2025 (10) TMI 1114 - AT - GST

Authority accepts DGAP report: no contravention of Section 171(1) CGST; complaint dismissed after multiple probes

GSTAT (AT) New Delhi accepted DGAP's report dated 23.05.2025, concluding the respondent did not contravene section 171(1) of the CGST Act by failing to ... Profiteering - Respondent has not passed the commensurate benefit of the Reduction of tax rate to Recipient - HELD THAT:- It is apparent that the investigation was conducted by the DGAP on several occasions under the direction of the higher authorities. On the basis of investigation, the DGAP arrived at the conclusion that the Respondent has not contravened with any provisions as contained under section 171(1) of the CGST, Act, 2017. Therefore, the report of the DGAP dated 23.05.2025 deserves to be accepted. The report submitted by DGAP dated 23.05.2025 is accordingly accepted. ISSUES PRESENTED AND CONSIDERED 1. Whether the Respondent contravened the provisions of Section 171(1) of the CGST Act, 2017 by not passing on the commensurate benefit of the reduction in tax rate effective 15.11.2017. 2. Whether the Respondent reduced, re-fixed and displayed the MRPs of the impacted SKUs commensurately w.e.f. 15.11.2017 and conveyed such reduction to its dealers (distributors/wholesalers/retailers). 3. Whether the Respondent affixed stickers, stamped or online-printed reduced MRPs on stock lying with it or its dealers as on 15.11.2017 so as to pass on the benefit of tax reduction. 4. Whether the Respondent continued to charge 18% GST on the impacted SKUs after the rate reduction of 15.11.2017. 5. On what grounds the Respondent increased the base price of its products in November 2017 immediately after the tax reduction and whether such increase was attributable to increase in crude oil prices (including what evidence, if any, supports such claim). 6. Whether, having regard to the above, there was a quantifiable contravention amount (quantum of profiteering) and, if so, its computation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Contravention of Section 171(1) CGST Act, 2017 (overall question) Legal framework: Section 171(1) CGST Act, 2017 imposes an obligation on suppliers to pass on the benefit of reduction in rate of tax to recipients by way of commensurate reduction in prices. Precedent treatment: The matter was re-opened for re-investigation in light of a judgment of the High Court (Writ Petition (C) No. 7743/2019 dated 29.01.2024), and the CCI directed re-investigation accordingly; the Tribunal notes those directions and ensuing actions. Interpretation and reasoning: Multiple independent investigations were conducted by the DGAP (initial report dated 15.12.2021, remand investigation resulting in report dated 27.01.2023, re-investigation after CCI direction, and final report dated 23.05.2025). On each occasion, the DGAP concluded there was no contravention of Section 171(1). The Tribunal examined the record and the DGAP's repeated findings and found no material to displace the consistent investigative conclusion. Ratio vs. Obiter: The Tribunal's acceptance of the DGAP's repeated investigative conclusion that there was no contravention is ratio decidendi for the disposal of the reference before it; the observation that multiple reinvestigations were conducted under higher authority directions and still yielded the same conclusion is dispositive rather than obiter. Conclusion: The Tribunal accepts the DGAP's report and concludes there was no contravention of Section 171(1) by the Respondent. Issues 2-4 - Reduction/refixing/displaying MRPs; affixing reduced MRPs on stock; charging of GST post rate-change Legal framework: Obligation to reflect commensurate reduction in price and make it known through MRP adjustments, markings on existing stock (stickers/stamps/online printing), and through invoicing practices consistent with the reduced rate. Precedent treatment: These specific factual inquiries were remitted by the NAA to DGAP for detailed fact-finding; the DGAP's scope included checking MRP displays, communication to dealers, physical marking of stock and taxation charged post rate change. Interpretation and reasoning: The DGAP's investigations addressed whether MRPs were reduced/re-fixed and displayed, whether reduced MRPs were affixed to stock, and whether post-15.11.2017 sales bore a reduced GST incidence. After examining records and dealer interactions across successive inquiries, DGAP concluded no failure to pass benefit in these respects. The Tribunal reviewed the DGAP's reports and found no contrary material warranting a different conclusion. Ratio vs. Obiter: The finding that evidence did not establish failure to reduce MRPs or to mark stock and that GST was not improperly charged is part of the operative reasoning (ratio) sustaining acceptance of the DGAP report. Conclusion: On the factual matrix investigated, the Tribunal accepts that MRPs and dealer communication practices did not amount to a breach of Section 171(1), and there is no established practice of charging 18% GST on impacted SKUs after the rate reduction that would constitute contravention. Issue 5 - Alleged base-price increase and crude oil cost justification Legal framework: Suppliers may adjust base prices for legitimate cost increases, but such increases proximate to a tax-rate reduction may attract scrutiny to determine whether price hikes negate the benefit of tax reduction. Precedent treatment: NAA had specifically directed enquiry into grounds for base-price increase in November 2017 and evidence regarding crude oil price movements relied upon to justify increases; DGAP's remand reports addressed these points. Interpretation and reasoning: DGAP examined the Respondent's asserted rationale (increase in crude oil prices) and the evidence relied upon. The DGAP repeatedly determined that the available evidence did not demonstrate contravention of Section 171(1). The Tribunal, having perused the investigation records and reports, found no material to displace DGAP's conclusion that price changes were not a proximate contravention of the statutory obligation to pass on tax-rate reduction benefits. Ratio vs. Obiter: The Tribunal's acceptance that the Respondent's base-price adjustments, as supported by the investigative record, do not establish unlawful profiteering is part of the court's operative conclusion. Conclusion: The DGAP's finding that claimed cost increases (including crude oil-related claims) do not establish contravention is accepted; no quantum of profiteering is made out on that basis. Issue 6 - Quantum of profiteering Legal framework: If contravention under Section 171(1) is established, DGAP/NAA/Tribunal must quantify the profiteering amount and prescribe remedial measures per statutory scheme. Precedent treatment: DGAP repeatedly investigated and did not find a contravention; therefore, quantification was not undertaken as a requisite remedial step. Interpretation and reasoning: Because the factual and evidentiary inquiries concluded absence of contravention on multiple investigations (including re-investigation per CCI direction and final DGAP report of 23.05.2025), there is no basis to compute or impose any quantum of profiteering. Ratio vs. Obiter: The conclusion that no quantum is payable flows directly from the primary finding of no contravention and is a ratio of disposition. Conclusion: No quantum of profiteering is established or imposed. Disposition and Administrative Direction Interpretation and reasoning: Given repeated investigations under higher authorities and consistent findings of no contravention, the Tribunal accepts the DGAP report dated 23.05.2025 and disposes of the reference accordingly. Conclusion: The DGAP report is accepted; the matter is closed with directions to send a copy of the order to the Respondent and concerned Commissionerate for any action as may be necessary. The Tribunal's acceptance of the investigative conclusion is final for the proceedings before it.