TaxTMI 
TaxTMI 
2018 (12) TMI 473
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....e GST rate applicable on the Chocolates had been reduced from 28% to 18% w.e.f. 15.11.2017, the Respondent had not reduced the prices of 2 products viz. the Nestle Munch Nuts 32 Gm. Chocolate and the Cadbury Dairy Milk Chocolate (here-in-after referred to as the products) and had thus not passed on the benefit of such rate reduction to him. He had also submitted the pre rate reduction invoice No. 299238 dated 10.11.2017 and the post rate reduction invoice No. 311392 dated 16.11.2017 which showed that both the above products were sold by the Respondent @ Rs. 20/- per piece and Rs. 40/- per piece respectively before and after the rate of tax was reduced on them. Thus it had been alleged by the above Applicant that the Respondent had indulged in profiteering in contravention of Section 171 of CGST Act, 2017 and action should be taken against him. The above application was examined by theStanding Committee on Anti-Profiteering and was referred to the DGAP, vide minutes of it's meeting dated 20.12.2017 for detailed investigations under Rule 129 (1) of the CGST Rules, 2017. 2. The DGAP had called upon the Respondent to submit his reply on the above allegation and also asked him to....
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....y Dairy Milk Chocolate 27.90 31.25 12.00% 30.27 33.90 12.00% 3. The DGAP's Report has submitted that the Respondent had also filed Purchase & Sale invoices from November 2017 to March 2018, copies of the GSTR-3B from November, 2017 to March, 2018 along with copies of GSTR-I from November, 2017 to February, 2018 but did not provide the details of the invoice-wise outward supplies. The DGAP after examining the facts of the case has reported that vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 the o rate of tax on Chocolates was reduced from 28% to 18% w.e.f. from 15.11.2017. The Report also mentioned that from the sale invoices of the Distributor of Cadbury Chocolates viz. M/s. Chandna Trading Company (here-in-after referred to as M/S CTC) for the period from November 2017 to March 2018 it was revealed that he had given discount to the Respondent on the base price categorically mentioning that the "Anti- Profiteering provisions under GST Act require that you pass on the benefits of GST rate reduction given to you; to the consumers". Similarly the Distributor of Nestle Chocolates viz. M/S Navin Enterprises (here-in-after referred to as M/S NE....
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....Gm. and 4646 units of Cadbury Dairy Milk Chocolate during the period between 15.11.2017 to 31.03.2018. He has also reported that the Respondent had failed to supply the details of the invoices of the outward supplies pertaining to the above period and hence he had presumed that the above quantity of the Chocolates was sold by him during the period between 15.11.2017 to 31.03.2018. The DGAP had therefore, concluded that the Respondent had resorted to profiteering of Rs. 15,958/- as per the details given in the table below. He has also reported that the Respondent had profiteered an amount of Rs. 4.69 from the Applicant No. 1 vide invoice date 16.11.2017 while selling two units of the above products to him. Product MRP (Rs.) Before 14.11.2017 (Rs.) 15.11.2017 to 31.03.2018 (Rs.) Profiteering per unit (Rs.) Total profiteering in Rs. Amount charged Base price GST GST rate Amount charged Base price GST GST rate Unit sold Nestle Munch Nuts 32 Gm. 20 20 15.63 28 20 16.95 18 910 1.56 1416 Cadbury Dairy Milk Chocolate 40 20 31.25 28 40 33.90 18 4646 3.13 14542 ....
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....quoted the case of Dinesh Mohan Bhardwaj v. Vrandavaneshwree Automotive (P) Ltd. (2018) 67 GST 429/92 taxmann.com 360 = 2018 (4) TMI 1377 - THE NATIONAL ANTI-PROFITEERING AUTHORITY (NAA) decided by this Authority on 27.03.2018 stating that the entire scheme of GST was ITC based i.e. the recipient of the goods and services took credit of the GST paid by him on the purchase of goods and services and used such ITC while discharging GST output tax liability on supply of goods and services and since no additional ITC was available to him he was bound to enhance the base prices of the above products. 7. The Respondent has also claimed that he had purchased Cadbury Dairy Milk Chocolates from M/S CTC at the base price of Rs. 27.90 per unit before15.11.2017 and at the base price Rs. 30.27 per unit after 15.11.2017. He has further claimed that since the Distributor had increased the basic purchase price, he was also forced to increase his basic sale price however, he had not increased his profit margin. The Respondent has also pleaded that M/S CTC through it's sale invoices issued to him on different dates during the pre and post GST period was giving him quantity discounts through va....
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....uts 32 Gm. bars calculated as a difference between the actual MRP and the ideal MRP (Rs. 20 - 18.44) was wrong as the profit if any should be calculated on the increase in the base price i.e. Rs. 1.32 per unit (Rs. 16.95 - Rs. 15.63). The Respondent has further stated that the assessment of profit of Rs. 3.13 per unit in the case of Cadbury Dairy Milk Chocolate as a difference between the actual MRP and the ideal MRP (Rs. 40 - Rs. 36.87) was also incorrect as the amount of profit if any should be calculated on the increase in the base price i.e. Rs. 2.65 per unit (Rs. 33.90 - 31.25). He has also claimed that the amount of profiteering shown by the DGAP in para 15 of the Report was wrong as he had purchased 944 units of Nestle Munch Nuts 32 Gm. and 4515 units of Cadbury Dairy Milk Chocolate during the period between 15.11.2017 to 31.03.2018. 10. The above submissions filed by the Respondent were forwarded to the DGAP who vide his reply dated 16th August 2018 has stated that the Respondent was a supplier who was registered vide GSTIN 06AABCH2910GIZ3 and the Applicant No. 1 had alleged that he had not passed the benefit of tax reduction to him. He has also stated that the Responden....
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....acturers viz. M/S Mondelez India Foods Private Ltd (Cadbury) & M/S Nestle Limited India respectively and they couldn't make any change in them expect that of quantity. They also claimed that the GST rate reduction benefits were passed on by them to the Respondent in the form of discounts which had also been reflected in their invoices. Additionally M/S CTC vide his written submissions dated 30.08.2017 contended that the sale invoicing of the products was done through the Company billing software and all the rates & reductions were decided through the Company server system and he could not add/alter/delete any rates/discounts in the Company's billing software. He further submitted that the above Company had provided him discount on his closing stock as on 15.11.2017 and after getting the same in the billing software, he had passed it on to his respective retailers on the directions of the Company and he being the sale Distributor had got only the profit margin on the sales which had remained same during the pre and post period of 15.11.2017. M/S NE vide his written submissions dated 08.09.2018 reiterated the points already submitted by M/S CTC. They had also submitted the....
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....revealed from the perusal of the tax invoice dated 10.11.2017 issued by the Respondent in favour of the Applicant No. 1 that he had sold one unit of Nestle Munch Nuts 32 Gm. Chocolate at the base price of Rs. 15.63 and after levying GST @ 28% realised MRP of Rs. 20/- from him. It is also revealed from the above invoice that the Respondent had charged Rs. 31.25 per bar for the Cadbury Dairy Milk Chocolate and sold it @ MRP of Rs. 40/after realising GST of 28%. Perusal of the tax invoice dated 16.11.2017 shows that the Respondent had charged base price of Rs. 16.95 per unit for the Nestle Munch Nuts 32 Gm. Chocolate and after levying GST @ 18% had again charged MRP of Rs. 20/- and for one bar of Cadbury Dairy Milk Chocolate he had charged base price of Rs. 33.90 and after charging 18% GST the MRP realised by him from the above Applicant was Rs. 40/-. Therefore, it is clear that the Respondent had increased the base price by Rs. 1.56 per unit in respect of the Nestle Munch Nuts 32 Gm. Chocolate and Rs. 3.13 for the Cadbury Dairy Milk Chocolate and hence the MRP charged on both the above products had remained Rs. 20/- and Rs. 40/- per unit respectively before and after the reduction in....
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....rices were maintained. The claim of the Respondent that his profit margins had remained the same is also not tenable as he had not only increased the base prices but had also earned additional margin on the enhanced prices. He had further forced his customers to pay additional GST on the increased base prices otherwise the customers should have got further benefit of reduced base prices. The Respondent has also cited the case of Dinesh Mohan Bhardwaj supra in his support however the facts of the present case are different than that case as the complainant in the above case had been given the benefit of ITC whereas in the present case the Applicant No. 1 was to be given the benefit of tax reduction and hence the Respondent cannot claim any relief on account of the above case. Therefore, the above contentions of the appellant cannot be accepted. 17. The Respondent has also argued that M/S CTC and M/S NE had not given him discounts for passing on the benefit of tax reduction. However, perusal of the tax invoices issued by both the above Distributors shows that they had given him discounts to pass on the benefit of tax reduction with specific endorsements that he was required to pas....
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....ord that the Respondent vide his written submissions dated 23.08.2018 has voluntarily admitted that he had profiteered to the extent of Rs. 1295/- on the stock which was lying with him On 14.11.2017 and had also deposited the same in the CWF. Therefore, there is absolutely no doubt that the Respondent has resorted to profiteering and has not passed on the benefit of tax reduction to his customers. 21. It is clear from the narration of the facts stated above that the Respondent has indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction of tax as per the Notification dated 14.11.2017 supra in respect of the above products to his customers and therefore, he is liable for action under Rule 133 of the CGST Rules, 2017, the relevant provisions of which state as under:- "133. x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-xx-x-x-x-x-x-x-x-x-x-x-x-x-x-x (3) Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Auth....