NAA confirms profiteering against Shapoorji Palonji (M/s Relationship Properties Pvt Ltd) and directs it to pass ITC benefit of Rs. 3 Cr to home buyers.

Penalty could not be imposed by NAA becuase of non-existence of penalty provision before 01.01.2020.

The brief facts of the case are that an application was filed before the Karnataka State Screening Committee on Anti-profiteering by the Applicant No. 1, alleging profiteering by the Respondent in respect of purchase of Apartment No. Emerald-002 in the Respondent’s project PARKWEST-EMERALD. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him, on implementation of the GST w.e.f. 01.07.2017, in terms of Section 171 (1) of the CGST Act, 2017.

The Respondent has availed benefit of ITC of 3.62% of the total turnover in respect of the project PARKWEST-MAPLE during the period from July, 2017 to April, 2019 which he was required to pass on to the flat buyers of the above project which he has failed to do and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent and thus an amount of ₹ 3,03,94,113/- inclusive of GST @ 12% on the base amount of ₹ 2,71,37,601/- is determined as the profiteered amount as per the provisions of Section 171 (2) and Rule 133 (1). Further, the Respondent has realized an additional amount of ₹ 74,929/- which includes both the profiteered amount © 3.62% of the taxable amount (base price) of ₹ 66,900/- and 12% GST on the said profiteered amount from the Applicant No. 2. The details of the profiteered amount and buyers of the above project have been mentioned by the DGAP in Annexure-22 of his Report dated 31.01.2020. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on the amounts of ₹ 3,03,19,184/- and ₹ 74,929/- to the other flat buyers and the Applicant No. 2 respectively along with the interest @ 18% per annum in terms of Section 171 (1) read with Rule 133(3)(c) of the above Rules from the dates from which the above amounts were collected by him from them till the payment is made within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-22 attached with the Report dated 31.01.2020.

Accordingly, 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 flats of the above projects commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 30.04.2019 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. In case the above benefit is not passed on by the Respondent the above Applicants or any other buyer shall be at liberty to approach the Karnataka State Screening Committee to initiate fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017.

It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above projects in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171(1) during the period from 01.07.2017 to 30.04.2019 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. However, perusal of the provisions of Section 171(3A) under which penalty has been prescribed for the above violation shows that Section 171(3A) has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.04.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent.

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