TaxTMI 
TaxTMI 
2019 (4) TMI 1244
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....rofiteering, alleging profiteering by the Respondent on the supply of "Snacks" (HSN Code 21069099), by not passing on the benefit of reduction in the rate of tax from 12% to 5% w.e.f. 15.11.2017. Thus it was alleged that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. In this regard, the Applicant No. 1 had taken in to account the two invoices which were issued by the Respondent on 18.08.2017, before the rate of tax was changed and the other dated 21.12.2017 which was issued after the rate of tax was changed, as has been mentioned in the table given below:- Sr. No. Name of the Product Supplied Pre GST rate revision on 15.11.2017 Post GST rate revision on 15.11.2017 Invoice No. & Date Tax Rate Discounted Base Price (in Rs.) Invoice No. & Date Tax Rate Discounted Base Price (in Rs.) 1 Mathuraseva (HSN Code 21069099) MG00089 18.08.2017 12% 32.40 MG01278 21.12.2017 5% 33.75 2 Kuzhalappam (HSN Code 21069099) MG00089 18.08.2017 12% 36.00 MG01278 21.12.2017 5% 37.50 3 Mullomurukko (HSN Code 21069099) MG00089 18.08.2017 12% 36....
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....hedule II of the Notification dated 13.10.2017, the items mentioned under sub-heading No. 2106 90, being sold in unit containers and having a registered brand name or bearing a brand name on which an actionable claim or enforceable right in a court of law was available, would attract GST @ 12% and the rest of the products shall be liable to GST @ 5% subject to certain conditions. The Respondent had claimed that the import of the above Notification was not clear to him and hence he had started paying GST @ 5% w.e.f. 27.11.2017, however, on obtaining clarification, he had got his brand name registered and started payment of GST @ 12% w.e.f. 01.01.2018 and hence, he had not profiteered. (d) That he was selling his goods under a registered brand name till 2013, after which it was cancelled due to tax issues. The Respondent had also claimed that the contents of Notification dated 13.10.2017, were not clear and hence he had contacted the jurisdictional CGST officers, but they had failed to provide clarification and therefore, w.e.f. 27.11.2017, he had started charging GST @ 5% on the goods falling under HSN 2106 90 till 31.12.2017 and w.e.f. 01.01.2018, he had again started payi....
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.... Trademark/ Brand registration dated 29.12.2017. 4. The DGAP through his Report dated 04.12.2018 received on 05.12.2018 has submitted that vide Notification No. 01/2017-Central Tax (Rate) dated 28.06.2018 as per Sl. No. 46 of Schedule l, the rate of GST w.e.f. 01.07.2017 on the products under investigation, viz. Snacks having HSN Code 21069099 was fixed @ 12%. He has also submitted that the above Notification dated 28.06.2018 was amended vide Notification No 34/.2017-Central Tax (Rate) dated 13.10.2017, vide which the rate of GST on the Snacks was divided into the two categories which were shown at Sl. No. 101A of Schedule I on which GST @ 5% was imposed and at Sl. No. 46 of Schedule II on which GST @ 12% was levied as per the following details:- (i) Namkeen, bhujia, mixture, etc., other than those put up in unit containers, bearing a registered brand name or bearing a brand name on which an actionable claim or enforceable right in a court of law is available (other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as specified in the Annexure) attracting GST @ 5% (Sl. No....
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....ndent was levying GST @ 12%, as per the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 on the supply of Snacks having HSN Code 21069099, which were put up in unit containers. b) He was supplying his products under the unregistered brand name "Dev Snacks". c) The Respondent had filed an affidavit on 24.11.2017 before the Commissioner of Central Tax & Central Excise, Thiruvananthapuram stating that he was voluntarily foregoing his actionable claim or enforceable rights on his brand name "Dev Snacks" d) He had started charging GST @ 5% w.e.f. 27.11.2017, as per the Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017, subject to the conditions specified in the Annexure to the said Notification, albeit the correct effective GST rate of tax was 'NIL'. e) He had got his brand name "Dev Snacks" registered on 29.12.2017 and started charging GST @ 12% from 01.01.2018. 6. The DGAP has also stated that when Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 was read with the conditions specified in the Annexure to the said Notification, it was evident that the rate of GST was 12% on the Snacks (HSN 21069099) which ....
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.... contended that the Respondent had got his brand name registered on 29.12.2017 and, therefore, his products attracted 12% GST, as per Sl. No. 46 of Schedule-II of the above Notification. He has also averred that the Respondent had started charging GST @ 12%, w.e.f. 01.01.2018 and thus it was evident from the sale data submitted by the Respondent that he had increased the base prices of his products and had wrongly charged GST @ 5%, due to which the benefit of GST rate reduction from 12% to Nil had not been passed on to the recipients during the period w.e.f. 27.11.2017 to 31.12.2017. He has also claimed that the amount of profiteering computed for the period w.e.f. 27.11.2017 to 31.12.2017, on the supplies made during the above period came to Rs. 12,76,306/-., as per the details mentioned in Annex-14. He has further claimed that all the supplies were made in the State of Kerala only. 9. The above Report was considered by the Authority in its sitting held on 04.12.2018 and it was decided to hear the interested parties on 20.12.2018, which was further adjourned to 11.01.2019 on the request of the Respondent. Sh. Ronak RadhaKrishna Pillai Proprietor and Sh. Fernald Fernandez, Autho....
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....t. account. He has also objected to the calculation of the profiteered amount on the total taxable value of Rs. 1,03,25,326/- as Rs. 12,76,305/-, instead of Rs. 12,39,039/- calculated @ 12%, without taking into account the amount of GST (@5%) already paid by him, which worked out to Rs. 5,16,266/-. He has also stated that he had already paid GST on the goods supplied by him under HSN Code 2106 90 during the period from 27.11.2017 to 31.12.2017 and hence the amount of profiteering should have been Rs. 7,22,773/- (1239039 - 5,16,266) only, as the amount already paid by him could not be included in it. The Respondent has also submitted that the allegation made in para 17 of the Report that the base prices were enhanced and GST was levied on the increased base prices was not fully correct, as there was increase of Rs. 1/- only per packet in respect of only one item which was inclusive of GST. He has further submitted that the GST had been collected on the MRP minus discount and the nominal increase had nothing to do with the reduction in the rate of GST and therefore, the provisions of Section 171 of CGST, 2017 could not be invoked. 10. The above submissions filed by the Respondent ....
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....vealed that vide Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, as per Sr. No. 46 of Schedule II of the above Notification, the rate of tax was fixed @ 12% in respect of the products having HSN Code 21069099 viz. "Namkeens, bhujia, mixture, chabena and similar edible preparations in ready for consumption form" which were being sold by the Respondent. It is further revealed from the record that the rate of tax was changed on the above products vide Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 and the tax @ 5% was imposed on the above products as per the following criteria: - "(A) in Schedule 1-2.5%-(iv) 101A2106 90 Namkeen, bhujia, mixture, chabena in ready for consumption form, other than those put up in unit containers and,- (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available (other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone, subject to the conditions as specified in the Annexure I). Rate of tax was fixed as 12% on the following pro....
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....e actionable claim or enforceable right voluntarily on such brand name." 13. It is clear from the record that the Respondent was charging GST @ 12% as per the Notification dated 28.06.2017 on the supply of his products covered under HSN Code 21069099 which were put up in the unit containers. He was also using the unregistered brand name of "Dev Snacks". He had also filed an affidavit on 24.11.2017 which is placed on record as Annexure-13 before the Commissioner of Central Tax & Central Excise Thiruvanathapuram claiming that he was voluntarily foregoing his actionable claim or enforceable rights on his brand name "Dev Snacks". Therefore, it is clear that w.e.f. 24.11.2017 the rate of tax on the products being sold by the Respondent had become nil. It is also evident that the Respondent had started charging GST @ 5% from his customers w.e.f. 27.11.2017 as per the Notification dated 13.10.2017. Perusal of the evidence placed on record also shows that the Respondent had got his brand name registered as "Dev Snacks" on 29.12.2017 and had started correctly charging GST @ 12% as per the Notification dated 13.10.2017 w.e.f. 01.01.2018. Therefore, it is established that the Respondent ha....
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....an be relied upon for determining that the Respondent had profiteered an amount of Rs. 12,76,306/- in violation of the provisions of Section 171 (1) of the above Act. 17. The Respondent's claim that the changes brought out in the rate of tax were neither communicated to him by the local officers who were handling GST nor any Trade Notice or press release was issued by the concerned GST authorities is not legally tenable because he as a manufacturer registered under the GST was legally bound to charge the appropriate rate of GST and pass on the benefit of rate reduction in terms of Section 171 (1) of the CGST Act, 2017, which clearly mandates that every registered person has to pass on the benefit of reduction in the rate of tax on any supply of goods and services to the recipients by way of commensurate reduction in prices. The ordinary consumers can not be allowed to be denied the benefit of tax reduction, granted by both the Central and the State Govt. out of their own tax revenue, due to the ignorance of the Respondent. Moreover his claim that it was difficult to alter the MRPs printed on the packets also does not hold good as the Government of India in the Ministry of Co....
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.....10.2017 as he had complied with the conditions of the Annexure I mentioned in the above Notification. The extra amount of GST charged @ 5% by the Respondent forms part of the profiteered amount as had he not done so it would have resulted in reduction in the price to be paid by a customer and by charging it he has denied him the benefit of tax reduction. 19. It is also on record that the Respondent vide his written submissions dated 16.01.2019 has asked for permission to remit the profiteered amount in three instalments. 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. 20. 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 (1) of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax as per the Notification No. 34/2017-Central Tax (Rate) dated 13.10.2017 supra in respect of the products being supplied by him to his customers and therefore, he is liable for action under Rule 133 of the CGST Rules, 2017, the relevant provisions of which stat....