the benefit of ITC required to be passed on to homebuyers and that he had passed on the above amount to his homebuyers except the 4 buyers who denied to accept the benefit.

d. That as per his calculations, there were variation of figures while comparing the same with the calculation done by the DGAP and the same has been illustrated in the Table mentioned below:-

e. That the difference of Rs. 69,49,098/- is the amount of CENVAT Credit of VAT taken by him in the TRAN-1 Returns and the same has been certified and allowed to him by Gujarat VAT Authorities. Since GST Law was new and due to punching error, he has wrongly availed the VAT Credit of Inputs held in Stock as on 30.06.2017 in Table 7(a) – Duties and taxes on inputs instead Of Table 7(c) – VAT and Entry Tax paid of TRAN-1. He had intimated the error to Gujarat VAT Authorities vide letter dated 27.08.2020 for accepting the said form. Copy of letter is also enclosed. Hence. referring the above-mentioned facts, he has requested to consider TRAN-1 in Pre GST ITC for the calculations of anti-profiteering amount.

f. That the DGAP has taken Carpet area of units sold in the calculation, but build-up area should be taken, because conveyance deed was executed for “build-up area” and not only the “carpet area”. While calculating the profiteered amount, the DGAP has considered the Total Saleable Area as 19875 sq. mt. which is the Carpet Area of the project However, as per the BU Certificate the Total Saleable Area of the project came out to be 39599.57 sq mt. (Build-up area). He has sold portion of the Common Area along with Carpet Area. Hence, total saleable area should be inclusive of Common Area. Hence, while computing the profiteered amount, ‘Build-up Area’ should have been considered by the DGAP in place of ‘Carpet Area’. Thus, the remaining difference area of 19724.54 sq. mt. should also be added to the Carpet Area white computing the profiteered amount. He has also enclosed a copy of the BU Certificate.

g. That real estate sector, realtors and agents uses fascinating terms to attract the customers like Carpet Area, Built-up Area, Super Built-up Area (also known as Common Area), Among these words. Carpet area and Common areas are defined in Real Estate (Regulation and Development) Act, 2016, which are reproduced below:-

“carpet area” means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

Explanation:- For the purpose of this clause, the expression “exclusive balcony or verandah area” means the area of the balcony or verandah, as the case may be, which is appurtenant to the net usable floor area of an apartment, meant for the exclusive use of the allottee; and “exclusive open terrace area” means the area of open terrace which is appurtenant to the net usable floor area of an apartment. meant for the exclusive use of the allottee;

“common areas” mean –

i. the entire land for the real estate project or where the project is developed in phases and registration under this Act is sought for a phase, the entire land for that phase;

ii. the staircases, lifts, staircase and lift lobbies, fire escapes, and common entrances and exits of buildings;

iii. the common basements, terraces, parks, play areas, open parking areas and common storage spaces;

iv. the premises for the lodging of persons employed for the management of the property including accommodation for watch and ward staffs or for the lodging of community service personnel;

v. installations of central services such as electricity, gas, water and sanitation, air-conditioning and incinerating, system for water conservation and renewable energy;

vi. the water tanks, sumps, motors, fans, compressors, ducts and all apparatus connected with installations for common use;

vii. all community and commercial facilities as provided in the real estate project;

viii. all other portion of the project necessary or convenient for its maintenance, safety, etc., and in common use;

Formula to calculate these areas are as follows:

Carpet Area = Area of bedroom + living room + balconies + toilets – the thickness of the inner walls

Built-up Area = Carpet area + area of walls + area of balcony

Super Built-up Area = Built-up area + proportionate common area

h. That in the Allotment Letter dated 12/06/2017, the Agreement to Sale dated 20/06/2017 and the Sale Deed dated 25/10/2018 issued to the Applicant No. 1, the Respondent has clearly mentioned the area to be sold to him would be (super built up area).

i. That regarding the difference of 208 and 284 sq. mt., the Respondent submitted that in our previous replies he have some erroneous facts of the area of the Project as his internal data was scattered and reconciliation was not happened properly. Hence the revised one to be considered in the calculation.

j. That all the communications of the Applicant No. 1 were baseless as he never denied him the payment of the benefit of ITC as claimed by him.

k. That as per his calculations. he calculated the profiteered amount as per the methodology adopted by the DGAP and the benefit of ITC required to be passed on by him came to Rs.1,64,52,359. However, he has already passed on the benefit of ITC amounting to Rs.1,76,24,958 to the home buyers which is excess of anti-profiteering payable amount. He is also ready to pass on the benefit of ITC amounting to Rs.2,36,217 to the remaining 4 homebuyers, who earlier denied taking the benefit. The calculation of profiteered amount executed by the Respondent is provided in the Table mentioned below:-

24. Clarifications under Rule 133(2A) of the CGST Rules, 2017 were also sought from the DGAP on the submissions dated 21.01.2021 and 25.03.2021 filed by the Respondent. The DGAP has filed his clarifications dated 12.02.2021 and 11.06.2021 vide which he has stated:-

a. That the details/data has been collated from the statutory documents/ information submitted by the Respondent. However, on re-verification it was found that the amount of Cess on S. Tax has not been added in the pre-GST period which is Rs.3,00,902/-. Considering the above fact, the Ratio of CENVAT to turnover would increase from 2.31% to 2.38% and profiteering may reduce from 6.33% to 6.26%.

b. That the main focus for the calculation of profiteering is to pass on the additional benefit of ITC accrued to the Respondent and the profiteering, if any, is determined at a point of time when demand is raised from the customer, and benefits of additional ITC as available should be passed on to the customers at that point itself

c. That there has been no comparison of periods for calculation of profiteering. The whole purpose of taking period of 15 months is to cover a reasonable period just before the GST so that proper & representative assessment of percentage of ITC available to the Respondent just before the transition to GST era could be arrived at. Further, during this period there was no variation of rate of tax on services. Therefore, this period was taken to find out the average ratio of input tax credit availability with turnover. The ratio of ITC and turnover in Pre-GST is compared with ratio of ITC in post GST. The period during the GST period may be one month or one year. depending upon the period of investigation. It does not mean that if the period is larger than the availability of ITC would increase or decrease but it only gives a ratio which represents the period for comparison.

d. That the DGAP’s investigation has no mandate to examine the cost component, market condition or inflation, Section 171 of the CGST Act, 2017, mandates that any benefit of reduction in the rate of tax or the benefit of input tax credit which accrues to a supplier must be passed on to the consumers as both are concessions given by the Government and the suppliers are not entitled to appropriate such benefits by increasing their profit margin at the cost of the consumers. Such benefits must go to the consumers.

e. That this is not a case of rate reduction but the issue relates to additional amount of ITC available to the Respondent i.e. the amount of ITC which was not available in pre GST era, is now available to him.

f. That the Investigation Report has considered the proportionate credit of sold unit only for calculation of profiteering and credit of unsold units is not part of the investigation.

g. That in the erstwhile tax regime (pre GST) 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 input tax credit (ITC) in some cases was not allowed in the erstwhile tax regime. 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 w.e.f. 01.07.2017, all these taxes got subsumed in the GST and the input tax credit of GST is available in respect of all goods and services, unless specifically denied. The method adopted is to find out the ratio of CENVAT/ITC to taxable turnover in the pre-GST era as well as post-GST era, which is nothing but an exercise to find out the accrual of additional amount of ITC. if any, in the post-GST era

h. That as per Rule 126 of the CGST Rules, 2017, this Authority has been empowered to determine the methodology and procedure for determination as to whether the reduction in the rate of tax or the benefit of ITC has been passed on by the registered person to the recipients by way of commensurate reduction in prices.

i. That the Authority in exercise of power delegated to it under the Rule 126 has notified the Methodology & Procedure vide Notification dated 28.03.2018 which is also available on the website. However, it is submitted that no fixed/uniform mathematical methodology can be determined for all the cases of profiteering as the facts and circumstances of each case as well as the nature of goods or services supplied in each case differ. Therefore. the determination of the profiteered amount has to be computed by taking into account the particular facts of each case. The computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from case to case 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 recipient or the profiteered amount.

j. That the additional benefit of ITC has nothing to do with the output GST rate. The intent of Section 171 of the CGST Act, 2017 is very clear that any additional benefit of the ITC needs to be passed on to the customers,

k. That the legislature had delegated the task of prescribing the powers and functions of the Authority to the Central Government as per Section 171 of CGST Act, 2017 read with Section 2 (87) of the Act, on the recommendation of the GST Council. The Central Government, on the recommendation of the GST Council, which is a constitutional Federal Body under 101th Amendment of the constitution has formulated and notified Rule 126, 127 and 133 which prescribe the functions, duties and power of the Authority. All Rules of Anti profiteering have been framed under Section 164 of the said Act which has the sanction of the Parliament and the State Legislatures. It also shows that the delegated power to the Authority given under section 171(3) of the said Act has been duly exercised by the Central Government by formulating the Rules, on the recommendation of the GST Council. Therefore. the powers to determine its own methodology under Rule 126 is just and enables the Authority to clarify and effectuate the powers given and functions to be discharged by the Authority and this enabling provision has been granted to the Authority after careful consideration at several stages and levels and therefore there is no ground for claiming that the present delegation is excessive or arbitrary.

l. That the word profiteered should be construed as prospective is not correct, as the Explanation to Section 171 (3A) has defined the word profiteered, inserted vide  the Finance (No. 2) Act, 2019 (23 of 2019) dated 01.08.2019. In this context it is to clarify that any explanation added to an existing statute is to clarify the confusion and to convey the intent of the provisions. Hence, it has retrospective effect.

m. That the DGAP has considered area from the home buyer list, as submitted by the Respondent during the investigation. In the homebuyer list, size for each flat is mentioned as 75 Sq. Mt. and the same was considered for calculation of profiteering. Hence, there was no error in calculation of area of the project. Therefore, the contention of the Respondent was not acceptable.

n. Further, from the perusal of details given by the Respondent, it is observed that the entire exercise taken by the Respondent is to increase the ratio of turnover and CENVAT in pre-GST and to decrease the ratio of turnover and CENVAT in post GST period. To achieve this goal, they have given a new range of area of fiats varying between 79.78 sq. mt. to 79.96 sq. mt. The DGAP has calculated the profiteering as given by the Respondent and has been kept as same in pre and post GST era.

o. That as per the home buyer list submitted by the Respondent, the saleable area was mentioned as 75 sq. mt. The Respondent had not made any submission regarding different areas of a flat during the investigation. Those are the new facts submitted by the Respondent The saleable area mentioned in the home buyer list was considered for calculation of profiteering, the DGAP has taken the same area given by the Respondent in pre and post GST and thus no harm was caused to the Respondent. The Respondent has also not admitted that he had provided incorrect date earlier.

p. That the ITC relevant to taxable turnover has been considered for calculation of profiteering. In terms of Section 171 of the CGST Act, 2017, the provisions of Antiprofiteering was attracted as and when a Supplier did not extend the benefit of additional ITC accrued to him due to GST implementation. Thus, any such additional benefit, whether for the common area or individual area, were required to be extended the Recipients. Further, the demand/Charges taken by the Supplier also included the expenses on common. All demands where tax was being Charged was covered under the scope Anti profiteering if the criterion of Section 171 was fulfilled. Hence profiteering for common area has to be calculated as the Supplier has availed ITC on the same.

q. That the ITC available to the Respondent in pre-GST period (i.e. for the period from 2016-17 to June, 2017) was considered for calculation of profiteering. The credit available in TRAN-1 was nothing but closing balance of the ITC available to the Respondent as on 30.06.2017. The same could not be considered again. Further, the Respondent has not availed any Credit of VAT in the statutory returns for the period. Therefore, the contention of the Respondent was not acceptable.

r. That the profiteering has been calculated for the units sold before OC. The area, turnover as well as relevant ITC for the units sold post OC, has already been excluded from the profiteering calculation.

25. The proceedings in the matter could not be completed by the Authority due to lack of required quorum of Members in the Authority during the period 29.04.2021 till 23.02.2022, and that the minimum quorum was restored only w.e.f. 23.02.2022 and hence the matter was taken up for proceedings vide order dated 14.03.2022 and hearing in the matter through Video Conferencing was scheduled to be held on 29.03.2022 which was attended by the Applicant no. 1 and the Respondent. The Applicant No. 1 has also filed his submissions vide e-mail dated 30.03.2022 and has submitted copy of Sale Deed, Agreement for Sale, Allotment Letter, Index Copy and Invoice issued to him by the Respondent. The Respondent has filed his consolidated written submissions dated 6.04.2022, 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.

29. On this issue it has been reported by the DGAP as tabulated above 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 2.31% and during tie post-GST period (July-2017 to July-2020), it was 8.64%. Hence, according to the DGAP, post-CST. the Respondent has been benefited from additional ITC to the tune of 6.33% [8.64% (-) 2.31%] of his turnover and the same was required to be passed on to the Applicant No. 1 and the other flat buyers. Therefore, the amount of ITC benefit to be passed on to all the flat/shop buyers/customers is Rs. 4,52,79,754/-.

30. The Respondent has contended that while calculating the profiteered amount, the DGAP has not considered the CENVAT Credit of VAT amounting to Rs.69,49,098/- availed by him in his TRAN-1 Returns. The Respondent has also submitted a copy of the TRAN-1 Returns filed by him. With regard to the above contention, this Authority finds that while arriving at the ratio of CENVAT/ITC to Turnover Ratio, the CENVAT/ITC available to the Respondent in the pre-GST period has been considered by the DGAP. It is also evident from the Investigation Report of the DGAP that the Respondent did not avail any Credit of VAT in his monthly VAT Returns filed and thus, the Credit of VAT amount paid on purchase of inputs was not considered far the computation of ITC to Taxable Turnover Ratio for the pre-GST period. Further, the Respondent has not submitted any VAT Assessment Order vide which the VAT Authorities have confirmed that the above amount of ITC of VAT as claimed by him was correct and the Respondent was eligible to avail the same, upon perusal of the VAT Authority letter submitted by the Respondent, it is observed that the VAT Authority has mentioned that the Respondent has filed his TRAN-1 within due date and claimed Rs.69,49,098/- as ITC of VAT in his TRAN-I Return. The above Authority has no where claimed that the ITC of VAT claimed by the Respondent was correct and he was eligible for the same. Therefore. in view of above. it can be concluded that in the absence of any documentary proof i.e. VAT Return, VAT Assessment Order etc., the CENVAT Credit of VAT amounting to Rs. 69,49,098/- claimed by the Respondent in his TRAN-1 Returns cannot be considered while computing the ratio of CENVAT/ITC to Turnover in the pre-GST period. Hence, the above contention made by the Respondent cannot be accepted.

31. The Respondent has also argued that while calculating the profiteered amount, the DGAP has considered the Total Saleable Area as 19875 sq. mt. which was the Carpet Area of the project. However, as per the BU Certificate the Total Saleable Area of the project came out to be 39599.57 sq. mt. (Built-up area). Hence, for the purpose of calculation of profiteered amount, Built-up Area of 39599.57 sq. mt should have been considered in place of ‘Carpet Area’ of 19875 sq. mt. In this regard, this Authority finds that as per the home buyers list provided by the Respondent, size of each Flat was mentioned as 75 sq. mt. and the profiteering amount has been calculated based on the area as per the home buyers list provided by the Respondent Considering the figures of ‘Total Saleable Area’ and ‘Sold Area’ from the home buyers list is the standard mathematical practice adopted while calculating the benefit of additional ITC required to be passed on by any Construction Services provided to his customers/home buyers/recipients. Hence, if ‘Built-up Area’ is considered in place of ‘Carpet Area’, we would arrive at incorrect amount of profiteering. Hence, the above contention of the Respondent is not correct and cannot be accepted.

32. It has also been contended by the Respondent that the DGAP has adopted incorrect figures of Area Sold Relevant to Turnover in the pre and post GST period as 9.750 sq. mt and 16,275 sq, mt. respectively, whereas as per his calculations, it should have been 9,958 sq. mt. and 16.559 sq. mt. respectively. With respect to the above contention of the Respondent, we find that the DGAP has taken the figures of the Area Sold Relevant to Turnover’ from the data provided by the Respondent during the investigation. Hence, the same has been taken from the home buyers list provided by the Respondent. Any such claim regarding the incorrect figures of Area Sold Relevant to Turnover is an afterthought and cannot be considered. Hence, the above contention of the Respondent is not tenable.

33. The Respondent has argued that while calculating the profiteered amount, the Cess on Service Tax amounting to Rs.3,00,902/- has not been considered in the pre-GST period. With respect of the above contention, we find that in the pre-GST regime, CENVAT Credit of Krishi Kalyan Cess (KKC) could be utilised only towards payment of Krishi Kalyan Cess, if leviable, on taxable services provided. However, Swachh Bharat Cess (SBC) was not allowed as CENVAT Credit against the output service tax or SBC liability. Therefore, there was a clear demarcation of the credit in respect of both the Cesses (KKC & SBC) and it can be concluded that Tax and Cess are distinct levies. Further. the Hon’ble High Court of Delhi in the case of Cellular Operators Association of India has held that KKC could not be treated as Excise Duty or Service Tax. Therefore, both the above Cesses could not be carried forward under the GST-regime. Hence, the Cess on Service Tax could not be considered as Input Tax Credit and the same could not be considered while calculating the profiteered amount. Therefore, the contention of the Respondent being incorrect. cannot be accepted.

26. We have carefully considered all the submissions filed by the Applicant No. 1, the Respondent, and the other material placed on record and find that Applicant No. 1 had alleged that the Respondent was not passing on the benefit of ITC to him on purchase of the Flat, which he had purchased in the “Swati Florence” Project being executed by the Respondent in Ahmedabad. Gujarat by way of commensurate reduction in the prices after the implementation of the GST w.e.f. 01.07.2017. This complaint was examined by the Standing Committee and forwarded to the DGAP for investigation under Rule 129 (1) of the above Rules. The DGAP vide his Report dated 27.11.2020 had found that the Respondent had profiteered an amount of Rs.4,52,79,754/- by not passing on the ITC benefit to his buyers.

27. On examining the various submissions we find 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 that has to be passed on to the recipients?

28. We find that, Section 171 (1) of the CGST Act. 2017 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

34. The Respondent has also submitted his own calculations and arrived at profiteered amount of Rs.1,64,52,359/-. The above profiteered amount was arrived at by including the CENVAT/ITC of VAT amounting to Rs.69,49,098/- and considering the Build-up Area of 39,599.57 sq. mt. as the Total Saleable Area in place of the Area of 19,875 sq. mt. considered from the homebuyers list. In this regard, this Authority finds that the above profiteered amount calculated by the Respondent is incorrect as the inclusion of the CENVAT Credit of VAT amounting to Rs. 69,49,098/- is not possible as the Respondent has not produced any VAT Return/VAT Assessment Order evidencing that he was eligible to avail the above credit of VAT. Further, the exact quantum of profiteering cannot be computed by considering the Build-up Area in place of the Area from the homebuyers list. Hence, the calculations to arrive at profiteering amount carried out by the Respondent is not correct and cannot be accepted as discussed in paras above.

35. Hence, the Authority finds no reason to differ from the above detailed computation of profiteering in the DGAP’s Report or the methodology adopted. The DGAPs Report concludes that the ITC as a percentage of the turnover that was available to the Respondent for the project ‘Swati Florence’ during the pre-GST period (April-2016 to June-2017) was 2.31% and during the post-GST period (July-2017 to July-2020), it was 8.64%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 6.33% (8.64% – 2.31%) of his turnover and the same was required to be passed on to the customers/home buyers/recipients. Hence, as tabulated in Table ‘C’ above, the Authority determines the profiteered amount for the period from July-2017 to July-2020, in the instant case, as Rs.4,52,79,754/- and the same was required to be passed on by the Respondent to their customers/home buyers/recipients.

36. It is also evident from the Report of the DGAP that during the investigation, the Respondent has claimed that he has passed on benefit of ITC amounting to Rs.1,78,71,200/- to the customers/home buyers/recipients. To verify the claim of the Respondent, the DGAP sent e-mails to 177 customers/home buyers/recipients asking them to confirm whether they have received the benefit of ITC as claimed by the Respondent. Out of 177 customers/home buyers/recipients. only 36 customers/home buyers/recipients replied. Out of these 36 customers/home buyers/recipients, only 32 customers/home buyers/recipients confirmed the receipt of benefit of ITC from the Respondent. Hence, the verification of passing on the benefit of additional ITC done by the DGAP is not conclusive and it cannot be confirmed that the Respondent has passed on an amount of Rs.1,78,71,200/- to his customers/home buyers/recipients. Therefore. the profiteered amount required to be passed on to the customers/home buyers/recipients by the  Respondent is determined to be Rs.4,52,79,754/-.

37. Thus, the Authority finds that the Respondent has profiteered by an amount of Rs.4,52,79,754/- during the period of investigation i.e July-2017 to July-2020. The above amount that has been profiteered by the Respondent from his customers/home buyers/recipients in the above 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 refund/return/payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules 2017.

38. 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 customers/home buyers/recipients commensurate with the benefit of ITC received by him as has been detailed above.

39. The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs.4,52,79,754/-. Hence the Respondent is 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) (b) of the CGST Rules 2017.

40. We also order that the profiteering amount of Rs. 4,52,79,754/- along with the interest @ 18%. from the date of receiving of profiteered amount from the customers/home buyers/recipients till the date of passing the benefit of ITC/profiteered amount: 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.

41. The amount to be refunded to each customer/home buyer/recipient is as per Annexure A attached with this Order.

42. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to his customers/home buyers/recipients in contravention of the provisions of Section 171 (I) Of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. 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 July-2017 to July-2020, therefore, he is liable for imposition of penalty under the provisions of the above Section tor the amount profiteered from 01.01.2020 onwards, Accordingly, notice be issued to him.

43. 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 customers/home buyers/recipients as details provided above along with interest if not paid already. In this regard an advertisement of appropriate size to be visible to the public may also be published in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder (Respondent): Swati Realty, Project: Swati Florence. Location: Ahmedabad, Gujarat and Amount of Profiteering: Rs.4.52,79,754/-, so that the concerned customers/home buyers/recipients can claim the benefit of ITC, if not passed on, Customers/home buyers/recipients may also be informed that the detailed NAA Order is available on Authority’s website www.naa.gov.in, Contact details of concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement.

44. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of this order to this Authority and the DGAP within a period of 4 months from the date of receipt of this order.

45. Further, the Hon’ble Supreme Court, vide its Order dated 23.03.2020 in Suo Moto writ Petition (C) no. 3/2020, while taking suo-moto cognizance of the situation arising on account of Covid-19 pandemic, has extended the period of limitation prescribed under general law of limitation or any other special laws (both Central and State) including those prescribed under Rule 133(1) of the CGST Rules, 2017, as is clear from the said Order which states as follows:-

“A period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.”

Further, the Hon’ble Supreme Court, vide its subsequent order dated 10.01.2022 has extended the period(s) of limitation till 28.02.2022 and the relevant portion of the said order is as follows:-

“The Order dated 23.03.2020 is restored and in continuation of the subsequent Orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall excluded for the purposes of limitation as may be prescribed under any general of special laws in respect of all judicial or quasi-judicial proceedings. “

Accordingly this Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.

46. Copy of this order be sent, free of cost to the Applicant No. 1, the DGAP. the Respondent, Commissioners CGST/SGST Ahmedabad (Gujarat) and the Principal Secretary (Town and Country Planning), Government of Gujarat for necessary action. File be consigned after completion.

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