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TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 22
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....arded it to the Standing Committee to prima facie verify the veracity of the complaint. The Standing Committee vide the minutes of it's meeting dated 13.04.2018 requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 stating that the Respondent had not fully passed on the benefit of the tax reduction from 28% to 18% granted vide Notification No. 41/2017-Central Tax (Rate) dated 14.1 1.2017, instead he had increased the base price to keep the MRP of his product Garnier Nat Shade 3 to maintain the same price which he was charging before the rate of tax was reduced on 15.11.2917 and thus, the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. In this connection the following invoices issued by the Respondent were also submitted to the DGAP for further investigation:- Sr.No. Invoice No. and date Description of products MRP (in Rs.) Discounted Base price (in Rs.) Rate of GST Price charged (inclusive of GST) (in RS.) 1. LCBL039761702884 11.10.2017 Garnier Nat Shade 3 35 24.41 28% 31.25 2. LCBL039761704221 30.11.2017 G....
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....the Respondent were analysed and it was found that 388 products supplied by the Respondent during the period between 15.11.2017 to 31.03.2018 were impacted by the reduction in the rate of GST from 28% to 18% w.e.f. 15.11.2017. Out of the above 388 products 81 products were not sold during the period between 01.11.2017 to 14.11.2017 and hence, the reference prices for calculating the profiteering amount for these products were not available. Of out these 81 products, 41 products were newly introduced items post GST rate reduction w.e.f. 15.11.2017. For the remaining 40 items, the reference prices for calculation of the profiteered amount had been taken from the price list (for the period pre 15.11.2017) submitted by the Respondent, which further revealed that out of these 40 items, the base prices of 34 products were increased by the Respondent and the base prices of 6 products were reduced. Out of the remaining 307 products (388-81=307) which were sold during the period 01.1 1.2017 to 14.11.2017, it was observed by DGAP that the base prices of 259 products were increased and the base prices of 48 products were reduced post 15.11.2017. Thus, in respect of total 388 items, it was fou....
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....er has increased to the extent of increase in the MRP (i.e. Rs. 5). He has also contended that the MRP was decided by the Manufacturer as required under the law as such he should not be questioned for any such revision of MRP. He has further contended that the calculation made by the DGAP was incorrect and the proposed demand was in excess of the profiteering liability. He has also stated that the present notice by proposing cancellation of registration obtained by him under GST the law as a measure of penalty was not only grossly disproportionate to the alleged contravention, but was also extremely prejudicial to the very sustenance of his operations. 9. The Respondent again vide his written submissions dated 03.10.2018 stated that as per the mathematical calculations the reduction in the GST was 7.8% so far as the above product was concerned. He has claimed that considering the base price of the product as 100, gross price inclusive of GST @ 28% would be 128 and the gross price inclusive of GST @ 18% would be 118 and hence due to reduction on Rs. 128 of Rs. 10 (128 - 118 = 10) the percentage reduction would be 10/128 = 7.8%. He has also submitted that he had a closing stock of a....
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.... had already been covered in the Investigation Report itself. 12. During the course of proceedings, M/s. L'oreal the manufacturer of the product in question, was also asked to clarify the claims made by the Respondent in respect of the control on the software and increase of base price after 14.11.2017. M/S. L'oreal in it's written submissions filed on 03.10.2018 stated that they had ensured that the benefits reach the ultimate consumer by instructing the distributors to reduce the prices. It has also claimed that the notice was liable to be dropped as it was without jurisdiction and since M/S L'oreal and the Respondent were two different legal entities undertaking transactions on principal to principal basis and neither section 171 of the CGST Act nor under any provisions of the CGST Rules could be invoked against it in the proceedings initiated against the Respondent. It further stated that without prejudice, it had taken all the necessary steps and was under a bona-fide belief that the price benefit on account of reduction in the GST rate had already been passed on to it's customers. It further added that the pricing of the products sold by the distributors ....
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....upplied by him. Accordingly the amount of profiteering is determined as Rs. 3,43,109/- as per the provisions of Rule 131(1) of the CGST Rules 2017. 15. The Respondent has vehemently argued that he had no control on the fixing of base prices as well as the MRPs as both of them were fixed by the manufacturer M/S L'oreal India Pvt. Ltd. through it's software. The Respondent has also claimed that the MRP of the above product was not increased from Rs. 35 to Rs. 40 but discount of Rs. 5 was given on it in the months of September and October 2017. However the documents filed by the Respondent show that the discount was to the extent of 12.5% on the MRP of Rs. 40 as is apparent from the invoice No. LCBL039761704221 dated 30.11.2017 and 5% on the other products. In this invoice nowhere it has been mentioned that this discount was on account of the reduction in the GST rate from 28% to 18%. Moreover the Respondent has himself claimed that during the months of September and October regular promotional discounts were given on most of the products. Therefore the discounts provided to the customers after GST rate reduction are required to be considered as the on going existing promotio....