TaxTMI 
TaxTMI 
2019 (6) TMI 1337
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.... 18% w.e.f. 15.11.2017, granted vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, as he had increased the base price of the "Vitrified Tiles" (here-in-after referred to as the product) from Rs. 750/- in the pre-rate reduction period to Rs. 814/- in the period post implementation of the notification dated 14.11.2017. The Applicant No. 1 had also claimed that since the Respondent had increased the MRP of the product after the rate of tax was reduced on it, he 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 regard, Uttar Pradesh State Screening Committee had relied on two invoices issued by the Respondent, one dated 06.11.2017 (Pre rate revision) and the other dated 09.12.2017 (Post rate revision), as has been discussed in table given below:- Table 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 Base price (in Rs.) Invoice No. & Date Tax Rate Base price (in Rs.) 1. Vitrified Tiles (HSN Code 6901) 1649 06.11.2017 28% ....
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....t inspect the record. 4. The DGAP requested this Authority for grant of extension in time to complete the investigation up to 09.12.2018 which was allowed by this Authority under Rule 129 (6) of the CGST Rules, vide its order dated 21 08.2018. The present investigation pertains to the period between 15.11.2017 to 30 06.2018. 5. The DGAP, in his Report, has stated that the Respondent submitted his replies to the DGAP, vide letters dated 23.07.2018, 02.09.2018, 23.09.2018, 08.10.2018, 22.10.2018, 01.11.2018 and 15.11.2018. Vide his replies, the Respondent submitted that he is a retailer of tiles and his business was not based on MRP or fixed prices but at prices lower than MRP. He added that, no sale was made on MRP since his customers bargained the price based on the volume of requirement of tile boxes and finalized the deal at competitive prices. He further added that the Applicant No. 1 had offered to purchase vitrified tiles at a net price of Rs. 960/- per box, even though the MRP was Rs. 1300/- per box and that he had to accept the above price offered by the above Applicant due to competition and downfall in the business. The Respondent has further submitted that the above....
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.... intimated that from the invoices available, it was clear that the Respondent has increased the base prices of the tiles when the rate of tax was reduced from 28% to 18% and did not pass on the commensurate benefit of rate reduction to his customers. It was the Respondent's statutory responsibility and obligation to pass on the benefit of reduction in the GST rate to his customers. However, it was evident from the invoices submitted by the above Applicant, that by increasing the base price of the product from Rs. 750/- to Rs. 814/-, the benefit of the GST rate reduction was not passed on to him. 8. The DGAP has also analysed the outward sales data for the period 01.11.2017 to 30.06.2018 of the tiles supplied by the Respondent and stated that the prices of the same even before reduction in the tax rate w.e.f. 15.11.2017 used to vary across different invoices for the same period. For example, prior to GST rate reduction w.e.f. 15.11.2017, the Respondent had sold the tiles (size 2"X1") in the price range between Rs. 234 to Rs. 525. Therefore, the average base prices for all sizes available from the sale data, have been considered to be the base prices during the pre-rate reduction ....
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....per various dictionaries. He has further stated that the Anti-profiteering provision was made to gain the confidence and to bring sense of security among the consumers towards the Act. However, in absence of any notified/specified rules for the proceedings under the anti-profiteering provision, there was lack of clarity regarding factors to be considered for profiteering or methods for determination of profiteering. 14. The Respondent further pointed out certain major lapses in the calculation sheet of profiteered amount. He submitted that the DGAP had taken the base prices for all the categories of products for the period prior to 15th November 2017 arbitrarily as the average of all discounted prices at which he had sold the goods (tiles) during the period of 1st November 2017 to 14th November 2017, in place of the MRP based standard prices. Further, the DGAP had taken a single price/rate as base price for all the qualities of the product in a particular size category; whereas, there was much price variation among the various qualities of tiles of any size category. He also submitted that the DGAP had compared selling price (inclusive of GST) with cum-tax Base Price (Ideal sell....
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....nt did not amount to profiteering. He has also mentioned that Section 171 of CGST Act, 2017 was intended to safeguard the interest of the consumers and deal with the violators who did not pass on the benefits to be passed on to the consumers, through anti-profiteering measures and there was no intention of the legislature to regulate the competitive prices and corresponding rebates and discounts and a dealer could not be forced to grant a certain amount of rebate or discount or to maintain the uniformity in rebates and discounts and allowing of rebate or discount was completely a discretionary subject for the dealers, which could not be regulated through the legislation. 17. He has further submitted that even if the contention of the Applicant No. 1 be taken according to his own viewpoint, the said transactions could be described as under:- TABLE Sl.No. Particulars Before change in Tax (GST) Rate [up to 14/11/2017] After change in Tax (GST) Rate [after 14/11/2017] 1. Product description (Complete Detail given under Annexure - 2) A Vitrified Tiles(4'x2') Vitrified Tiles (32'x32') Vitrified Tiles(4'x2') Vitrified Tiles (32'....
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.... Tile Size 16x32 (CRM Conn. Digital Kajaria) 1624 03-11-2017 515.63 1949 09-12-2017 496.61 -19.02 7 Tile Size 2X2 (PVT PRE, S/S Kajaria) 1337 14-10-2017 775.00 2325 08-01-2018 705.08 -69.92 8 Tile Size 2X2 (PVT PRE. S/S Kajaria) 1578 05-11-2017 563.00 1939 08-12-2017 515.00 -48.00 9 Tile Size 32X32 (PVT. COM. SP. COLO. Kajaria) 1640 06-11-2017 966.40 1950 09-12-2017 814.00 -152.40 10 Tile Size 32X32 (PVT. STD SOLI & PLUS Kajaria) 1313 11-10-2017 1000.00 2506 23-01-2018 994.06 -5.94 11 Tile Size 48X48 (ETER. COM. H.D. WOOD Kajaria) 1690 11-11-2017 542.00 1835 23-11-2017 523.73 18.27 12 Tile Size 48X8 (ETER. COM. H.D. WOOD Kajaria) 1564 02-11-2017 960.00 1708 16-11-2017 948.00 -12.00 13 Tile Size 48X8 (ETER. STD. HD. WOOD Kajaria) 1580 05-11-2017 637.00 1919 06-12-2017 587.29 -49.71 14 Tile Size 4X2 (ETR.COM PO. HD Kajaria) 1251 06-10-2017 750.00 2392 17-01-2018 745.76 -3.24 15 Tile Size 4X2 (ETR.PREM. PO. HD Kajaria) 1564 02-11-2017 1....
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.....15 Less: Losses (Total of Column "M"X Column "G") 4,13,833.01 3,01,27,409.14 However, Total Sale after 15.11.2017 (Total of Column "H") 2,93,81,995.77 DIFFERENCE: 7,45,413.36" 23. The Respondent further submitted that the Average method so adopted by the DGAP for ascertaining base price rate was not recognized in any accounting standard or law /norms and nothing can be calculated correctly by this method. He has advanced his argument as below:- Table Amount (in Rs.) A B C TOTAL (A+B+C) Quantity Sold 100 300 600 1000 Sales Rates before 15.11.2017 per unit 234 400 525 Sales Rates after 15.11.2017 per unit 230 390 520 Actual Profiteering after 15.11.2017 0 0 0 0 Profiteering if Average Rate taken Rs. 386.33 AS the DGAP had done (230-386.33)X100=0 (390-386.33)X300=1101 (520-386.33)X600+=80202 81303.00 Actual Sales after 15.112017 23000 117000 312000 452000.00 However, sale on the basis of Average Rate 386.33X1000 386330.00 From the above average rate methodology, it ....
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....he consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him" (ii) Commissioner of Income Tax, Guwahati & Vs. M/s. Sati Oil Udyog Ltd. & ANR (2015) 56 taxmann.com 285 (SC) = 2015 (3) TMI 854 - SUPREME COURT which stated that "The burden of proving that the assessee has so attempted to evade tax is on the revenue which may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it." (iii) Government of Andhra Pradesh Vs. Guntur Tobaccos Ltd 1965 AIR 1396 = 1964 (11) TMI 65 - SUPREME COURT which stated that "Whether a contract for service or for execution of work, involves a taxable sale of goods must be decided on the facts and circumstances of the case. The burden in such a case lies upon the taxing authorities to show that there was a taxable sale, and that burden is not discharged by merely showing that property in goods which belonged to the party performing service or executing the....
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....RP. The DGAP has further submitted that the calculation sheet submitted by the Respondent was not acceptable since the MRPs had been considered for calculating profiteering instead of the transaction value. The DGAP has further submitted that all the other issues raised by the Respondent and also by the Applicant No. 1 had already been incorporated in his Report dated 05.12.2018. 30. The DGAP vide his report dated 28.03.2019 has stated that all these issues had already been covered in his Report dated 05.12.2018. 31. The Respondent filed his last submissions on 23.04.2019. Vide his above submissions, the Respondent has stated that the DGAP, vide his report dated 28.03.2019, had only tried to cross explain the written submissions of the Respondent but had not asked him (the Respondent) for any further information or data which the DGAP ought to have done. 32. We have carefully considered the material placed before us and all the submissions made by the Applicant No. 1 dated 14.01.2019, Respondent No. 1 dated 25.01.2019, 13.02.2019, 06.03.2019 and 23.04.2019, and by the DGAP dated 05.02.2019, 12.02.2019 and 25.03.2019. 33. It is revealed that the Central Govt.....
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....by the registered person to the recipient by way of commensurate reduction in prices." (iii) He has pointed out major errors in the DGAP's report. The first was that the method of calculation was arbitrary as average of all discounted prices was taken in place of MRPs based standard prices. Secondly, selection of single base price (rate) for different qualities of tiles whereas there was much variation among the various qualities of tiles in any size category and third one, that the element of Tax (GST) was also included in profiteering. Since the Respondent had not made supplies on the basis of MRPs but has done so on discounted prices, there appears to be no relevance of MRP in this particular case as the product having MRP of Rs. 1300/- was sold at Rs. 960/- to the Applicant No. 1 on both the occasions i.e. pre and post rate reduction of GST where from the base price was ascertained by reverse calculation and the base price for pre and post rate reduction of GST was arrived at as Rs. 750/- and Rs. 814/exclusive of tax at the rate of 28% and 18 % respectively. Second contention that the single base price for different qualities was taken, the same is also not accept....
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....product was being sold at much lower price than the MRP. Also his contention that he had been selling his goods at much lower prices than the MRPs and terming this act as passing on the benefit was also not correct and cannot be accepted. (v) As regards his submission that the period selected for calculation of profiteering was from 15th Nov 2017 to 30th June 2018 which seemed to be excessive, having regard to the stock holding period of the Respondent as well as periodicity of price revision by the manufacturer, since no documentary evidence to this effect was produced by the Respondent, hence this contention cannot be considered. (vi) On his submission that the transaction price was not the standard price at which the Respondent was entitled to sell the goods, but it was the discounted price most of the times, the Authority is of the view that with no document to sustain this averment especially because the supply invoice had no details of size, quality & texture etc. and the Respondent has not provided the invoices of his suppliers in respect of his purchases despite being asked to do so several times, merely supplying MRP list of his supplier is not sufficient....
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....ot hold good in the absence of details and comparable invoices provide by the Respondent. His contention that the quality was not considered does not hold good as the invoices produced by him do not carry details about quality, texture etc. and it is these parameters that are relevant here. Therefore, the DGAP has correctly based his calculations on averaging which is acceptable in the facts and circumstances of the present case. (xi) Also, the contention of the Respondent that the period selected for calculation of profiteering from 15.11.2017 to 30.06.2018 was excessive is also not acceptable as no proper grounds have been advanced by him as to why the same should not have been considered. (xii) The Respondent in his submission dated 23.04.2019 has stated the incorrect facts by claiming that in the hearing dated 06.03.2019, the Authority had set aside the calculations made by the DGAP and the DGAP was directed to investigate/calculate afresh the matter. In fact DGAP was only asked to submit his report on the submission dated 06.03.2019 of the Respondent which he has done vide his Report vide dated 28.03.2019. (xiii) The Respondent in his submission date....
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....nder Section 171 of the CGST Act, 2017 which aims at protection of consumers and not about collection of taxes. (xvii) The contention of the Respondent regarding the DGAP not properly investigating the instant case is also incorrect since the DGAP has properly investigated in line with the general principles adopted by this Authority. (xviii) The contention of the Respondent regarding no restriction on accepting the profit according to Article 19 (g) of the constitution of India does not hold since the profit/loss etc. has no relevance in any proceedings under Section 171 of the CGST Act, 2017. Profiteering, as referred under the said Section does not have any correlation with profit. (xix) The contention of the Respondent regarding not giving him a fair opportunity in the interest of natural justice is also incorrect since he was given adequate opportunities of hearing but even then he did not submit the purchase invoices and other documents as desired by the Authority (xx) The contention of the Respondent which is detailed in the Para 31 of the present order is also incorrect. In this context, we find that the Respondent had not cooperated duri....