TaxTMI 
TaxTMI 
2019 (12) TMI 588
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....7 and accordingly, Office Memorandum (OM) F. No. D-22011/NAA/17/ 2018/1039-41 dated 10.04.2018 was issued by the Secretary of this Authority advising the Respondent to provisionally deposit the quantified profiteered amount set aside by him on account of the reduction in the GST rates w.e.f.15.11.2017, into the Consumer Welfare Fund (CWF). Vide the above OM, the DGAP (erstwhile Director General of Safeguards) was also directed to conduct an investigation to determine the actual amount of benefit of reduction in the GST rates which was not passed on by the Respondent to the recipients. 2. The DGAP had called upon the Respondent vide his Notice dated 26.04.2018 issued under Rule 129 (3) of the above Rules, to determine and furnish requisite supporting documents to confirm the actual amount of the benefit of reduction in the GST rates that had not been passed on by him to the recipients. The period covered by the current investigation in respect of the items impacted by the reduction in the GST rates w.e.f. 15.11.2017 and 25.01.2018, is from 15.11.2017 to 30.06.2018. 3. The Respondent, vide his letter dated 02.04.2018 had informed that wherever it was practical, he had passed on the....
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....of Rs. 15,32,86,055/- in two instalments of Rs. 13,80,54,526/- and Rs. 1,52,31,529/- for the period from 15.11.2017 to 31.03.2018 and Rs. 1,25,46.668/- for the period from 01.04.2018 to 30.06.2018, in terms of aforementioned OM dated 10.04.2018 in CWF. Respondent vide his letter dated 19.09.2018 had also submitted the evidence with regard to the expenses incurred on passing on the GST rate reduction benefits, such as, expenses on obsolete packing material, expenses on manufacture and development of new packaging material and expenses on advertisements in the newspapers etc. for creating public awareness about the change in the GST rates. The Respondent vide his e-mails dated 26.09.2018, 27.09.2018, 28.09.2018 and 29.09.2018 had also submitted the data regarding pre-GST rate reductions selling prices of some of the SKUs which were not available in the sales data submitted by him. 5. The DGAP has also submitted that the Central Government, on the recommendation of the GST Council, had reduced the GST rates on several products supplied by the Respondent from 28% to 18% and from 18% to 12%, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 with effect from 15.11.2017 a....
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....ion in GST rates by way of a commensurate reduction in the prices of the goods being supplied by him. The DGAP has also pleaded that the Respondent's contention that the benefit of the GST rate reduction was passed on by way of giving discounts on the relevant products was not correct as the sample invoices submitted by him did not mention that the discounts were given due to the GST rate reductions, however, on the other hand, these invoices revealed that the discounts offered were in accordance with the general discount pattern which was being followed by the Respondent in the course of his business. The DGAP has also averred that since the pattern of discounts offered in the pre and post-GST rate reduction periods was the same, the discounts offered post-GST rate reduction were a continuation of the earlier discounts and hence, they could not be attributed to the GST rate reduction. The DGAP has also intimated that the Respondent has also submitted that there were practical difficulties in passing on the benefit on certain packs by lowering the Maximum Retail Prices (MRPs) due to unavailability of coins i.e. price point products and the taste parameters and therefore, the benefi....
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....nd other Government outlets and (c) Distributors and Modern Trade. He has further submitted that the base prices of the SKUs varied across the different channels and also varied within the same channel e.g. prior to the GST rate reduction w.e.f. 15.11.2017, the base prices at which the Respondent was selling "Nescafe Classic Jar 24x50g PR Dbl Maggi In" to the CSD ranged between Rs. 1,803.70 to Rs. 2,716.12, to Para-military Force Canteens and other Government outlets at the base price of Rs. 2,455.22 and to Distributors and Modern Trade at the base prices ranging between Rs. 2,414.40 to Rs. 2,656.30. Therefore, the DGAP has stated that the average base prices of supplies to each of the aforementioned three channels have been considered separately for calculation of the base prices during the pre-rate reduction period. 9. He has further stated that based on the pre and the post-reduction GST rates and the details of the outward taxable supplies for the period from 15.11.2017 to 30.06.2018, a total of 374 SKUs were impacted by the GST rate reductions w.e.f. 15.11.2017 and 25.01.2018, out of which 325 SKUs were impacted by the GST rate reductions w.e.f. 15.11.2017 and 49 SKUs were im....
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....nt for the Respondent. Further hearings were held on 12.12.2018, 20.12.2018, 10.01.2019 (adjourned), 03.04.2019 (adjourned), 12.04.2019, 02.05.2019, 07.05.2019, 28.05.2019, 14.06.2019 (adjourned), 28.06.2019 (adjourned) and 01.07.2019. 11. The Respondent has filed the following replies during the course of the proceedings:- (i) Filed preliminary reply dated 07.12.2018 along with 18 Exhibits. (ii) Furnished additional documents on 20.12.2018 requesting to treat them as confidential in accordance with Rule 130 of the CGST Rules, 2017. (iii) Rejoinder dated 12.04. 2019 to the replies filed by the DGAP dated 01.02.2019 and 15.03.2019. (iv) Reply dated 02.05.2019 furnishing confidential information in accordance with Rule 130 of the GST Rules. (v) Reply dated 07.05.2019 with details of the reply dated 02.05.2019. (vi) Reply dated 28.06.2019 consolidating all the factual and legal submissions. 12. The Respondent in his above submissions has stated that he was a subsidiary of Nestle Group, Switzerland and was a listed company with 37.26% public shareholding comprising of 90,000 shareholders and was present in India for over 100 years and followed ethical practices being a la....
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....each product category based on the sales contribution of the SKUs in that product category with due consideration to the lower priced SKUs. The sale contribution of the SKUs in the product category impacted by the GST rate changes with effect from 15.11.2017 was determined by aggregating the actual sales of the SKUs from January 2017 to September 2017 with the planned sales from October 2017 to December 2017, with annualized impact of price changes and new products. For GST rate change with effect from 25.01.2018 actual sales of SKUs in boiled sugar confectionary for the financial year January 2017 to December 2017 were taken with annualized impact of price changes and new products. Applying the above methodology for the period from 15.11.2017 to 30.06.2018 for the products impacted by the GST rate changes w.e.f. 15.11.2017 and for the period from 25.01.2018 to 30.06.2018 for the products impacted by the GST rate change w.e.f. 25.01.2018, the benefit on account of rate reduction to be passed on was estimated at around Rs. 204 Crores whereas the actual aggregate benefit passed on was higher at around Rs. 209 Crore, comprising of benefit passed through MRP reductions and/or more quan....
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.... with effect from 15.11.2017 that has not been passed on to the consumers with the necessary documents/evidences. Thereafter, the Respondent has provided the details sought by the DGAP through various communications. However, the Report was silent about his letter dated 11.09.2018 in which the methodology adopted by the Respondent to pass on the benefits from GST rate reductions, determination of the actual amount of benefit not passed on as per the methodology and the calculations to demonstrate that there has been no profiteering by the Respondent and other points were mentioned. The Respondent had received communication dated 06.06.2018 from this Authority on the constitution of the CWF and thereafter, he had suo moto deposited the amount set aside in the above Fund in 2 tranches as follows:- (i) 1st Tranche on 06.07.2018 aggregating Rs. 15,32,86,055/-, comprising a sum of Rs. 13,80,54,526/- that was set aside till 31.01.2018 with respect to the GST rate changes effective from 15.11.2017 and a sum of Rs. 1,52,31,529/- set aside till 31.03.2018 with respect to rate changes effective from 25.01.2018 and (ii) 2nd Tranche on 21st August, 2018 of Rs. 1,25,46,668/- set aside for....
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....after taking in to account the operational, manufacturing and legal constraints and with an intent to ensure that there was no disruption in the supply of his products to the consumers. In respect of the Price Point Products which play a critical role in the Fast Moving Consumer Goods (FMCG) sector the price points were in the multiples of Rs. 5/- like MRPs of Rs. 5/-, Rs. 10/-, Rs. 15/-, Rs. 20, Rs. 25/- and the price points below Rs. 5/- were Rs. 1/- and Rs. 2/-corresponding to the available coinage. For products sold at the price points, the business option available was to pass on the benefit through extra quantity and reduction of MRPs was not an option as consumer demand was based on the price point and the consumer over years was used to the price points. 23. That the packaged food products have MRPs, which were in multiples of Re. 1/- however, coinage below 25 paise has been scrapped by the Reserve Bank of India and even 50 paise coinage was practically not available in the trade. The MRPs of the products in the market were in the multiples of Re. 1/- such as 1, 2, 5 and 10 etc. The products did not have MRPs with coinage such as Rs. 1.84, Rs. 4.50, Rs. 4.75 and Rs. 9.25 e....
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....modities) Rules, 2011 reads as follows:- "(e) The retail sale price of the package shall clearly indicate that it is the maximum retail price inclusive of all taxes and the price in rupees and paise be rounded off to the nearest rupee or 50 paise" Till 01.01.2018, the definition of 'retail sale price' under Rule 2 (m) was as under: "(m) 'retail sale price' means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer and the price shall be printed on the package in the manner given below : 'Maximum or Max. retail price Rs. ....../Rs.......inclusive of all taxes or in the form MRP Rs......./Rs............incl. of all taxes after taking into account the fraction of less than fifty paise to be rounded off to the preceding rupee and fraction of above 50 paise and upto 95 paise to the rounded off to fifty paise". Therefore, Under the above Rule the retail sale price (MRP) of a packaged commodity could only be in Rupees or in fraction of 50 paise and any package having MRP which has in fractions such as 15 paise, 25 paise or 60 paise etc. would be violation of the above Rules. 29. The Respondent was under bonafide belief that the intent of....
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....int products was not an option as the consumer demand was based on the price point and the consumer over years was used to the price point. When extra quantity was given on a pack on the same MRP, it resulted in price reduction per unit measure of that product pack. In respect of MUNCH pack sold at price point MRP of Rs. 5/- with 10.1 Gms. before the rate reduction the benefit would be around 49.5 paise per Gram of the product. To pass GST benefit quantity of the product pack with MRP of Rs. 5/was increased from 10.1 Gms. to 11.1 Gms. which translated into benefit of 49.5 paise having been passed on to the consumer (1 Gm. additional quantity x 49.5 paise per Gram rate = 49.5 paise benefit passed i.e. 9.9% of the original price). The approach of the DGAP for arriving at the profiteering by comparing the rate per case of the pre and the post SKUs without taking in to account the two different weight's was not correct e.g. 10.1 Gm. MUNCH going up to 11.1 Gm. post GST rate reduction. The extra quantity passed was not temporary and the adjustment of the quantity was the norm followed by industry for price point packs, even prior to the passing of the GST benefit. He has also provided de....
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....ainst GST benefit of 7.81%, benefit passed was around 7.83%. 34. That in the case of few SKUs relating to the product category of Instant Coffee, the benefit accruing due to the rate reduction with effect from 15.11.2017 was offset by the increase in the incidence of tax when GST was introduced on 01.07.2017 and hence the benefit was not passed on. He has also submitted the list of such products impacted by the rate reduction with effect from 15.11.2017 where no commensurate benefit was to be passed as the benefit was offset by the increase in the tax earlier. 35. That the benefit to be passed on was determined by the Respondent at the time when the rate reductions were announced, which was with immediate effect. The benefit to be passed, was determined for each product category based on the sale contribution of the SKUs in that product category with due consideration to the lower priced SKUs. The sales contribution of the SKUs in the product category impacted by the GST rate changes with effect from 15.11.2017 was determined by aggregating the actual sales of the SKUs from January 2017 to September 2017 with the planned sales from October 2017 to December 2017, with annualized i....
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....by him and the benefit passed on, has attained finality and should form the basis to determine if there has been profiteering. He has also referred to the supplementary Report dated 11.06.2019 furnished by the DGAP and stated that the DGAP has again not addressed the issue of benefit of Rs. 192 Crore passed by the Respondent based on the methodology followed by him and hence, the above amount has attained finality. The Respondent has also contended that the DGAP has also not raised any objection against the estimated quantum of Rs. 204 Crore of the amount of benefit of to be passed on and the actual benefit passed of Rs. 209 Crore and therefore, the above amount should be considered the final amount of benefit to be passed on. 39. That the Respondent has adopted such a methodology that there was non-retention of the benefit by the Respondent and it was duly passed on to the recipients. SKUs where the Respondent has passed benefit by way of extra grammage or no benefit has been passed or proportionate benefit has not been passed, was due to operational reasons such as prevalent practices, practicality and legal reasons. He has also given the details of the key SKUs where no benefit....
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....of SKUs across the product categories on which higher benefit has been passed and the quantum of additional benefit passed, would clearly demonstrate the purpose of higher benefit being passed only to offset the SKUs where it was not practical to pass any/ proportionate benefit. The Respondent had explained to this Authority the methodology followed by him vide his letter dated 02.04.2018 which was duly considered by it and vide its letter dated dated 10.04.2018 no objection was raised on the methodology followed and the Respondent was directed to provisionally deposit the amount set aside in the CWF and hence, implicitly the methodology of the Respondent was accepted by this Authority. In case this Authority had raised objection on the methodology the Respondent would have had opportunity to modify it in the future as per the directions of this Authority. 41. That the Respondent had met this Authority on 23.02.2018 and 26.03.2018 to discuss the manner in which the Respondent has passed the GST benefit on products where reduction in the GST rate was announced on 15.11.2017. Thereupon, the Respondent vide his letter dated 02.04.2018 had recorded his discussions by stating that he h....
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....cordingly, 9.9% of the Respondent's net realization from the sale of old stocks of MUNCH with quantity of 10.1 Gm. has been set aside. 44. That the amount accumulated on that product category net of compliance costs outlined below, would be passed on as benefit on the SKUs in the particular product category. 45. That the amount has been set aside during the quarter w.e.f. 01.01.2018 to 31.03.2018, for some product categories where the rate changes were effective from 15.11.2017 and for product category of Boiled Sugar Confectionary (HSN Code 17.04) where rate change was effective from 25.01.2018, the amount set aside during the quarter will be finalized and subjected to a limited review by statutory auditors. 46. That the Respondent was in the process of detailing the steps to pass on the 'set aside benefit' at the same product category level to the consumers but after his meeting on 23.02.2018 with the Authority, the same was put on hold, pending conclusions to our discussions. 47. That in response to his letter dated 02.04.2018 the Respondent has received OM dated 10.04.2018 from this Authority provisionally to (i) deposit the amount set aside of Rs. 12.6 crore as on 31.12.20....
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....y disclosed by the Respondent to the Authority has to be followed by the DGAP in determining the actual amount of benefit and therefore, the DGAP could not have invoked Section 129 of the CGST Act for investigation. 52. That the impugned investigation and Report of the DGAP has gone much beyond the terms of investigation as was directed by this Authority and has questioned the methodology followed by the Respondent even in respect of those cases which have been implicitly accepted by this Authority. The investigation was to be conducted only in respect of the products for which the amount was set aside and for the period from the date of rate change till the date amounts were set aside following the methodology implicitly accepted by the Authority. Accordingly, for the products where the amounts were set aside, the investigation for the rate changes with effect from 15.11.2017 should be for the period from 15.11.2017 to 31.01.2018 and for the rate change with effect from 25.01.2018 it should be for the period from 25.01.2018 to 30.06.2018. Thus, the impugned Report and investigation was entirely beyond the scope of reference ordered by this Authority and also not in compliance wit....
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....timated to be Rs. 61.3 Crore due to ignoring of passing of the benefit by (a) more grammage (extra quantity), (b) passing of the benefit at the product category HSN level, (c) by applying wrong base price and by (d) ignoring the expenses incurred on changeover of Rs. 3.2 Crore. 58. That from the DGAP's Reports dated 01.02.2019 and 15.03.2019 it appeared that only the errors in respect of profiteering amounting to Rs. 10.6 Crore and Rs. 30 Lakh mentioned above have been reexamined and accepted by the DGAP which has resulted in reduction of alleged profiteering to Rs. 89.73 Crore. The other errors have not been examined by the DGAP and the same should be considered by this Authority. 59. That the DGAP has not considered the benefit passed by way of more grammage (extra quantity) at the SKU level amounting to Rs. 14.86 Crore and he has wrongly included the GST element in the calculation estimated to be Rs. 9.75 Crore (Tax component in total profiteering amount of Rs. 11.9 Crore less tax component pertaining to grammage benefit) and after adjusting the amount of suo moto deposit of Rs. 16.58 Crore and the amounts wrongly included, the balance profiteering was on account of the SKUs c....
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....nd to which period the base prices pertained. The method adopted by the DGAP by taking the average base prices pre rate reduction has resulted in an incongruent situation where for the very same SKU of the product, for some supplies the Report has shown no profiteering and for some other supplies, the same was showing profiteering. The wrong base prices were on two accounts:- a. Calculation Error: There were calculation errors in the base prices taken by DGAP in his workings. Some of the examples of calculation errors were annexed as Exhibit - 22 to his reply dated 12.04.2019. b. Incongruent average base price: The method adopted by the DGAP in taking the average base prices pre rate reduction has resulted in an anomaly where for the very same SKU of the product, the report was showing no profiteering and for some other supplies, it was showing profiteering which has been explained in Exhibit-17 attached to the reply dated 07.12.2018. Further, discounts and commissions to the customers / recipients impacted the net realization which has resulted in profiteering in DGAP's Report. 64. That the Respondent vide his letter dated 27.09.2018 and e-mail dated 29.09.2018 addressed ....
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.... was determined by the Respondent at the time when the rate reduction was announced, which was with immediate effect. 67. That the Respondent has also submitted the details of the benefit passed through price reductions and grammage increase per SKU wise vide Exhibit-25 on 07.05.2019 which has to be read in conjunction with the methodology adopted by the Respondent. 68. That the DGAP has repeatedly refused to furnish his comments on the submissions filed by the Respondent as was evident from his communication dated 11.06.2019 due to which the entire proceedings should be quashed. 69. That the 'commensurate' benefit to be passed has to be determined by offsetting any cost incurred by the manufacturer/ supplier, therefore, the commensurate benefit could not always be determined in absolute terms and a methodology was therefore necessary to take into account different scenarios. Malaysia has enacted the Price Control and Anti-Profiteering Act, 2011 and the Price Control and Anti-Profiteering (Mechanism To Determine Unreasonably High Profits for Goods) (Net Profit Margin) Act, 2014 which has defined profiteering as "making unreasonably high profits". Section 15 of the above Act prov....
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....om any other person was the starting point for initiating proceedings under the above Rule. However, in the present case, no such application either in the prescribed form or in any other manner has been made either to the Screening Committee or the Standing Committee alleging profiteering against the Respondent. Thus, the entire proceedings initiated against the Respondent were without jurisdiction and liable to be quashed. 73. That as per Rules 128 and 129 of the above Rules the prescribed procedure was required to be followed both by the DGAP as well as this Authority. However, in this case there has been no prima facie satisfaction either of the Screening committee or the Standing Committee that the Respondent has not passed on the benefit of rate reduction and hence, there has been no recommendation by the Standing Committee to the DGAP to conduct detailed investigation. In fact, there was no collection of evidence by the DGAP to even conduct the investigation, thus, none of the statutory requirements for even initiating the investigation by the DGAP in the present case, have been followed. 74. That in the present case, the trigger point for the DGAP to initiate investigatio....
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.... in violation of the principles of natural justice as show cause notice has not been issued to the Respondent proposing the action to be taken against him by this Authority. Rule 133 of the CGST Rules, 2017 inter alia provided that this Authority should pass an order within a period of 3 months from the date of the receipt of the Report from the DGAP and in case this Authority determined that a registered person has not passed on the benefit it may order the following:- (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest; (c) the deposit of an amount equivalent to Consolidated Fund of India where the eligible person does not claim return of the amount or is not identifiable; (d) imposition of penalty as specified under the CGST Act; and (e) cancellation of registration under the CGST Act. 78. That on the basis of the aforementioned powers of this Authority, it can be said that this Authority under Section 171 of the above Act would determine the rights and liabilities of the registered person with civil and/or penal consequences. However, Rule 133 did not pro....
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....l justice which must be read into sub-rule (5) of Rule 9B, wherever called for." 81. That in the case of Vasta Bio-Tech Pvt. Ltd. v. Assistant Commr. 2018 (360) ELT 234 = 2018 (1) TMI 1437 - MADRAS HIGH COURT, the Hon'ble Madras High Court has held that if a statute was silent about opportunity being granted to the assessee to put forth his case, then principles of natural justice have to be read in the statute. The extract of the relevant portion of the judgment was as under:- "5. ..and if the statute is silent, then, principles of natural justice has to be read into the statute, so that the assessee has reasonable opportunity to put forth his case." 82. The Respondent has also cited the case of Dharampal Satyapal Ltd. v. Dy. Commissioner of Central Excise 2015 (320) ELT 3 = 2015 (5) TMI 500 - SUPREME COURT, where the Hon'ble Supreme Court has observed that applicability of principles of natural justice was not dependent upon any statutory provision. The principle has to be mandatorily applied irrespective of the fact as to whether there was any such statutory provision or not. In the case of Anrak Aluminium Ltd. v. Commissioner 2017 (4) G.S.T.L. 248 = 2017 (5) TMI 1200 - CEST....
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.... be computed and whether such computation must be done invoice-wise, product-wise, business vertical-wise or entity-wise, etc. Thus, in the absence of the same, there was lack of transparency as the results could vary from case to case resulting in arbitrariness and violation of Article 14 of the Constitution of India. 86. That in other countries like Malaysia the Government has introduced the 'Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations 2014, which provided for the mechanism to calculate whether any company has profiteered on account of GST or not. The anti-profiteering measures in Australia revolved around the 'Net Dollar Margin Rule' serving as the fundamental principle for its guidelines. These regulations have been set as barometers for calculating profiteering. 87. That in the case of Commissioner of Income Tax Bangalore v. B.C. Srinivasa Setty (1981) 2 SCC 460 = 1981 (2) TMI 1 - SUPREME COURT, the Hon'ble Supreme Court has held that charging section was not attracted where corresponding computation provision was inapplicable. In this regard, reliance was also placed on the case of Eternit Everest Ltd....
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...., If any, should be computed at the entity level and not on item (SKU) level. The interpretation given to Section 171 and rules made thereunder by the DGAP without considering the 'marginal notes' appended to Section 171 and heading of Chapter XV of CGST Rules, was a legally untenable interpretation. The text of Section 171 did not use the term 'profiteering'. It is mentioned in the marginal notes to Section 171 and in the heading of Chapter XV of CGST Rules only. In order to understand the scope of Section 171, it was pertinent to understand the meaning of the term 'profiteering' which has been used in the marginal notes. 89. That It was a settled principle of law that marginal notes could be used as an internal aid for interpretation to address any ambiguity in the provision. In this regard, reliance was placed on the case of Indian Aluminium Company v. Kerala State Electricity Board (1975) 2 SCC 414 = 1975 (7) TMI 158 - SUPREME COURT, wherein the Hon'ble Supreme Court has held that the marginal notes could be relied upon to show what the section was dealing with. In another case of Union of India v. Harbhajan Singh Dhillon (1971) 2 SCC 779 = 1971 (10) TMI 31 - SUPREME COURT, th....
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.... reduction by using the word 'commensurate' which in this context would mean 'appropriate', 'adequate' or 'proportionate'. The Respondent has also cited the following dictionary meanings of the word 'commensurate':- Random House Compact Unabridged Dictionary, Special Second Edition: Having the same measure; of equal extent or duration. 2. Corresponding in amount, magnitude or degree...3. Proportionate, adequate. 4. Having a common measure The New International Webster's Comprehensive Dictionary of the English Language, Deluxe Encyclopaedic Edition: Commensurable 2. In proper proportion; proportionate. 3. Sufficient for the purpose or occasion. 4. Adequate; of equal extent The Compact Edition of the Oxford English Dictionary: Having the same measure; of equal extent, duration or magnitude; 2. Of corresponding extent, magnitude, or degree; proportionate, adequate 3. Corresponding in nature; belonging to the same sphere or realm of things. 4. Characterized by a common measure 10th Ed., The Concise Oxford Dictionary: "corresponding in size or degree; in proportion" Chambers 21st Century Dictionary: "1. in equal proportion to something, appropriate to it 2. E....
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....vernment of India. In an appeal filed by the EU before the Appellate Body, the Appellate Body held that the practice of not netting off of positive dumping margins and negative dumping margins was not correct. Thus, the Government of India succeeded before the WTO Appellate Body that positive and negative dumping margins must be taken together and therefore got lower dumping margins for Indian exporters. European Commission accepted the decision and revised dumping margins not only for bed linens cases but also for all other cases against India. 96. That the position taken by the Government of India before the WTO was binding on the DGAP in calculating the alleged 'profiteering' and therefore, this Authority should follow the above stand taken by the Government of India and allow 'netting off' in determining whether the Respondent has passed the benefit or not. 97. That as per the provisions of Section 171 of the CGST Act the benefit could be ascertained product category wise, service category wise or entity however, the above Section or the rules or the procedure laid down by this Authority was silent on this aspect of calculation/computation in the absence of which the Responde....
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....nd Services Tax Rules, 2017. Since the Respondent had himself admitted 'Profiteering' in his letter addressed to the Authority he was justified in conducting a detailed investigation based on the aforesaid OM. The Report dated 08.10.2018 submitted by him had been prepared on the basis of the data submitted by the Respondent which incorporated the details taken into account and the logic behind the quantification of profiteering. The Respondent's submission that products/SKUs not impacted by the rate reduction w.e.f. 15.11.2017 or 25.01.2018, had been wrongly included (involving amount of Rs. 10.9 Crores), was examined and finally a fresh Report in this regard was furnished on 15.03.2019. His above Report has stated that the investigation revealed that there had been profiteering by the Respondent and hence, the quantum of profiteering had been determined. 101. That the DGAP has also submitted that as per Rule 126 of the CGST Rules, 2017, this Authority has been empowered to determine the methodology and procedure for determination as to whether the reduction in the rate of tax or the benefit of ITC had been passed on by the registered person to the recipients by way of commensurat....
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....l information (v) Reply dated 07.05.2019 with details of the reply dated 02.05.2019. (vi) Reply dated 28.06.2019 consolidating all the factual and legal submissions 105. It is also revealed that the Respondent is a subsidiary of Nestle Group, Switzerland and is a public shareholding company comprising of 90,000 shareholders. The Respondent is engaged in the manufacture and sale of various food products including coffee, noodles, chocolates and confectionary etc., under the brand names NESCAFE, MAGGI and KITKAT etc. The Respondent sells his products mainly through his distributors and also makes sales to the CSD, Government outlets and the Modern Trade etc. 106. It is further revealed that the Central and the State Governments vide Notification No. 41/2017 Central Tax (Rate) dated 14.11.2017 had reduced the rates of GST from 28% to 18% and from 18% to 12% w.e.f. 15.11.2017 and vide Notification No. 06/2018 Central Tax (Rate) dated 25.01.2018 had reduced the rate of the above tax from 18% to 12% w.e.f. 25.01.2018. 107. It is also apparent from the record that a total number of 370 SKUs being manufactured and sold by the Respondent were impacted by the rate reduction w.e.f. 15....
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....e discounts offered post-GST rate reductions were a continuation of the earlier discounts. The tax invoices attached by the Respondent with his submissions dated 07.12.2018 also do not disclose that the Respondent had given discounts to his customers on account of benefit of tax reductions. Therefore, the above discounts cannot not be construed to have been given due to the GST rate reductions and hence, the above claim of the Respondent cannot be accepted. 110. It is also clear from the perusal of his submission dated 07.12.2018 that the Respondent has claimed to have passed on the above benefit at the aggregate level of the SKUs or at the product level whereas he was required to pass it on every SKU so that the benefit could reach every buyer of that SKU. Passing on of the benefit to another customer at the expense of the customer who was legally entitled to receive it or complete denial of the above benefit to such customer amounts to violation of the provisions of Section 171 (1) of the above Act as well as Article 14 of the Constitution as the intent of the above provision is to pass on the benefit to every customer on his every purchase of a SKU. The Respondent has no discre....
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....had simply transferred his legal obligation to his distributors who had no power to re-fix the MRPs and stamp/re-sticker/print them on the impacted SKUs. Since, the MRPs were not reduced and affixed on the above SKUs by the Respondent there is no likelihood of their being sold to the consumers at the commensurate reduced rates keeping in view the above rate reductions. Accordingly, the Respondent has acted in contravention of the provisions of Section 171 (1) of the above Act. 112. The Respondent has also claimed to have passed on the benefit at the product category level based on the sales contribution of the SKUs in that product category with due consideration to the lower priced SKUs. Accordingly, vide Exhibit-3 of his submissions dated 07.12.2018 he has calculated that overall benefit of 5.08% was requited to be passed on 8 product categories which were impacted by the tax reductions whereas he had passed 5.78% benefit. Vide Exhibit-4 and 5 the Respondent has claimed that he had passed benefit of Rs. 204 Crore at the product category level against the benefit of Rs. 192 Crore and in case the set aside amount of Rs. 16.6 Crore was also included the total amount passed was Rs. 2....
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....in to account the sales contribution of all the SKUs in that product category with consideration of lower priced SKUs. There is also no justification why the sales which have taken place from January 2017 to June 2017 should be taken in to account when the GST has been implemented w.e.f. 01.07.2017. The Respondent has also not furnished the actual mathematical calculations which he has adopted while computing the benefit of tax reductions to prove his above methodology. The most simple and appropriate methodology required to be adopted by the Respondent was to calculate the new MRP for each SKU as per the tax reductions and to charge it accordingly. Therefore, the above methodology adopted by the Respondent is illogical, arbitrary and illegal and hence the same cannot be approved and held to be correct. Accordingly, the claim of the Respondent that he had passed on benefit of Rs. 209 Crore as against the benefit of Rs. 204 Crore as has been shown in Exhibits-4 & 5 is fallacious and hence the same cannot be accepted. 114. The Respondent has further claimed that he has computed the benefit from 15.11.2017 to 30.06.2018 to correspond with the period taken by the DGAP whereas it shoul....
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.... Rs. 12.6 Crore for the period from 15.11.2017 to 31.12.2017 and claimed it to have been set aside for passing it on the SKUs pertaining to the same product category in future. The above claim of the Respondent was incorrect as the set aside amount pertained to those customers who had already purchased the SKUs sold by the Respondent and hence it was not possible to pass the benefit to them and it could also not have been passed to the future customers as it did not pertain to them. Moreover, the Respondent had also proposed to pass more benefit than what was required to be passed on the SKUs belonging to the same product category, which he could not have done legally. Perusal of the above letter also shows that the Respondent had claimed to have passed on the above benefit by giving discounts to his distributors. However, as mentioned supra the Respondent had not given any discount on account of tax reductions. Charging of the reduced rates of GST also does not amount to passing on the benefit as the Respondent was legally bound to charge the reduced rates of tax once they had been notified. He has also claimed that he had written letters to his distributors to pass on the benefit....
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....ed 16.11.2017 supra. The expenditure incurred on the new printing cylinder and the advertisements can also not be adjusted against the above benefit as there is no such provisions in the CGST Act, 2017. The tax invoices enclosed by the Respondent with the above Exhibit also do not disclose that the benefit of tax reductions has been passed on as no comparison can be done on the basis of these invoices between the prices which were prevalent pre-GST rate reductions and post-GST rate reductions. Therefore, all the above contentions of the Respondent are incorrect and hence, they cannot be accepted. 116. This Authority on receipt of the letter dated 02.04.2018 of the Respondent vide its OM dated 10.04.2018 (Exhibit-7 Colly) had advised the Respondent to provisionally deposit the amount of Rs. 12.6 Crore in the CWF to be constituted under Section 57 of the CGST Act, 2017. The above OM reads as under:- "National Anti-profiteering Authority Department of Revenue, Ministry of Finance, Tower-I, 6th Floor, Jeevan Bharti Building, Connaught Place, New Delhi F.No. D-22011/NAA/17/2018/ Date: 10.04.2018 OFFICE MEMORANDUM Sub: Deposit of the suo moto profiteering amount by M/s. Nestle I....
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....ndent or not. 118. The Respondent has further contended that vide his letter dated 20.04.2018 (Exhibit-7) he had sought clarification and guidance to make the provisional deposit and adjustment of the expenses incurred from this Authority. In this connection it would be relevant to mention that the duties of this Authority have been clearly explained vide Rule 127 of the CGST Rules, 2017, according to which this Authority is neither a consultative nor an advisory body and hence there was no question of advising the Respondent on the issues raised by the Respondent in his above letter. 119. The Respondent has also stated that he had received a Notice dated 26.04.2018 (Exhibit-8) issued by the DGAP for initiation of investigation under Rule 129 of the CGST Rules, 2017 vide which he was directed to determine the total actual amount of the benefit with effect from 15.11.2017 that has not been passed on to the consumers with the necessary documents/evidences. The above Notice was issued by the DGAP in terms of Rule 129 (3) of the above Rules and hence the same has been issued to the Respondent correctly as the Respondent had himself admitted to have resorted to profiteering. The Respo....
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....04.2018 (Exhibit-6) mentioned above. The above amount was also computed as an afterthought as has been discussed in para supra. The seriousness of the Respondent to pass on the benefit can be gauzed from the fact the Respondent had not computed the benefit for the quarter 01.04.2018 to 30.06.2018 till 21.08.2018 when it was finally deposited in respect of the rate reduction which had occurred on 25.01.2018 as is clear from his letters dated 06.07.2018 and 21.08.2018 (Exhibit-10 Colly). 121. It is also apparent from the record that the DGAP vide his Report dated 08.10.2018 has concluded that the allegation of profiteering by way of either increasing the base prices or by maintaining the same selling prices and by not reducing the selling prices of the products commensurately, despite a reduction in the GST rates stood confirmed against the Respondent to the tune of Rs. 100,98,03,096/- which shows that the Respondent has not reduced his prices as he was required to do and hence he had resorted to profiteering. 122. The Respondent has also submitted that vide his letter dated 02.04.2018 he had disclosed the methodology adopted by him for complying with the provisions of Section 171 ....
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....ax was reduced from 18% to 12% that the Respondent had neither reduced the MRP nor increased the quantity and had continued to deny the benefit of tax reduction to millions of customers. Similar is the case in respect of the NESCAFE Classic single serve pack having MRP of Rs. 2. Hence, the above claim of the Respondent is not tenable. 125. The Respondent has further argued that the packaged food products have MRPs, which were in multiples of Re. 1/- however, coinage below 25 paise has been scrapped and 50 paise coinage was not available. The MRPs were in the multiples of Rs. 1/- such as 1, 2, 5 and 10 etc. and the products did not have MRPs with coinage such as Rs. 1.84, Rs. 4.50, Rs. 4.75 and Rs. 9.25 etc. and in case the GST benefit involving coinage was passed on, it was unlikely to reach the end consumer. He has also cited the case of MAGGI Noodles pack bearing MRP of Rs. 5/- per pack and claimed that to pass on the benefit the MRP was required to be reduced to Rs. 4.75 and in the absence of 25 paise tender, reducing MRP to Rs. 4.75 was not a feasible option. The above argument of the Respondent is not justified as it was for the customer to provide the required amount of pric....
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....2.04.2019 filed by the Respondent. Perusal of the above Exhibit shows that the Respondent under the garb of changing of the mould has not passed on the benefit of tax reduction. As there is no evidence of his having changed the mould on record it appears that the Respondent has not passed on the benefit yet. 128. The Respondent has also placed reliance on Rule 6 (1) (e) and (m) of the Legal Metrology (Packaged Commodities) Rules, 2011 as it was existing on 01.01.2018 and contended that the retail sale price (MRP) of a packaged commodity could only be in Rupees or in fraction of 50 paise and any package having MRP which has fractions such as 15 paise, 25 paise or 60 paise etc. would be violation of the above Rules. In this connection it would be relevant to mention that the Respondent has to act in consonance with the above Rules and in case MRP of any of his products is fixed in the fractions he has to round off the same. Therefore, the above contention of the Respondent is wrong as he cannot act in contravention of the law. 129. The Respondent has further contended that the benefit was to be passed on immediately and the Respondent could not deposit it in the CWF. However, it is....
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....nted to purchase the SKU having MRP of Rs. 5/- and he could not have passed the benefit to another buyer who had purchased the pack having MRP of Rs. 12/-. As per the provisions of Section 171 (1) of the CGST Act, 2017 the benefit has to be passed on to each customer on every supply and the Respondent could not have denied the benefit to an eligible customer arbitrarily as per his own convenience as he was bound to take note that the Central and the State Governments have given the above benefit by sacrificing their own revenue in the interest of the general public and the Respondent has no right to deny it to a particular customer at the expense of another customer when the above benefit is not being paid out of his own account. The above action of the respondent amounts to violation of Article 14 of the Constitution as it denies equal treatment to a customer in comparison to another customer as well as provisions of Section 171 (1) of the CGST Act, 2017. 132. The Respondent has further stated that in the case of 6 SKUs (Exhibit-13 of his submissions dated 07.12.2018) relating to the product category of Instant Coffee, the benefit accruing due to the rate reduction with effect fr....
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....mount cannot be taken as the amount of benefit passed on. Similarly the amounts of Rs. 16.6 Crore and Rs. 209 Crore which have been claimed to have been set aside and passed on as benefit in the above Exhibit cannot be construed to have been correctly computed and passed on as the methodology adopted to compute them is inherently flawed. 135. The Respondent has further submitted that where it was not possible to pass on the benefit by price reductions he has passed it by commensurately increasing the grammage or quantity of the SKU. The first such claim was made by the Respondent vide Exhibit-5 attached to his submissions dated 07.12.2018 in which the amount passed as grammage benefit was included in the amount of Rs. 209 Crore which was claimed to have been passed on by the Respondent as overall tax benefit. However, details of the amount of grammage benefit given and the amount passed were not explained in the above Exhibit. The names of the SKUs on which the above benefit was passed were also not mentioned by the Respondent in his above submissions. He had also not mentioned the amount of benefit which was required to be passed on these SKUs and the amount of quantity which was....
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....SKUs belong. The extra benefit of 5.1% shown in respect of the SKUs mentioned at Sr. No. 21 to 27 is equal to the percentage of 5.1% which has been computed for the product category of 'Instant Noodles & Pasta' as per Exhibit-5, to which these SKUs pertain. Therefore, there is no doubt that the percentage benefit of grammage has been computed at the product category level whereas it was to be calculated at the SKU level. Therefore, the benefit of grammage computed by the Respondent in Column E of the Chart prepared by the Respondent is incorrect and hence it cannot be allowed. 138. The Respondent has also given details of the extra grammage actually passed on in respect of the above 27 SKUs vide Column F of the above Chart. Perusal of this Column shows that different percentages have been mentioned in this Column which are either higher or lower than the percentages shown in Column E which shows that the Respondent has not passed on benefit of 7.8% or 5.1% in the case of even a single SKU. Therefore, it is established that the commensurate reduction has not been passed on by the Respondent against each SKU and he has tried to set off the higher benefit with the lower benefit which....
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....ent has claimed that he has passed on benefit of 54 Crore by increasing the grammage or quantity by Rs. 5.5 Crore in respect of the Chocolate product category, by Rs. 3.1 Crore in respect of Instant Noodles & Pasta Category, by Rs. 33.2 Crore for the Wafer containing Chocolate category, by 4.3 Crore in respect of Instant Coffee product category, by Rs. 6.7 Crore for the Curry Paste, Mixed Condiments & Seasoning Category and by Rs. 1.2 Crore for the Sugar Boiled Confectionary (Total Rs. 54 Crore). However, the above claim of the Respondent is not correct as the benefit was to be passed on at the SKU level and not at the level of product category and hence the above claim of the Respondent cannot be accepted. 143. Vide Exhibit-24 attached to his submissions dated 02.05.2019 the Respondent has given the details of the grammage benefit computed by him as per Exhibit-23 as well as the benefit passed on corresponding with the period of Report of the DGAP w.e.f. 15.11.2017 to 30.06.2018. Perusal of the Exhibit-24 shows that no grammage benefit has been passed in respect of the categories of Sweetened Condensed Milk (page 5) and Nutrition Supplement (page 7) coinciding with the period of ....
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....age benefit claimed in respect of MUNCH Maha 32 (24X11.1g) 10% and KIT KAT 2F Mini (36X13.2 g) 3%. In respect of Munch Maha mentioned above the profiteering computed by the DGAP has been shown as Rs. 4.2 Crore by the Respondent whereas as per the Annexure-14 of the DGAP Report dated 08.10.2018 the profiteered amount has been shown as Rs. 4,16,63,810/- Crore In respect of KIT KAT mentioned above the profiteering computed by the DGAP has been mentioned as Rs. 0.6 Crore whereas as per Annexure-14 of the Report the profiteered amount comes to Rs. 86,54,924/-. Since, the details of the grammage benefit passed on each SKU have not been explained in the above Exhibit and the amount claimed to have been passed on account of the grammage benefit has been computed on the product category level and not at the SKU level and there is also no corroborative and irrebuttable evidence produced by the Respondent, hence the above amount cannot be allowed to have been passed on account of the benefit of tax reductions. 146. Although the DGAP in his Report dated 08.10.2018 has pointed that the provisions of Section 171 (1) of the CGST Act, 2017 require that the benefit of tax reduction can be passed o....
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....hich is also more logical and in consonance with the provisions of Section 171 (1) of the above Act. Since, the DGAP has not used the methodology adopted by the Respondent it amounts to raising objections against the methodology used by the Respondent. Hence, both the above amounts cannot be taken to be correct and final as per the wishes of the Respondent as the mathematical methodology adopted by the Respondent to compute the above amounts was flawed. 149. The Respondent has further contended that he has adopted such a methodology that the benefit was duly passed on to the recipients and the SKUs where the benefit has been passed by extra grammage or no benefit has been passed or proportionate benefit has not been passed, was due to prevalent practices, practicalities and legal reasons. He has also given the details of the key SKUs viz. MAGGI Noodles Masaia 35 Gms., KIT KAT Rs. 10/- and NESACAFE SUNRISE Rs. 2/- (70/30 Recipe) SKUs and cited the reasons how the commensurate benefit could not be passed and how it was passed on other SKUs. The issues pertaining to these SKUs have already been discussed above and the reasons given by the Respondent have not been found to be justifie....
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....istently claimed during these meetings that he had passed on the full benefit and had at no stage admitted that there were practical difficulties in passing on the benefit and hence, he has set aside an amount of Rs. 12.6 Crore on account of the benefit which he could not pass. The above admission of the Respondent was an afterthought as he had realised during the discussions that he had not passed on the benefit and hence he had set aside the above amount to justify what he had wrongly claimed. The Respondent had also not volunteered to deposit the above amount in the CWF inspite of the fact that he could not have passed the above amount to the customers who had already bought his goods at the higher prices as he had denied them the benefit. These customers were also not identifiable. The Respondent wanted to pass on the above amount in future which he could not have 'legally done. The above actions of the Respondent show that he had no sincere intention of passing on the above benefit and the claims made by him in this regard are wrong and untenabale. 152. The Respondent has also stated that within each product category for each Stock Keeping Unit (SKU) where it was not practica....
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.... the process of passing on the 'set aside benefit' at the same product category level but after his meeting with this Authority on 23.02.2018, the same was put on hold pending discussions. In this connection it is made absolutely clear that the Respondent had never admitted during the above meeting that he had set aside the above amount as his repeated stand was that he has passed on the full benefit and nothing remained to be passed on. Moreover, the Respondent could not have passed on the above amount to those customers who had already purchased his goods and to whom he had denied the benefit. Hence, the above contention of the Respondent is bereft of logic and hence, it cannot be accepted. 155. He has further contended that as per the directions of this Authority given vide OM dated 10.04.2019 the DGAP was required to investigate only the quantification of the amount set aside for the GST rate reductions effective from 15.11.2017 till January, 2018 and for the rate reduction effective from 25.01.2018 till June, 2018 and any investigation carried beyond the above periods was beyond the above directions. In this regard it would be appropriate to mention that this Authority had no....
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.... 8, 9, 10, 11 and 12 attached with the Report dated 08.10.2018. The DGAP was not bound to interpret the data supplied by the Respondent as per the wishes of the Respondent and hence the above arguments advanced by the Respondent are irrelevant. 158. He has also submitted that the impugned Report despite specifically pointing out that this Authority had passed directions for provisional deposit of the amount set aside and investigation to verify the same, as per the modality disclosed in letter dated 02.04.2018, the DGAP has not followed the methodology adopted by the Respondent by ignoring the directions of this Authority. The above claim of the Respondent is not correct as no direction was passed to restrict the investigation to the set aside amount and the methodology adopted by the Respondent as per OM dated 10.04.2018 and hence the above claims of the Respondent are not tenable. 159. The Respondent has further submitted that the DGAP has applied wrong interpretation of Section 171 of the CGST Act by stating that the benefit to be extended to the consumer on account of reduction in the rate of tax has to be in absolute terms and there were no other means of passing the same. T....
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.... Respondent stands admitted by the DGAP. 162. He has also claimed that the DGAP has wrongly included the GST amounting to Rs. 9,75,18,342/- (Annexure-29 attached to his submissions dated 28.06.2019) in his calculations of the profiteered amount which he had already deposited with the Government. However, as far as the issue of including the GST charged by the Respondent in the profiteered amount is concerned the DGAP has correctly included it in the profiteered amount as the Respondent has not only charged additional price from his customers which they were legally not bound to pay as they were entitled to the benefit of tax reductions but he has also forced them to pay additional GST on this illegally charged price which they should not have paid. Had he not charged extra GST the customers would have paid less price and thus got the benefit of tax reductions. The Central as well as the State Governments had sacrificed their own tax revenue to benefit the consumers by these tax reductions which the Respondent had denied them and thus, defeated the very aim of passing on the benefit of tax reductions. Therefore, the illegally charged additional GST has been rightly included i....
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....ction in the GST rate indicated the benefit passed on the relevant product as a discount bearing Code Z368 and sample invoices were annexed as Exhibit-6 to his reply dated 07.12.2018. He has further claimed that where the discount was on account of the GST rate reduction, code Z368 has been indicated. As has been discussed above the Respondent was required to pass on the benefit by reducing his MRP in respect of each SKU sold by him and not by offering discounts at the product level. Moreover, the Respondent had also not passed on the benefit of tax reductions by way of discounts as is evident from the Report dated 08.10.2019 of the DGAP. Therefore, the above claims of the Respondent cannot be accepted. 167. The Respondent has also contended that in para 21 of his Report the DGAP has observed that for calculating profiteering, the average base prices of supplies made to each channel of suppliers has been considered separately during the pre rate reduction period which was incorrect as the profiteering has to be examined only on a comparison of the actual sale prices of the products charged to the recipients for the pre rate reduction period and for the post rate reduction period. ....
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....10.2018. Hence, the allegation levelled by the Respondent on this ground in not tenable. 169. The Respondent has also submitted that there were calculation errors in the base prices taken by DGAP in his workings as has been mentioned by him vide Exhibit-22 attached to his reply dated 12.04.2019. Perusal of Annexure-22 shows that all these errors have been taken in to account by the DGAP in his supplementary Report dated 15.03.2019 and hence the objection of the Respondent made on this ground stands removed. 170. The Respondent has also stated that the method adopted by the DGAP by taking average base prices pre rate reduction has resulted in an anomaly where for the very same SKU the report was showing no profiteering and for some other supplies, it was showing profiteering. This objection has been explained in Exhibit-17 attached by the Respondent with his reply dated 07.12.2018. Perusal of the above Exhibit shows that the DGAP has computed the profiteered amount by taking the average price pre GST whereas the Respondent has taken the actual price pre GST and hence there is bound to be difference in the amount of profiteering. Therefore, the above claim of the Respondent is not ....
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....ower to fix prices of his products in violation of the provisions of Article 19 (1) (g) of the Constitution. 174. The Respondent has also cited the Order dated 04.05.2018 passed by this Authority in the matter of Kumar Gandharv v. KRBL Limited Case No. 3/2018 = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY and claimed that the increase in the cost of raw materials had been taken into consideration for calculation of the quantum of benefit which should also be taken in to account in his case. However, perusal of the above Order shows that in the above case the rate of tax had increased and not reduced and since, there was no reduction, the provisions of Section 171 were not applicable in the above case. However, in the present case the rates of tax have been reduced and therefore, the above Order does not help the Respondent. 175. The Respondent has also argued that Rule 126, 127 and 133 of the CGST Rules, 2017 suffered from the vice of excessive delegation and hence they were violative of the Constitution. In this connection it would be relevant to mention that Rule 126 empowers this Authority to frame "Methodology & Procedure" to regulate its proceedings. This power is....
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....price control Acts in line with the Acts framed by the Malaysian and the Australian Government. Hence, the above contentions of the Respondent are not maintainable. 177. That the Respondent has further argued that in the absence of a judicial member, the constitution of the Authority was improper. In this regard it is mentioned that there is no judicial member in all such Authorities viz. the Authorities on Advance Rulings on the GST or Income Tax and the TRAI etc. All the proceedings are conducted by this Authority by applying the principles of natural justice and all its orders are detailed, reasoned and speaking and they are also subject to judicial review. The Parliament, the State Legislatures, the GST Council as well as the Central and the State Governments in their wisdom have not thought it fit to provide a judicial member in this Authority. However, absence of judicial member does not cause any prejudice to the Respondent. 178. The Respondent has also contended that as per the provisions of Rule 128 of the CGST Rules, 2017 receipt of a written application in the prescribed manner from an interested party or from a Commissioner or from any other person was mandatory. In t....
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....o order investigation against the Respondent once information of profiteering has been received by it, as per the above provisions. Therefore, no illegality has been done on this ground as the investigation has been ordered as per the provisions of the statute and hence the investigation carried out by the DGAP is also legal and within jurisdiction. It is also stated here that the Respondent had himself subjected him to the jurisdiction of this Authority vide his letter dated 02.04.2018 and hence he cannot resile from his earlier stand. 182. He has also claimed that he had sought advice / clarity from this Authority and also furnished his methodology which was accepted by this Authority and hence he could not have been investigate mentioned supra this Authority is not an advisory body nor it has accepted the methodology adopted by the Respondent to compute the profiteered amount and hence the above claims of the Respondent cannot be accepted. 183. The Respondent has also alleged that this Authority was acting both as a complainant as well as the judge which was illegal. In this regard it would be appropriate to mention that power to order suo moto investigations is generally and ....
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....ME COURT, Vasta Bio-Tech Pvt. Ltd. v. Assistant Commr. 2018 (360) ELT 234 = 2018 (1) TMI 1437 - MADRAS HIGH COURT, Dharampal Satyapal Ltd. v. Dy. Commissioner of Central Excise 2015 (320) ELT 3 = 2015 (5) TMI 500 - SUPREME COURT and Anrak Aluminium Ltd. v. Commissioner 2017 (4) G.S.T.L. 248 = 2017 (5) TMI 1200 - CESTAT HYDERABAD, does not help the Respondent as this Authority has fully complied with the principles of natural justice. 186. The Respondent has also contended that this Authority has considered the Report of the DGAP as a show cause notice, which was not correct as it was bound to serve a detailed notice to him to that he could defend himself. In this regard it is mentioned that the Report dated 08.10.2018 was carefully considered by this Authority in its sitting held on 16.10.2018 and accordingly, the show cause notice dated 16.10.2018 was issued to the Respondent and he was also been given more than sufficient opportunity to defend himself which he has done by filing several submissions and has also been supplied with all the required information and hence the above claim of the Respondent is incorrect. 187. The Respondent has also stated that no methodology and mec....
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.... of construction services. Even the methodology applied in two cases of construction service may vary on account of the period taken for execution of the project, the area sold and the turnover realised. Similarly, the mathematical methodology applied in two cases of FMCGs may differ on account of quantum of goods and services and the period during which the benefit of tax reduction was not passed. It would also be appropriate to mention here that this Authority has power to 'determine' the methodology and not to 'prescribe' it as per the provisions of the above Rule and therefore, no set prescription can be laid while computing profiteering. It would be further relevant to mention that the power under Rule 126 has been granted to this Authority by the Central Government as per the provisions of Section 164 of the above Act which has approval of the Parliament. Rule 126 has further been framed on the recommendation of the GST Council which is a constitutional body created under the Constitution (One Hundred and First Amendment) Act, 2016. Therefore, the above power has both legislative sanction as well as incorporation in the CGST Act, 2017 and the CGST Rules, 2017. The delegation ....
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....-profiteering measures adopted in Australia mention the 'Net Dollar Margin Rule' which also provides for regulation of prices which is not the intent of the CGST Act, 2017. There is also an adequate mechanism to enforce the Anti-Profiteering measures in the Act and hence the above contentions of the Respondent are frivolous. 191. The Respondent has also relied upon the cases of Commissioner of Income Tax Bangalore v. B. C. Srinivasa Setty (1981) 2 SCC 460 = 1981 (2) TMI 1 - SUPREME COURT, Eternit Everest Ltd. v. Union of India 1997 (89) E.L.T. 28 (Mad.) = 1996 (6) TMI 90 - MADRAS HIGH COURT and Commissioner Central Excise and Customs Kerala v. Larsen and Toubro Limited (2016) 1 SCC 170 = 2015 (8) TMI 749 - SUPREME COURT in his support but since appropriate methodology and mechanism exists for implementing the above provisions and no tax has been imposed under the above Section hence, it is respectfully submitted that the above cases are not being relied upon. 192. He has also submitted that the profiteering should be computed at the entity level and not on item (SKU) level. The above contention is incorrect as the Respondent appears to be labouring under the wrong impression that....
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....fit of ITC to the recipient by way of commensurate reduction in the price of the goods or services or both." 195. Based on the above Explanation there is no doubt on the definition of profiteering which has been duly incorporated in the CGST Act, 2017 and hence the above contention of the Respondent is incorrect and the interpretation given by the Respondent is wrong. 196. He has further claimed that the term 'commensurate' appearing in Rule 127 and Section 171 (1) means 'appropriate', 'adequate' or proportionate'. The Respondent has also cited the dictionary meanings of the word 'commensurate' from the Random House Compact Unabridged Dictionary, Special Second Edition, The New International Webster's Comprehensive Dictionary of the English Language, Deluxe Encyclopaedic Edition, The Compact Edition of the Oxford English Dictionary, 10th Ed., The Concise Oxford Dictionary and Chambers 21st Century Dictionary to support his above contention. However, as has been discussed above the word 'commensurate' has been adequately defined in Section 171 (1) of the above Act as well as in Rule 127 and 133 of the CGST Rules and hence there is no ambiguity in its intent and the same cannot be....
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....that in the absence of any framework or guidelines different approaches may be followed by the DGAP and such unfettered discretion would lead to uncertainty and arbitrariness on case to case basis. The above argument of the Respondent is incorrect as the mathematical methodology adopted by the DGAP in this case is in consonance with the provisions of Section 171 and Rule 127 and 133 of the above Act whereas the methodology adopted by the Respondent is illogical, arbitrary and illegal which has resulted in unfairness and inequality while passing on the benefit of tax reductions. As mentioned above the mathematical methodology applied in one case cannot be applied in another case as no two cases have the same facts. However, every mathematical methodology adopted by the DGAP is subject to scrutiny by this Authority as well as the higher judicial forums and hence there is hardly any scope for arbitrariness. 199. The Respondent has also stated that in case the allegation of profiteering was confirmed and it was proposed to invoke penal provision he should be given opportunity to show cause against invocation of the penal provisions. The above contention of the Respondent would be duly....