2026 (1) TMI 1556 - AT - GST

GST profiteering pass-through of reduced tax rate upheld; profiteered amount recoverable and deposit to consumer welfare fund

Anti-profiteering review addressed the obligation to pass on reduced GST rates and input tax credit by commensurate price reduction; the Average-to-Actual ... Profiteering - Validity of Section 171 - Pass on benefit of reduced tax rate and Input Tax Credit by commensurate reduction of price - Methodology for computation of profiteering Average-to-Actual (weighted average base price compared with actual invoice-wise sale price) - Limitation of timelines for DGAP report is directory not mandatory - Rebuttable presumption that tax rate reduction ought to result in price reduction - HELD THAT:- The Notices was issued to the Respondent to file their written submissions. The Learned Counsel for the Respondent would submit that the order passed by the NAA for re-investigation is barred by limitation however, we are of the opinion that as the remand was an open remand without any specific restriction on the NAA or NAPA or the authority exercising Anti-Profiteering Jurisdiction. Quasi-Judicial Order passed by the preceding Authority to the DGAP for clarification will not attract limitation and it cannot said that the proceedings are barred by the limitation. Once, it is held that there is a profiteering by the traders of goods and services and consumer has paid a higher price because of the fact of non-passing of the benefit of reduction of the tax, in the ultimate analyses the faceless consumer has definitely paid GST on the differential amount (higher) which have been collected by the Respondent and deposited in the Exchequer. However, this amount has to be returned to the consumer, if identified, or, in the case of unidentifiable consumer, the same needs to be deposited in Consumer Welfare fund(s). Deposit of the GST collected by the retailer (paid by the consumer) is immaterial as the benefit is not passed on to the Consumer and he paid a higher price. In that view of the matter, we find no illegality in the fact that the profiteered amount should be charged with a applicable rate of GST and same should be borne by the Respondent concerned. It is settled principal of law that initial presumption, as arising in this case is rebuttable presumption but such presumption can be rebutted only by cogent, unambiguous and clear materials or evidences to show that after reduction of the rate of GST from 28% to 18%, there was some cogent reasons to show that there was play of market forces which led the Respondent no. 1 to keep the MRP unchanged. So, this contention raised by the Respondent is of no substance. The pendency of the case challenging the constitutional validity of Section 171 before the Supreme Court by itself will not in the absence of the order of Stay would anyway affect the jurisdiction of the Tribunal to decide the case of alleged profiteering. Moreover, the Hon’ble High Court of Delhi in the case of Reckitt Benckiser India (P.) Ltd. [2024 (1) TMI 1248 - DELHI HIGH COURT] has upheld the validity of the relevant provisions. In result, we come to the conclusion the DGAP has established by preponderance of probability and evidences that Respondent no. 1 has profiteered an amount of Rs. 19,32,446/- which needs be recovered from the Respondent No. 1. Since, in this case the applicant is faceless, the said profiteering amount shall be deposited in the Consumer Welfare Fund(s). As per our earlier judgment because of the date of amendment regarding imposition of interest and penalty are after the period of alleged profiteering by the Respondent No. 1. In that view of the matter, we are not inclined to impose any interest or penalty on the profiteered amount as calculated by the DGAP against Respondent no. 1. Issues: (i) Whether Section 171 of the CGST Act contains machinery/methodology for determining the profiteered amount; (ii) Whether absence of a prescribed methodology renders Section 171 unenforceable; (iii) Whether the investigation/report was barred by limitation and whether delay in filing the Standing Committee report could be condoned; (iv) Whether DGAP erred in comparing weighted average base price with actual sale price (method of calculation); (v) Whether the respondent had profiteered and the quantum of profiteering.Issue (i): Whether Section 171 of the CGST Act contains machinery/methodology for determining the profiteered amount.Analysis: The Tribunal considered precedent (Delhi High Court in Reckitt Benckiser) and the statutory framework including Rules under the CGST Rules. It examined whether the Act and Rules furnish sufficient procedural/machinery provisions to enable calculation of profiteering and noted the role of rules and DGAP methodology adopted in prior cases.Conclusion: Section 171 together with the CGST Rules provides adequate machinery to determine profiteering and to enable enforcement of the pass-on obligation.Issue (ii): Whether absence of a prescribed methodology renders Section 171 unenforceable.Analysis: The Tribunal relied on authority establishing that no single uniform formula applies across industries; rules and established methodologies (as applied by DGAP and upheld in precedent) suffice. It noted that beneficial consumer-protective provisions should receive liberal construction and that procedural timelines in Rules are directory.Conclusion: The absence of a single prescribed formula does not make Section 171 unenforceable; the provision remains operative and enforceable.Issue (iii): Whether the investigation/report was barred by limitation and whether delay in filing the Standing Committee report could be condoned.Analysis: The Tribunal examined the timing of DGAP reports, the remand by the High Court, and precedent confirming that time-limits in the Rules are directory where no prejudice arises. It noted that the remand was open and that clarification/re-investigation did not attract a bar by limitation in the circumstances.Conclusion: The proceedings and re-investigation are not barred by limitation; delay in filing the report is not a bar to continuation of the proceedings in the facts of this case.Issue (iv): Whether DGAP erred in comparing weighted average base price with actual sale price (method of calculation).Analysis: The Tribunal considered the Average-to-Actual methodology used by DGAP, earlier authority validating such approaches in similar contexts, and the contentions about party-wise or weighted-to-weighted comparisons. It also addressed allegations of clerical duplication and the rectification undertaken by DGAP on remand.Conclusion: The Average-to-Actual methodology as applied is not fatally flawed in law; DGAP's method is acceptable and methodological corrections for clerical duplication were properly made.Issue (v): Whether the respondent had profiteered and the quantum of profiteering.Analysis: On review of DGAP's revised calculations post-remand and correction of duplicate entries, the Tribunal assessed the evidential record and applicable rules on calculation, inclusion of GST in amounts to be returned/deposited, and the requirement to pass on benefits to final consumers or deposit unidentifiable amounts in Consumer Welfare Funds.Conclusion: The Tribunal found, on preponderance of evidence, that profiteering occurred and accepted the revised quantified amount to be recovered and deposited to Consumer Welfare Fund(s).Final Conclusion: The Tribunal upheld the enforceability of Section 171 and related Rules, validated DGAP's methodology subject to correction of clerical errors, rejected limitation and methodological challenges, and directed recovery and deposit of the determined profiteered sum into Consumer Welfare Fund(s).Ratio Decidendi: Section 171 of the CGST Act, read with the CGST Rules, furnishes sufficient procedural machinery to enforce the statutory obligation to pass on benefits of tax-rate reductions; where methodologies vary by industry, Average-to-Actual calculations by DGAP are permissible and time-limits in the Rules are directory absent prejudice.