TaxTMI 
TaxTMI 
TaxTMI 
In one of the recent cases, In Re: Lifestyle International Pvt. Ltd. (2018) 9 TMI 1640 (NAA), National Anti-Profiteering Authority vide its order dated 25.09.2018 has confirmed Anti-profiteering charges on sale of goods and penalty imposed.
In the instant case, the applicant alleged that the respondent had not passed on the benefit of reduction in the rate of tax by lowering the price of ‘Maybelline FIT Me foundation’ (product), which she had purchased, when the Goods and Services Tax (GST) was reduced from 28% to 18% on this product on 15.11.2017. She had also alleged that she had bought the above product from the Respondent @ ₹ 525/- per unit vide tax invoice, which included GST @ 18%. She had also claimed that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against it.
The respondent contended that the label on the product showed Maximum Retail Price (MRP) of ₹ 550/- and the sale price of the product in the retail sale invoice was shown as ₹ 525/- and that he was not in a position to correlate the invoice with the MRP label as only a part of the MRP label was made available along with the application. The DGAP has further informed that the Respondent had also contended that it was evident that the MRP label of the product provided by the applicant was from the pre-GST stock which was imported in March, 2017 and hence, it did not factor the GST in its price. The Respondent had also stated that in respect of the external brands he was dependent on the respective brand owner and the MRP and the retail selling price should have been revised by the brand owners.
After the investigation, he had found that though the Respondent had no direct influence over the revision of MRP of external brands but still he was liable to revise his retail selling price as he had taken the benefit of Input Tax Credit (ITC) on the purchase of the product, therefore he was required to reduce the Retail Selling Price (RSP) to pass on the benefit of reduction in the rate of GST from 28% to 18% w.e.f. 15.11.2017 to his customers. It was also found by the DGAP that earlier the MRP of the product was ₹ 550/- which was revised to ₹ 575/- post 20.06.2017 and the RSP of the product was decided by the Respondent within the MRP which was printed on the back of the product.
The Authority observed and concluded that the Respondent had enhanced the basic price of both the shades of the product which was exactly equal to the amount by which the GST on them had been reduced and hence there is no doubt that the Respondent had resorted to profiteering amounting to ₹ 15,861/- which includes profiteering of ₹ 41/- made by him from the Applicant, which constitutes violation of the provisions of Section 171 of the above Act. It is also established that the Respondent had issued incorrect invoices while selling the product to his customers as he had not correctly shown the basic price which he should have legally charged from them which is an offence under Section 122 (1) (i) of the CGST Act, 2017 and hence he is liable for imposition of penalty under the above Section. Rule 133 (3) (d) of the CGST Rules, 2017 also makes it clear that the penalty has to be imposed as per the provisions of the Act and since it is proposed to impose penalty under the Act, there is no question of creating substantive liability under the Rules as there is specific sanction under the above Act to impose penalty. Similarly, the CGST Act, 2017 also provides for imposition of interest under the Act and therefore, the same can be levied in the present proceedings. The Respondent cannot claim that since the amount of profiteering was miniscule no penalty should be imposed as each breach of the law has to be visited penalty.
Accordingly, the Respondent was directed to reduce the price of both the shades of the product to ₹ 410/- and ₹ 449/- respectively excluding GST. He was also directed to refund an amount of ₹ 41/- along with interest @ 18% to the Applicant No. 1 from the date when this amount was realised by him from her till the date of refund. Since rest of the recipients were not identifiable, the DGAP was directed to get the balance amount of profiteering of ₹ 15,820/- deposited in the Consumer Welfare Fund of the Central and the Concerned State Govt. as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 along with interest @ 18% till the amount is paid. Any amount ordered to be refunded or to be deposited shall be refunded or deposited within a period of 3 months by the Respondent from the date of receipt of this order failing which the same shall be recovered by the DGAP as per the provisions of the CGST Act, 2017 and shall be refunded or deposited.
The notice was also directed to be issued to show cause as to why penalty should not be imposed.