The National Anti-Profiteering Authority and the Competition Commission of India (CCI) held that the penalty for anti-profiteering cannot be imposed retrospectively even though the denial of Goods and Service Tax ( GST) reduction benefit is in contravention of provisions of Section 171 (1) of the CGST Act, 2017.
A complaint filed under Rule 128 of the Central Goods and Service Tax (CGST) Rules, 2017, accused MICL Realty LLP of not passing on the Input Tax Credit (ITC) benefits to a homebuyer.
The investigation, triggered by a complaint from a homebuyer, focused on MICL Realty LLP’s project “Aaradhya Nine-Ghatkopar Avenue” in Mumbai. The complainant alleged that despite assurances of ITC benefits, MICL Realty LLP did not reduce the property price accordingly.
The Director General of Anti-Profiteering (DGAP) conducted a thorough examination, considering the period from 01.07.2017 to 03.12.2019. The company argued that it had passed on the benefit of ITC amounting to Rs. 94,83,735/- to 48 homebuyers, as confirmed by bank statements and customer acknowledgements.
Section 17 (3) “The value of exempted supply under sub-section (2) shall be such as might be prescribed and shall include supplies on which the recipient was liable to pay tax on a reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building”. Therefore, the ITC pertaining to the unsold units might not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling prices of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST.
However, post-GST, the Respondent could avail ITC of GST paid on all the Inputs and the Input Services including the sub-contracts. It was evident that based on the aforesaid CENVAT/Input Tax Credit availability in the pre and post-GST periods and the details of the amount raised/collected by the Respondent from the Complainant and other home buyers during the period 01.07.2017 to 03.12.2019, the Respondent had benefited by an additional amount of Input Tax Credit, by an amount of Rs. 6,43,756/- which included applicable GST (12% or 8%) on the base amount of Rs. 5,79,349/-.
The DGAP had concluded the investigation stating that the Respondent had passed on the benefit of Rs. 94,83,735/- by issuing cheques to 48 home buyers against the demand raised during the period from 01.07.2017 to 03.12.2019. The Respondent had submitted copies of the Bank Statements along with copies of signed customer confirmation letters for receipt of cheques from all the home buyers vide his submissions dated 31.08.2021 vide which he had passed on the benefit of ITC and the same were duly verified by DGAP with the list of home buyers and found to be correct.
The Respondent also submitted sample copies of signed confirmations given by customers acknowledging that the agreed prices between the Respondent and them were after giving effect to such benefit by/adherence inter alia to the provisions of Section 171 of the Central Goods & Service Tax Act, 2017.
Further, no home buyer denied to have received the benefit of the ITC passed on by the Respondent. The DGAP had further submitted that on examination of all the documentary evidence and after getting confirmations from the buyers and the Bank, it appeared that in some cases, the Respondent has passed on the benefit of ITC more than the required commensurate benefit whereas in some cases, the benefit of ITC passed on was less than the required commensurate benefit. A summary of category-wise ITC benefits required to be passed on and the benefit
The said profiteered amount is to be passed on to the eligible home buyers along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment made as per the detailed furnished by the DGAP vide Annexure- 21 of his report dated 29.10.2021.
It was evident from the above narration of facts that Respondent has denied the benefit of Input Tax Credit (ITC) to the customers/shop buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section.
The CCI viewed that “However since the provisions of Section 171 (3A) have come into force w.e.f. 01.01.2020 whereas the period during which the violation has occurred is w.e.f. 01.07.2017 to 03.12.2019, hence the penalty prescribed under the above Section cannot be imposed on the Respondent retrospectively. “
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