GST rate reduction must be passed on through lower prices; cinema ticket profiteering confirmed, with prospective interest and no penalty.

A reduction in GST rate on cinema admission tickets had to be passed on to consumers through commensurate price reduction under section 171(1) of the CGST Act; increasing the base ticket price while keeping the cum-tax price unchanged amounted to profiteering. Conditional state court permission to propose fares did not override the statutory anti-profiteering duty. The profiteering computation was accepted on the record, proceedings were properly decided ex parte, interest at 18% per annum applied prospectively from 28.06.2019, and penalty was not leviable because the penal provision came into force later.

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Issues: (i) Whether the Respondent failed to pass on the benefit of reduction in GST rate on cinema admission tickets from 18% to 12% by commensurate reduction in prices; (ii) Whether the increase in base ticket prices pursuant to the Telangana High Court order could justify non-passing of the tax benefit; (iii) Whether the DGAP's computation of profiteering at Rs. 9,67,589/- was correct; (iv) Whether the proceedings were liable to be adjudicated ex parte on the basis of material on record; (v) Whether interest was payable on the profiteered amount and from what date; (vi) Whether penalty under Section 171(3A) of the CGST Act, 2017 was leviable.

Issue (i): Whether the Respondent failed to pass on the benefit of reduction in GST rate on cinema admission tickets from 18% to 12% by commensurate reduction in prices.

Analysis: Section 171(1) of the CGST Act, 2017 required any reduction in tax rate to be passed on to the recipient by way of commensurate reduction in prices. The record showed that after the rate reduction with effect from 01.01.2019, the Respondent increased the base price of tickets and kept the cum-tax price unchanged, so the benefit of the reduced tax rate was not passed on to consumers.

Conclusion: The Respondent failed to pass on the benefit of reduction in GST rate and was held to have profiteered.

Issue (ii): Whether the increase in base ticket prices pursuant to the Telangana High Court order could justify non-passing of the tax benefit.

Analysis: The liberty granted by the High Court to collect proposed fares was conditional and did not override the statutory mandate under Section 171 of the CGST Act, 2017. The regulatory power of the State over ticket pricing did not dilute the obligation to pass on the GST benefit to recipients.

Conclusion: The High Court order did not justify non-passing of the benefit, and the defence was rejected.

Issue (iii): Whether the DGAP's computation of profiteering at Rs. 9,67,589/- was correct.

Analysis: The profiteering was computed on the increase in base price and included the GST collected on the additional realization. The amount of base profiteering and the corresponding GST component were accepted as properly worked out on the available material.

Conclusion: The DGAP's computation was accepted and the profiteered amount was determined at Rs. 9,67,589/-.

Issue (iv): Whether the proceedings were liable to be adjudicated ex parte on the basis of material on record.

Analysis: Despite repeated notices, confirmed service, and multiple opportunities, the Respondent neither appeared nor filed written submissions. The proceedings were therefore taken up on the basis of the material available on record, and the principles of natural justice were treated as satisfied.

Conclusion: The matter was rightly adjudicated ex parte.

Issue (v): Whether interest was payable on the profiteered amount and from what date.

Analysis: Rule 133(3)(c) of the CGST Rules, 2017 was inserted with effect from 28.06.2019. Since the profiteering period extended from 01.01.2019 to 30.09.2019, interest could operate only prospectively from the date the rule came into force.

Conclusion: Interest was payable at 18% per annum from 28.06.2019 till the date of actual refund or deposit.

Issue (vi): Whether penalty under Section 171(3A) of the CGST Act, 2017 was leviable.

Analysis: The penal provision under Section 171(3A) came into force on 01.01.2020, whereas the alleged profiteering related to a prior period. A penal provision cannot be applied retrospectively in the absence of express legislative intent.

Conclusion: Penalty was not leviable.

Final Conclusion: The Respondent was held to have profiteered by not passing on the GST rate reduction benefit, and was directed to return the profiteered amount with interest, but no penalty was imposed.

Ratio Decidendi: Any reduction in GST rate must be passed on to consumers by commensurate reduction in price, and conditional permission under state cinema regulation cannot override this statutory anti-profiteering obligation; interest follows prospectively from the date the applicable interest provision comes into force, while penalty provisions operate only prospectively unless expressly made retrospective.

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