TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 934
X X X X Extracts X X X X
X X X X Extracts X X X X
....as being sold at the pre rate reduction MRP. 2. The above issue was examined by the Standing Committee on Anti-profiteering in its meeting held on 08.10.2018, where it was decided, to refer the matter to the Director General of Anti-Profiteering (DGAP) to initiate detailed investigation in the matter and collect evidence necessary to determine whether the benefit of reduction in the rate of GST on supply of the product had been passed on by the Respondent to the recipients. 3. The DGAP, after completing the investigation has submitted his Report under Rule 129 (6) of CGST Rules, 2017 on 23.04.2019 pertaining to the period w.e.f. 27.07.2018 to 30.11.2018. 4. The DGAP in his Report has stated that a notice under Rule 129 of the CGST Rules, 2017 was issued on 02.11.2018, calling upon the Respondent to reply as to whether he admitted that the benefit of GST rate reduction had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice along with all the supporting documents. The Respondent was also given an opportunity to inspect the non-confidential evidences/inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....% as has been shown in the table below:- Sl.No Period Particulars Amount (in Rs.) 1. July, 2017 to 26.07.2018 Total Taxable Turnover exclusively from Sanitary Napkins (A) 10,07,45,295 2. July, 2017 to 26.07.2018 Input Tax Credit exclusively in respect of Sanitary Napkins (B) 1,27,11,749 3. Reversal of Input Tax Credit on closing stock as on 26.07.2018 (C) 42,56,338 4. July, 2017 to 26.07.2018 Input Tax Credit relevant to Taxable Turnover (D) = (B-C) 84,55,411 5. Ratio of Input Tax Credit to Taxable Turnover (%) (E)=(D/A*100) 8.39% 8. The DGAP further stated that due to the reduction in GST rate from 12% to Nil w.e.f. 27.07.2018, the ITC which was not available to the Respondent became part of his cost and thus, the commensurate base price of the product post GST rate reduction, would be higher to the extent of loss of ITC. The DGAP after taking into account the loss of ITC @8.39% assessed the commensurate price for each SKU and compared it with the base prices at which the Respondent had actually sold each SKU during the period from 27.07.2018 to 30.11.2018. 9. The DGAP also submitted that based on the outward taxable supplies made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mption he discontinued to levy GST on the existent base prices. He also enclosed copies of invoices to prove his point. 13. The Respondent also submitted that the suppliers of the product had increased the purchase prices (by approximately 30% on an average for each pack type), partially on account of loss of ITC on procurement of inputs, input services and capital goods and partially on account of various business considerations and taking into account his loss of ITC on various other procurement of inputs and input services the DGAP in his Report had rightly estimated the loss on account of ITC @8.39%. Therefore he claimed that his base price had increased only to the extent of loss of ITC. 14. The Respondent further stated that he had launched his products in November 2017 and the sales had started in December 2017 and therefore, he was in the process of fixing a suitable price on the basis of reduction in tax rate without the benefit of ITC. He also claimed that he had sold products worth Rs. 41 Lakhs for the period from April to June 2018 prior to the exemption and products worth Rs. 10.68 crores post exemption upto October 2018.Therefore he claimed that the price charged pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of 7.5% of the MRP for Distributor 1 and at the rate of 5% of the MRP for Distributor 2 (3.75) (3.75) Price to Distributor 31.25 32.5 18. The Respondent also provided sample copies of the invoices issued by the distributors to demonstrate that the post rate reduction base price had reduced as compared to the pre rate reduction prices. With regard to the inventory lying with the distributors he claimed that he had directed them to invoice the existing stocks at the reduced MRPs which was also advertised in one of the leading newspapers informing the consumers about the reduction in the MRPs. 19. The Respondent further submitted that Rule 129 (5) of the CGST Rules 2017 reads as "The Director General of Anti-profiteering shall make available the evidence presented to it by one interested party to the other interested party, participating in the proceedings". Based on this he claimed that the evidences relied on by the Applicant No. 1 should have been made available to him. He further submitted that in the case of Shiva Sahu vs. Union of India 2018 (362) ELT 439 (Cal.) = 2018 (6) TMI 1026 - CALCUTTA HIGH COURT it was held that it was the right of the person against whom the evi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....22. The Respondent further submitted that it was unreasonable to expect him to determine the net impact of the major changes in the GST rate structure and pass on the benefit immediately. The Respondent further claimed that he should not be penalised for not being able to conduct a comprehensive analysis with in a limited time frame. To support his claim he also relied upon the decision of the Hon'ble Allahabad High Court in the case of Commissioner of Income Tax vs. Prem Kumar {2008 (214) ITR 452 (ALL.)} = 2007 (11) TMI 603 - ALLAHABAD HIGH COURT where the Hon'ble High Court had stated that "Lex Non Cogit ad impossibilia" is an age old maxim meaning that the law does not compel a man to do which he cannot possibly perform. Requiring the assessee to file a proper and complete return by including the income under the head 'Capital gain' would be impossible for the assessee, in cases of the nature referred above" 23. The Respondent in his further written submissions dated 11.06.2019 stated that the DGAP had computed the profiteered amount on promo packs which were launched in the post-GST rate exemption period. The DGAP has adopted the pre GST rate exemption price of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....18 this product attracted 12% GST with the benefit of ITC on the inputs and input services which was denied from 27.07.2018 as the product was exempted from levy of tax. The GST paid on the inputs and on input service post rate reduction was a cost to the supplier, hence the base prices of the products would increase to the extent of denial of ITC. Accordingly the DGAP based on the turnover and the ITC available to the Respondent had rightly estimated the ratio of ITC to the taxable turnover as 8.39% which has not been disputed by the Respondent. The DGAP vide Annexure 27 of his Report has arrived at the base prices after taking into account the average price of the product for the period w.e.f. 01.07.2018 to 26.07.2018 i.e. prior to GST rate reduction. These base prices have been loaded with 8.39% as discussed above and accordingly recalibrated base prices per unit have been arrived at. These recalibrated base prices have been compared with the actual selling prices after the product was exempted and wherever the selling price of the product were more than the recalibrated base prices, it proved that the benefit of exemption of tax had not been extended to the recipients. Accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P has compared pre rate reduction average price with post rate reduction invoice wise price in respect of a particular SKU, as can be seen in the annexure-27 of the DGAP Report, the Respondent has strongly opposed this and has given his own calculations of average to average comparison, pre and post rate reduction when its done per product and per customer. Since the place of supply is only in Madhya Pradesh, the contention of the Respondent cannot be accepted because it is difficult to identify the customer with the purchase during the pre rate reduction period and the post rate reduction period. Therefore, we are of the opinion that since the actual prices are available for the post rate reduction, the DGAP has correctly followed this methodology and arrived at the profiteering amount. 31. In view of the above discussion the quantum of profiteering illegally obtained by the Respondent is determined as Rs. 42,52,370/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 as the Respondent has failed to passed on the benefit of rate reduction to his customers. Accordingly, the Respondent is directed to reduce his prices by way of commensurate reduction keeping in view the ....