TaxTMI 
TaxTMI 
2019 (2) TMI 295
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....ail dated 29.11 2017 (Annexure-I of the Report) was filed by the Applicant No. 1 against the Respondent stating that he had purchased 1 SGB Stuffed GB (Garlic Bread) and 1 Med NHT Veg Extrava (Medium Veg Pizza) after paying Rs. 129/- and Rs. 440/- per item respectively vide tax Invoice No. 66065/17/66210 dated 20.10.2017 (Annexure-2 of the Report) from the restaurant being run by the Respondent in Bengaluru. He had also stated that he had purchased the above 2 items again vide tax Invoice No. 66294/17/40249 dated 19.11.2017 (Annexure-3 of the Report) by paying an amount of Rs. 139/- and Rs. 485/- respectively from the Respondent. He had alleged that though the Goods & Services Tax (GST) rate on restaurant services was reduced from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the base prices of the above food items and charged the same base prices which he was charging before the rate of tax was reduced and had he maintained the same base prices which he was charging before the tax reduction the consumers would have been benefited but in this case it had not happened. He had therefore alleged that the Respondent had resorted to profiteering and accordingly action should....
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....rience and the prices of all the products as shown in the menu were exclusive of all taxes/GST except in the State of Maharashtra prior to 01.07.2017. (b) That the Respondent had denied the allegation of profiteering and stated that there was no profiteering by him as the tax reduction in respect of restaurant services had been made along with denial of Input Tax Credit (ITC) which had become a cost for him as he was required to pay GST on the inputs without benefit of the ITC. (c) That the menu prices were exclusive of taxes/GST and hence any comparison had to be made between the cum-tax prices and not the base prices. The Respondent had also stated that the revised base prices had taken into account the cost of non-creditable input GST, however there had been no increase in the ultimate prices inclusive of GST to be paid by the customers. (d) That he had increased the base prices of Medium Veg Pizza and Garlic Bread, however their selling prices inclusive of GST had actually decreased as could be seen from the following table:- Type of product Price up to 14.11.2017 (Rs.) Price w.e.f.15.11.2017 (Rs.) Increase in base price Decrease in total price Base p....
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....ely analysed. He had also contended that due to competition and the price sensitivity of certain SKUs he had revised their base prices and absorbed the additional input costs. He had further contented that various factors like Competition pricing, Strategies for market penetration, Profit margins for sustaining in market, Life cycle of the product, Economic and political conditions, Credit period offered to vendors and Costs of procurement etc. had influenced pricing of his products. (h) That as per general practice, he was increasing his base prices every year due to inflation and for Stuffed Garlic Bread the base price was increased by 17.3% over a period of 3 years which came to around 5.8% annually. He has also claimed that the annual increase in base prices ranged between 1% to 5% depending upon the product and he had made increase of at least 5% in November, 2017. (i) The Respondent has also claimed that in respect of the Medium Veg Pizza and the Garlic Bread he had not only passed on the benefits by reduction in the tax rate but had also reduced their prices and incurred substantial losses. (j) He has further claimed that after 15.11.2017, he had not availed any ITC....
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.... by increasing his selling prices. In this regard the DGAP has contended that from the perusal of Note-4 attached to the Statement of Audited Financial Results for the quarter and year ending 31.03.2018 (Annexure-19 of the Report) it was clear that the Respondent's business activity fell within a single business segment, i.e. Food and Beverages. The DGAP has further contended that the Statement of Audited Financial Results for the current and previous periods submitted by the Respondent showed that post 15.11.2017, there was a distinct sharp increase in the profits made by him without a corresponding increase in the sale of his products and this increase was to the tune of 406.33% during March, 2018 quarter and 184.97% during the Financial Year (FY) 2017-18 as against the decline in the profits during the previous periods. The Report also stated that the increase in the sales was only of 27.26% during March, 2018 quarter and 17.06% during the FY 2017-18 and this negated the Respondent's claim that he had not factored in the loss of ITC in the increase which he had made in the prices and had also not taken in to account inflation in the cost of inputs while fixing the revised base p....
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....e paid by the consumers had not been reduced commensurately for all the above items, inspite of the reduction in the rate of tax. 9. The DGAP in his report has further stated that the impact of denial of ITC required the determination of the ITC as a percentage of the total outward taxable turnover during the periods pre and post GST rate reduction and accordingly he has calculated the same by taking into consideration the period from 01.07.2017 to 31.10.2017 and not up to 14.11.2017 due to the following reasons:- (a) The Respondent has reversed the ITC on the closing stock of inputs and the capital goods as on 14.11.2017 and this credit was not available in the GSTR-3B return of November, 2017. As these inputs would have been used after 15.11.2017, their ITC had been left out as no ITC could be claimed after the above date. (b) The details of the invoice-wise outward taxable turnover for the month of November, 2017 were not supplied by the Respondent to calculate the taxable turnover for the period between 01.11.2017 to 14.11.2017. (c) Random checks of the invoices on which the ITC was availed by the Respondent during the month of November, 2017 revealed that in a few ....
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....7, when the GST rate on restaurant services was reduced from 18% to 5%, the ITC was not available to the Respondent. A summary of the computation of the ratio of input tax credit to the taxable turnover of the Respondent is given in the Table below: - Particulars Jul-17 Aug-17 Sept.-2017 Oct.-2017 Total ITC Availed as per GSTR-3B (A) 9,59,21,833 21,19,96,345 24,71,23,168 22,77,09,524 78,27,50,870 Less: Tax on Inter unit branch transfers as per Sales register (B) 4,86,70,456 6,34,79,714 5,65,75,226 5,9015,082 22,77,40,478 Net Input Tax Credit available for the period July, 2017 to October, 2017 (C)=(A-B) 4,72,51,377 14,85,16,631 19,05,47,942 16,86,94,442 55,50,10,392 Total Outward Taxable Turnover as per GSTR-1 (D) 2,78,61,32,213 2,99,11,80,009 2,93,77,50,465 3,04,74,93,204 11,76,25,55,891 Less: Inter unit branch transfers Included in B2B Sales as per Sale Register (E) 39,18,73,402 49,69,53,429 44,71,12,802 49,47,41,644 1,83,06,81,277 Net Outward Taxable Turnover for the period July, 2017 to October, 2017 (F)=(D-E) 2,39,42,58,811 2,49,42,26,580 2,49,06,37,663 2,....
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....mikumaran, Advocate, Mr. Manish Gaur, Advocate, Mr. Dhruv Gupta, Advocate, Mr. Rachit Jain, Advocate, Mr. Gaurav Gogia, CA, Mr. Keshav Kumar Sharda, GM, Mr. Ashish Srivastava, Manager, Ms. Disha Jain, Advocate and Ms. Uma Kapoor, Manager (Taxation). On the specific request of the Respondent, 3 further hearings were held on 21.08.2018, 11.09.2018 and on 22.10.2018. 14. The Respondent has filed detailed written submissions on 13.08.2018, 21.08.2018, 11.09.2018, 17.09.2018, 05.10.2018 and on 22.10.2018. In his initial submissions dated 13.08.2018, the Respondent has stated that the Standing Committee had erred in referring the matter to the DGAP for further investigation, as the Applicant No. 1 had filed complaint in respect of 'medium veg. pizza', while the invoices submitted by the above Applicant showed that the pizzas ordered by him were of different variety. The pizza ordered by the above Applicant vide invoice dated 20.10.2017 was 'Medium Veg Extravaganza Pizza Normal Crust Hand Tossed, whereas the pizza ordered by him vide invoice dated 19.11.2017 was 'Medium Veg Extravaganza Pizza Pan Crust'. Therefore, the Respondent has contended that the application was filed for two dif....
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....dication how to conclude that there was profiteering due to change in the rate of tax and whether such computation had to be done invoice-wise, product-wise, business vertical-wise or entity-wise etc. He has therefore contended that due to lack of transparency the results could vary from case to case resulting in arbitrariness and violation of Article 14 of the Constitution of India. 16. The Respondent has also stated that in order to control rise in inflation on account of implementation of GST, the Malaysian Government had promulgated the 'Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations, 2014, which provided for the mechanism to calculate the profiteered amount on account of GST. He has further stated that the anti-profiteering measures in Australia were based on the 'Net Dollar Margin Rule' on which profiteering was calculated. Relying on the cases mentioned below he has claimed that unless the methodology was in place no action could be initiated:- (1) Commissioner of Income Tax, Bangalore v. B. C. Srinivasa Setty (1981) 2 SCC 460 = 1981 (2) TMI 1 - SUPREME COURT, in which the Hon'ble Supreme Court had ....
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....and the notes on Section 171, the Respondent has submitted that from a joint reading of the above provisions, it was apparent that a registered person should pass on the benefit of reduction in the rate of tax or ITC to the recipient by way of 'commensurate' reduction in prices by keeping both of them as separate entities. The Respondent has also alleged that the DGAP had treated him as an entity although all the stores of the Respondent were separately registered and were separate entities as per the GST law. He has further alleged that the DGAP had taken into account the total price charged from the customers all over India for arriving at the alleged profiteered amount which was incorrect. The Respondent has also objected to the methodology adopted by the DGAP in not 'netting off' the increase and decrease from the optimum price as he should have considered the positive and negative price variations in respect of all the SKUs which were above and below the optimal price to arrive at the profiteered amount. Accordingly he has claimed that it was necessary to define the term 'commensurate' appearing in Section 171 and Rule 127. He has further stated that the Legislature had qua....
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....o stated that he had not increased the prices of all the SKUs w.e.f. 15.11.2017 and the change in the prices whether increase or decrease in respect of some of the SKUs was based on market conditions, consumer behaviour and competition in the market. He has further stated that it was his usual business practice to increase the prices of his products at different rates and historically also he had made different price increases for different SKU's. The Respondent has also claimed that the DGAP had wrongly applied a methodology similar to the 'zeroing methodology' which was used by the anti-dumping authorities in certain countries which while calculating the dumping margins took only those SKUs in account which were being dumped and those SKU's which were not being dumped were not considered. The Respondent has further claimed that the Government of India (GOI) had objected to this methodology at the WTO and argued that while determining the dumping margins, all the SKUs should be taken into consideration. He has also cited the Report No. WT/DS141/AB/R dated 01.03.2001 of the Appellate Body of WTO in his support and claimed that the plea of the GOI was accepted by the Appellate Body ....
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....hat the price charged by the Respondent was exclusive of tax and w.e.f. 15.11.2017 he had been charging 5% GST and even after the revision of prices, the total amount charged from the recipients was less than the total amount received for such services from the recipients prior to the reduction in the tax rate. The Respondent has also cited the case of Kumar Gandharv v. KRBL Ltd. 2018-VlL-02-NAA = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY decided by this Authority in his support in which it was held that the supplier had increased the MRP of his product from Rs. 540/- to Rs. 585/- which constituted increase of 8.33%, keeping in view the increase in the purchase price and hence the law settled in the above case was fully applicable in the present case also as increase in the cost was a reason for price increase and frequent price increases were very common in the food and the beverage industry, however, the DGAP had not taken in to account the normal inflation and presumed that the Respondent was entitled to increase his prices on account of denial of ITC only. He has also argued that in case the impact of nominal inflation in cost of 1.99% was considered, then the pro....
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....goods had been duly mentioned in the GSTR-3B return. He has also submitted that the DGAP had allowed him to provide SKU wise details of the sales instead of invoice wise details due to large number of invoices. He has further stated that the discrepancies pointed out by the DGAP in respect of the invoices issued by M/s. Neel Kamal and M/S Contract Advertising (India) Pvt. Ltd. were incorrect as the invoices were received by him before 15.11.2017, the date from which the Respondent was not eligible to claim ITC, even otherwise also ITC could not be denied as the invoices pertained to the period when he was eligible to claim ITC. He has also stated that the TRAN-1 credit of Rs. 1.84 Crore was claimed in the month of November, 2017 only once and not twice which could be verified from the ITC register as well as the GSTR-3B return. He has also averred that he was entitled to claim ITC of Rs. 20.72 Crore till 14.11.2017 which should have been allowed to him. He has also alleged that the DGAP had considered the period between 01.11.2017 to 14.11.2017 for all other calculations except for the computation of ITC which had adversely affected him. The Respondent has further alleged that the ....
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....n this regard. He has also argued that since the menu prices were constant throughout the country the same should have been taken it to account instead of net sale realization which differed from case to case and such menu prices pre and post rate reduction should have been compared. The Respondent has further argued that he had changed his discount policy w.e.f. 01.11 2017 as he proposed to do away with many type of discounts which showed that this had nothing to do with the GST rate reduction which came into effect from 15.11. 2017. The Respondent has also submitted that if the menu prices were considered instead of net sale realization the profiteered amount would be reduced by Rs. 15.72 Crore and if the incorrect menu prices for some SKUs were corrected the above amount would be further reduced by Rs. 4.64 Crore. 27. The Respondent vide his submissions dated 21.08.2018 has claimed that at the time of investigation he could not provide invoice wise details to the DGAP as the number of the invoices for the period between 15.11.2017 to 31.5.2018 was more than 4 Crore which he wanted to submit now to demonstrate that there was no profiteering by him to the extent the DGAP has ca....
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....tax rate was reduced from 28% to 18%, the Respondent should have reduced the price by the same amount by mathematical calculation from the MRP at which the goods were sold before such reduction. Therefore, the Respondent has asserted that by following the ratio laid down in the above case the Respondent had also duly discharged his responsibility by reducing the rate of tax from 18% to 5%. He has further asserted that the he had not received any additional benefit of ITC rather the benefit of ITC was denied to him w.e.f. 15.11.2017 which had resulted in loss to him. The Respondent has also contended that he had increased the prices of some of the SKUs due to the denial of the ITC and on account of other commercial grounds which this Authority could not examine as such issues were not covered under the provisions of Section 171. He has further contended that the present proceedings had been launched as reduction in tax rate and denial of ITC had occurred simultaneously and in case the rate of tax would have remained the same and the ITC would have been denied, then these proceedings would not have been started. He has also claimed that reduction in the tax rate and denial of ITC sho....
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....any action is proposed to be taken must be informed in writing of such action. He has also claimed that the Authority has treated the Report of the DGAP as the show cause notice which was not correct and he should have been served with a detailed show cause notice otherwise he could not defend himself. He has also cited the cases of Canara Bank & others v. Debasis Das & others (2003) 4 SCC 557, = 2003 (3) TMI 664 - SUPREME COURT Uma Nath Pandey & others v. State of UP (2009) 12 SCC 40 = 2009 (3) TMI 526 - SUPREME COURT, Collector of Central Excise v. ITC Ltd. 1994 (71) ELT 324 = 1994 (2) TMI 62 - SUPREME COURT OF INDIA, Vasta Bio-Tech Pvt. Ltd. v. Assistant Commissioner 2018 (360) ELT 234 = 2018 (1) TMI 1437 - MADRAS HIGH COURT, Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise 2015 (320) ELT 3 = 2015 (5) TMI 500 - SUPREME COURT, Anrak Aluminium Ltd. v. Commissioner 2017 (4) GSTL 248 = 2017 (5) TMI 1200 - CESTAT HYDERABAD and Goyal Tobbaco v. Commissioner 2015 (329) ELT 619 = 2015 (11) TMI 249 - CESTAT NEW DELHI in his support. 30. The Respondent has also claimed that the rate of tax was reduced from 18% to 5% without benefit of ITC as per the Notification No....
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.... Restaurant Service 2. Business Model Franchisee of Subway Systems India Pvt Ltd. Para-5 Franchisee of Dominos Pizza Overseas Franchising B.V. 3. Consideration for Franchisee Royalty on Net Turnover Para-5 Royalty on Net Turnover 4. Fixation of Price By Franchisee Para-5 By Franchisee 5. Procurement of Raw material By Franchisee Para-5 By Franchisee 6. No. of Outlets Approx. 600 Para-6 Approx. 1128 Reduction in rate of tax GST reduced from 18% to 5% without D ITC vide Notification No. 46/2017-Central Tax Rate Para-1 GST reduced from 18% to 5% without ITC vide Notification No. 46/2017-Central Tax Rate 8. Complaint "6 Hara BharaKabab Sub" Para-1 Medium Veg Pizza and Garlic Bread 9. Increase in base price Rs. 130/- to 145/- Para-1 Pizza: Rs. 440 to FRS. 450/(Type A) Garlic Bread: Rs. 129/-to 139/- 10. Period examined for loss of ITC July 2017 to November 2017 Para-4 July 2017 to October 2017 (Request by Noticee for considering period of July 2017 to 14th November 2017) 11. Period for comparison for outward taxable supplies ....
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....reduction in the price of each and every supply of goods or services and by following the same rule, he had requested the Respondent to provide invoice-wise details of outward taxable supplies vide his letters dated 15.03.2018 and 27.03.2018, whereas the Respondent, vide his letter dated 20.03.2018 had expressed his inability to provide the same due to its voluminous nature and had requested to provide it in summarized manner on product-wise and state-wise basis or under any methodology as was deemed fit by the DGAP. 35. The DGAP has also submitted that the Respondent vide his letter dated 04.04.2018 had submitted Product/SKU wise sales for the period w.e.f. 15.11.2017 to 28.02.2018 which were considered by him after accepting request of the Respondent and accordingly he had asked the Respondent to submit the product/SKU-wise sales for the period w.e.f. 01.10.2017 to 14.11.2017 vide his letter dated 11.04.2018 and the details for the period between March 2018 to May 2018 vide his letter dated 26.06.2018. He has further submitted that the anti-profiteering provisions were for the benefit of the recipients as each recipient must get benefit of reduction in the rate of tax or incre....
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....d could be summed up as follows. (a) A supplier of goods or services must pass on the benefit of ITC or reduction in the rate of tax to the recipients by commensurate reduction in prices. (b) The law does not offer a supplier of goods and services any flexibility to suo moto decide on any other modality to pass on the benefit of ITC or reduction in the rate of tax to the recipients. The DGAP has also contended that the increase in the cost of inputs and input services was a factor for determination of prices but this factor was independent of the output GST rate and it couldn't be asserted that the elements of cost unrelated to GST were affected by the change in the output GST rates, therefore in terms of Section 171 of the CGST Act, 2017, the claim of increase in cost of inputs and input services had not been considered. 38. The DGAP has further replied that there seemed to be contradiction in the claim made by the Respondent of inflation of 1.99% with his profitability statement, as per the Table given below:- (in Lakhs) Particulars FY 2016-17 % to Sales FY 2017-18 % to Sales Income from Operation A 2,54,607 2,98,044 ....
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....r the computation of profiteered amount and the above Para had been introduced only to address the Respondent's claim that he did not completely factor the loss of ITC in the increase in prices and did not consider inflation in the cost of inputs while determining the revised base prices and, therefore, faced a decline in his profit margins. 40. The DGAP has also stated that the day wise pattern of ITC availed by the Respondent during the period w.e.f. 1-14 November 2017 was as under:- Date Total ITC Availed % of Total ITC Availed ITC Reversed Net ITC Availed % to Total Net ITC Availed A B C (% of B) D E=B+D F (% of E) 1-Nov-17 31,39,376 0.90% (52,281) 30 87,095 1.23% 2-Nov-17 60,50,031 1.74% (1,56,024) 58,94,007 2.34% 3-Nov-17 58,21,864 1.68% (2,03,476) 56,18,388 2.23% 4-Nov-17 38,14,921 1.10% - 38,14,921 1.52% 5-Nov-17 37,53,056 1.08% - 37,53,056 1.49% 6-Nov-17 34,75,983 1.00% (4,746) 34,71 ,237 1.38% 7-Nov-17 52,22,267 1.50% (12,779) 52,09,489 2.07% 8-Nov-17 76,99,658 2.22% - 76,99,658 3.06% 9-No....
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....1 14-Nov-17 86,131 SGST/UTGST Receivable (C.G) Uttar Pradesh 21800026 14-Nov-17 Uttar Pradesh 100630224 14-Nov-17 4,62,043 SGST/UTGST Receivable (C.G) Uttar Pradesh Total 184,23,658 41. The DGAP has further mentioned that as the Respondent had already availed ITC on the original purchase of inputs, the same has been considered in the computation of denial of ITC to net turnover and the output tax liability on inter-unit branch transfer had been excluded from ITC on one hand and inter-unit branch transfer turnover has been excluded from the outward taxable turnover on the other hand which neutralised the impact of Branch transfer transactions from the computation. Further the ITC register contained only the value of ITC availed whereas the base prices on which the ITC was availed were not available in the ITC register. 42. The DGAP has also reported that Section 15 (1) of the CGST Act, 2017 reads as "The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both whe....
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.... considered the Reports submitted by the DGAP, the Respondent's submissions and all the other material placed on record and it is revealed that the Respondent is engaged in the business of operating quick service restaurants under the name and style of Domino's Pizza' and has a pan India presence with 1,128 outlets across 31 States and Union Territories in which the Respondent is duly registered under the GST and all his outlets were maintaining consistency from taste to overall experience and the prices of all his products as shown in the menu were similar throughout his restaurants exclusive of the GST. It has also been admitted by the Respondent that the Central Govt. vide its Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 18% to 5% on restaurant services with the stipulation that no ITC would be available on the goods and service supplied under the above services, accordingly, 398 items which were being supplied by the Respondent were impacted with the reduction in the rate of tax, the benefit of which was required to be passed on by the Respondent to his customers by commensurate reduction in his prices as per the provisions of Se....
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....inst the Respondent and the objection raised by the Respondent on this ground is completely wrong and frivolous and hence the same cannot be accepted. The contention of the Respondent that the DGAP had gone beyond his jurisdiction to investigate all the 393 products is also not tenable as the Applicant No. 1 had specifically mentioned in the last Para of his complaint that "Need your help to investigate pricing of these kind of large organisations where the prices are inflated with the reduction in the GST" therefore the DGAP had jurisdiction to extend his investigation as the Respondent happened to be one of such large organisation which had obligation to pass on the benefit of tax reduction. Further, while investigating when it came to the knowledge of the DGAP that apart from the product mentioned in the complaint, the Respondent had supplied other products also on which the benefit of reduction in the rate of tax was required to be passed on but the Respondent had not passed it, the DGAP was legally bound to take its cognizance as no infringement of Section 171 can be allowed on the ground that no complaint had been made in respect of a particular product(s). The facts of the c....
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....TC amounting to Rs. 55.50 Crore was available to the Respondent during the period between July, 2017 to October, 2017 which was 5.59% of the net taxable turnover of Rs. 993.18 Crore of the restaurant services supplied during the same period as has been calculated in Para 10 supra. 46. It is also clear from the record that the Respondent during the period between 15.11.2017 to 31.05.2018, had increased the base prices by more than 5.59% i.e. by more than what was required to offset the impact of denial of ITC in respect of 170 items, from 5.75% to as high as 84.55%, out of total 393 items sold during the same period and therefore, in respect of these items the commensurate benefit of reduction in the rate of tax from 18% to 5% had not been passed on to the customers by the Respondent. It is also established after analysis of the impact of denial of ITC and the details of the outward supplies that the amount of net higher sale realization due to increase in the base prices of the services, despite reduction in the GST rate from 18% to 5%, with denial of ITC or in other words, the profiteered amount was Rs. 41,42,97,635/- as per the very detailed, exhaustive and meticulous calculat....
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....nreasonable and hence it cannot be considered. 48. The contention of the Respondent that he had revised the prices of all the SKUs as a normal business decision due to the various factors, like rise in the prices of the raw material due to inflation and increase in the cost due to non-availability of the ITC which was available earlier, is also not borne out from the analysis of the data supplied by him. He has claimed that the impact on prices due to inflation was to the extent of 1.99% however as per the calculation made by the DGAP on the basis of the data supplied by the Respondent himself, which has been mentioned in Para 38 supra there has been reduction in the Total Variable Cost from 50.16% in the FY 2016-17 to 48.56% in the FY 2017-18 i.e. by 1.51% which falsifies the claim made by the Respondent that he had to raise his prices due to inflation. The Respondent has also claimed rise in his expenses on employee benefits by Rs. 27 however, the DGAP has demonstrated vide Table mentioned in Para 38 above that in fact he had made saving of Rs. 29.32 Crore in the FY 2017-18 even if inflation was not taken in to account. Hence both the above contentions of the Respondent cannot....
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....theory of breakeven floated by the Respondent is completely false and wrong as there is no correlation between the figures of sales and the profits which have been supplied by the Respondent and by no stretch of imagination increase in sales by 17% during the FY 2017-18 can result in increase in profits by 185%. Therefore, the claims made by the Respondent vide Exhibit-8 of his submissions are wrong and hence cannot be relied upon. All claims of having suffered losses, made by the Respondent due to denial of ITC, are also not supported by financial statements and hence they are completely unworthy of reliance. 50. The Respondent has further claimed that the DGAP had wrongly computed the amount of permissible increase due to non-availability of ITC as 5.59% which should be 7% as the DGAP has not taken into account the entire ITC which was available to him and had also disallowed the ITC which he could not have done. However, perusal of the record shows that the DGAP has rightly not allowed ITC on the invoices issued by M/s. Neel Kamal and M/s. Contract Advertising (India) Pvt. Ltd. as they were not in his possession before 15.11.2017, the date from which the Respondent was not....
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....not include any discount which is given before or at the time of the supply, if such discount has been duly recorded in the invoice issued in respect of such supply. 52. Therefore, as per the above provisions of Section 15 of the above Act, the value of the supply made by the Respondent can be calculated only on the basis of the actual price paid and not on the menu prices as generally products are not sold on the menu prices and it is the price up to which products can be sold. There is also no reason to add the discounts offered by the Respondent for calculating the total turnover as per the above provision and hence the claims made by the Respondent in this regard are frivolous and against the specific provisions of the CGST Act, 2017 and hence they cannot be acceded to. The DGAP has also rightly compared the SKU wise net realization from 01.10.2017-14.11.2017, prior to the rate reduction, with the average net realization from 15.11.2017 to 31.5.2018, subsequent to the rate reduction to consider the impact of the various discounts which were claimed to affect the calculation of net realization by the Respondent and hence there was no ground to make such comparison between the....
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....alore v. B. C. Srinivasa Setty (1981) 2 SCC 460 = 1981 (2) TMI 1 - SUPREME COURT to contend that this Authority could not determine profiteering in the absence of methodology by stating that in this case the Hon'ble Supreme Court had held that the charging section was not attracted where corresponding computation provision was inapplicable. In the above case the issue was whether the goodwill generated in a newly commenced business was an asset within the terms of Section 45 of the Income Tax Act, 1961 and whether this could be considered as capital gain subject to the Income Tax. The Hon'ble Supreme Court had held that Section 45 of the Income Tax Act had defined capital gains under which the goodwill generated in a newly commenced business as an asset was not part of the definition. However, in the present case the law is clear and unambiguous. The reduction in the rate of tax comes into effect from the date of the Notification and this reduction in tax has to be passed on to the recipients as per the provisions of Section 171 of the Act. Therefore the above case does not help the Respondent. The case of Eternit Everest Ltd. v. Union Of India 1997 (89) ELT 28 (Mad.) = 1996 (6) TM....
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....pients are not identifiable, the same should be deposited in the CWF. Depositing of the profiteered amount in the CWF does not amount to levy and collection of tax as has been alleged by the Respondent as it is not tax. 55. The Respondent has also claimed that the profiteered amount should be calculated by considering him as an entity and not on each SKU. However, this contention of the Respondent is irrational and against the basic provisions of Section 171 which require him to pass on the benefit of rate reduction to every recipient on every supply. In case this computation is made as has been suggested by the Respondent it would not be possible to ensure that the benefit has been passed on to each customer as the calculation would have to be made for all the SKUs together irrespective of the fact whether the base price of a product has been reduced or increased. The Respondent is under legal obligation to pass on both the above benefits to each customer and he cannot deny benefit to one customer on the ground that he has as an entity passed on the benefits to entire group of customers. Similarly benefit due to a customer cannot be denied to him on the claim that the same has ....
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....ues of anti-dumping margins and hence the same are fallacious and irrelevant to the facts of the present case. By applying the principle of netting off the computation of profiteering will have to be made by considering the positive and negative price rises which would result in denial of benefit to the recipients individually and on each product. 57. The Respondent vide his submissions dated 21.08.2018 has claimed that at the time of investigation he could not provide invoice wise details to the DGAP as the number of the invoices for the period between 15.11.2017 to 31.5.2018 was more than 4 Crore and he had submitted them now and hence the profiteered amount should be recalculated invoice basis. The claim made by the Respondent in this regard is without any basis as the calculation could not be done on the invoice basis as it would amount to cancelling out of the benefit between those products on which the prices have been increased with the products in the case of which the prices have been reduced, the net impact of which would not result in passing on the benefit commensurately to each customer on every supply. Therefore, the denial of benefit has to be calculated produc....
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....isions of Section 171. The Respondent is free to fix his prices and profit margin depending upon the factors which he finds fit to be considered. Any scrutiny of price increase made by the Respondent which is not commensurate with the denial of ITC certainly falls in the ambit of profiteering and it cannot be termed as price control or price regulation and hence it does not violate the provisions of Article 19 (1) (g) of the Constitution. There is no restriction on the Respondent to fix his prices keeping in view the various factors but such an exercise should not violate the provisions of Section 171 59. The Respondent has also claimed that present proceedings had been launched in violation of the principles of natural justice as no show cause notice had been issued to him. The claim made by the Respondent is wrong as it has been made as an afterthought. In this regard it would be appropriate to mention that the Respondent has been duly issued a notice for hearing by this Authority on 19.07.2018 intimating that a complaint dated 29.11.2017 had been received against him from the Applicant No. 1 which was investigated by the DGAP and The DGAP had submitted his Report on 16.07.201....
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....09) 12 SCC 40, Collector of Central Excise v. ITC Ltd. 1994 (71) ELT 324 = 2009 (3) TMI 526 - SUPREME COURT, Vasta Bio-Tech Pvt. Ltd. v. Assistant Commissioner 2018 (360) ELT 234 = 2018 (1) TMI 1437 - MADRAS HIGH COURT, Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise 2015 (320) ELT 3 = 2015 (5) TMI 500 - SUPREME COURT, Anrak Aluminium Ltd. v. Commissioner 2017 (4) GSTL 248 = 2017 (5) TMI 1200 - CESTAT HYDERABAD and Goyal Tobbaco v. Commissioner 2015 (329) ELT 619 = 2015 (11) TMI 249 - CESTAT NEW DELHI cited by the Respondent in his support ,are not being relied upon. 60. The Respondent has repeatedly quoted the order dated 27.09.2018 passed by this Authority in the case of Jijrushu N. Bhattacharya v. NP Foods = 2018 (10) TMI 1338 - NATIONAL ANTI-PROFITEERING AUTHORITY on the ground that the facts of that case were exactly similar to the case of the Respondent and hence the present proceedings should be dropped. However, comparison of both the cases shows that in the case of NP Foods the prices were increased by 12.14% due to denial of ITC of 11.80% i.e. by 0.34% which was commensurate with the denial of ITC whereas in the case of the Respondent the prices w....
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....t @ 18% till the same is deposited, within a period of 3 months. Accordingly an amount of Rs. 20,71,48,814.67 (Twenty Crore Seventy One Lakh Forty Eight Thousand Eight Hundred Fourteen and Sixty Seven Paise Only) will be deposited in the Central Consumer welfare fund while the balance will be deposited in the State CWFs as shown in the table given below:- S.No. State (Place of Supply) Profiteering Rs. 1 Andhra Pradesh 27,42 588 2 Arunachal Pradesh 1,30,898.50 3 Assam 22,72,669 4 Bihar 31,19,420.50 5 Chandigarh 18,84,362 6 Chhattisgarh 19,55,496.50 7 Dadra and Nagar Haveli 1,07,651.50 8 Daman & Diu 1 51,819 9 Delhi 2,39,88,346 10 Goa 21,14,117 11 12 Gujarat 1,04,94,079 Haryana 1,23,35,538 13 Himachal Pradesh 13,58,342.50 14 Jammu & Kashmir 12,93,382 15 Jharkhand 15,80,017 16 Karnataka 2,53,24,454.675 17 Kerala 22 97 540.50 18 Madhya Pradesh 49,34 225 19 Maharashtra 3,95,74,886.50 20 Meghalaya 2,64,126 21 Nagaland 1,41,545.50 22 Odisha 15 68,858 23 Pondicherry 3,40,605 ....