2022 (5) TMI 736 - NAPA - GST

Cinema operator must refund Rs. 12,06,750 for not reducing ticket prices after GST rate cut under section 171

NAPA found cinema operator contravened section 171 of CGST Act by failing to reduce ticket prices commensurate with GST rate reduction from January 2019 ... Profiteering - supply of “Services by way of admission to exhibition of cinematography films” - allegation is that the Respondent did not pass on the benefit of reduction in the GST rate - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is evident that the Respondent did not reduce the base prices of five categories of tickets in commensurate manner for the period from 01.01.2019 to 18.07.2019 and four categories for the period from 19.07.2019 to 31.01.2020 and has contravened the provisions of section 171 of the CGST Act. This Authority determines the profiteered amount as Rs. 9,74,638/- and Rs.2,32,112/- for the period 01.01.2019 to 18.07.2019 and 19.07.2019 to 31.01.2020 respectively. Therefore, the total amount of profiteering covering the period of 01.01.2019 to 31.01.2020 is determined as Rs.12,06,750/- The Authority determines the total amount of profiteering as Rs. 12,06,750/- as per the provisions of Rule 133 (1) of the above Rules - Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of Rs. 12,06,750/- in the Consumer Welfare Fund of the Central and the State Government in the ratio of 50:50, as per the provisions of Rule 133 (3) (c) of the above Rules along with 18% interest payable from the dates from which the above amount was realised by the Respondent from his recipients till the date of its deposit. The above amount shall be deposited within a period of 3 months from the date of passing of this Order failing which it shall be recovered by the concerned Commissioners CGST/SGST. Penalty - HELD THAT:- As the Respondent has committed an offence for violation of the provisions of Section 171 (1) during the period from 01.01.2019 to 31.01.2020 therefore, he is apparently liable for imposition of penalty under the provisions of Section 171 (3A) of the Act. These provisions came into effect from 01.01.2020 i.e penalty equivalent to ten per cent. of the profiteered amount will be imposed upon him for the amount collected after 01.01.2020. However, no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. This Order falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. Application disposed off. Issues Involved:1. Allegation of profiteering by not passing on GST rate reduction benefits.2. Investigation and findings by the Director General of Anti-Profiteering (DGAP).3. Respondent's defense and submissions.4. Determination of profiteered amount and directions for deposit.5. Imposition of penalty and monitoring of compliance.Issue-wise Detailed Analysis:1. Allegation of Profiteering:The Applicant No. 1 alleged that the Respondent did not pass on the benefit of the GST rate reduction on movie admission tickets from 28% to 18% and from 18% to 12% effective from 01.01.2019. Instead, the Respondent increased the base price to maintain the same cum-tax selling price.2. Investigation and Findings by DGAP:- The DGAP conducted a detailed investigation and found that the Respondent did not pass on the GST rate reduction benefits to the recipients by way of commensurate reduction in prices.- The investigation covered the period from 01.01.2019 to 31.01.2020. The DGAP observed that the Respondent increased the base prices of tickets in various categories, resulting in profiteering.- The DGAP's report included detailed tables (Table-A, Table-B, Table-C, and Table-D) illustrating the increased base prices and the resultant profiteering amounts.3. Respondent's Defense and Submissions:- The Respondent submitted that the Anti-profiteering Authority was constituted to check profiteering due to the advent of GST and not for subsequent rate reductions.- The Respondent claimed that the entire profiteering amount was not solely his share and had been distributed among others.- Despite disagreeing with the DGAP's findings, the Respondent agreed to deposit the alleged profiteered amount to avoid litigation and requested to pay it in installments without interest due to financial difficulties caused by the COVID-19 pandemic.4. Determination of Profiteered Amount and Directions for Deposit:- The Authority determined that the Respondent did not reduce the base prices of tickets commensurately for the periods from 01.01.2019 to 18.07.2019 and from 19.07.2019 to 31.01.2020.- The total profiteered amount was calculated as Rs. 12,06,750/-.- The Respondent was directed to deposit the profiteered amount in the Consumer Welfare Fund of the Central and State Governments in the ratio of 50:50 along with 18% interest from the date of realization till the date of deposit, within three months from the date of the order.5. Imposition of Penalty and Monitoring of Compliance:- The Authority noted that the Respondent committed an offense under Section 171(1) of the CGST Act, 2017, and was liable for a penalty under Section 171(3A) for the amount collected after 01.01.2020.- The Authority directed the concerned Commissioners of CGST/SGST to monitor the compliance of the order and ensure the deposit of the profiteered amount in the Consumer Welfare Funds.- A compliance report was to be submitted within four months from the date of receipt of the order.Conclusion:The Authority concluded that the Respondent did not pass on the GST rate reduction benefits to the recipients, resulting in profiteering. The total profiteered amount was determined as Rs. 12,06,750/-, which the Respondent was directed to deposit along with interest. The Respondent was also held liable for a penalty for the amount collected after 01.01.2020. The concerned authorities were instructed to monitor compliance and submit a report.