TaxTMI 
TaxTMI 
2019 (12) TMI 588
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....ns which had been notified w.e.f. 15.11.2017 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 ....
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....rs dated 09.07.2018 and 21.08.2018 had informed that he had deposited the amount set aside 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%, vi....
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....t the Respondent had not passed on the benefit that has accrued to him on account of the reduction 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 unava....
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....gh different channels, i.e. (a) Canteen Stores Department (CSD); (b) Para-Military Force Canteens and 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,....
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....oller, Sh. Manish Mudgal, Sales Controller and Sh. Gaurav Khanna, Authorised Representatives were present 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 wi....
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.... passed on select products indicating the reduced MRPs of the products were also published in the national and regional newspapers. The benefit to be passed on, was determined for 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 estima....
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....received a Notice dated 26.04.2018 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. 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) 1^st 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 effe....
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.... legal constraints applicable to the Respondent. 22. That the rate reductions announced with effect from 15.11.2017 and 25.01.2018 were with immediate effect and the Respondent had taken immediate steps to pass on the benefit 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 prac....
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....he products were sold in over 35 lakh retail outlets and an estimated 70 Crore packs of various food products of the Respondent were sold every month. 28. That effective from 01.01.2018, Rule 6 (1) (e) of the Legal Metrology (Packaged Commodities) 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) o....
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....of Rs. 192 Crore has been passed by way of reduction in the MRPs e.g. in the case of NESCAFE 25 gm. Jar bearing MRP of Rs. 80/- per pack, the MRP was reduced to Rs. 70/-. 32. That in respect of Price Points products the business option available to the Respondent was to pass on the benefit through extra quantity. Reducing MRPs for price point 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....
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....could accommodate 13.2 Gms. and was used to pass on the benefit. However in respect of KITKAT pack bearing price point MRP of Rs. 5/- having 7 Gms. quantity, the quantity was increased to 8.6 Gms., whereas to pass on the GST benefit quantity would have been 7.5 Gms. At the product category level of Wafers containing Chocolate (HSN Code 1905) against 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....
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....h product category was commensurate to the benefit. 38. The Respondent has also referred to the supplementary Report dated 07.05.2019 filed by the DGAP and stated that the DGAP's above Report has not addressed the issue of benefit of Rs. 192 Crore passed on by the Respondent based on the methodology followed by him and hence, the methodology followed 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 th....
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....iii. Understanding that under GST law benefit to be passed expeditiously and no retention of benefit; iv. Higher benefit passed in other SKUs within the same category, so that the benefits have been passed at product category level. v. No objection of Authority to letter dated 2^nd April, 2018 where this pack is mentioned as Example 2; vi. MRP of Rs. 1.84 (to pass benefit) not permitted under Legal Metrology Rules. 40. That the number 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 me....
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.... manner as was used for passing on benefit on 'New Stocks'. 43. That on the stocks available as on 15.11.2017 and stocks produced after that date having MRP/quantity fixed as on 15.11.2017 (i.e. till the New Stocks were available), the amount equivalent to the benefit to be passed on, has been kept aside and not reckoned in sales or in profit e.g. on MUNCH Rs. 5/- MRP pack, benefit passed by increasing the quantity from 10.1 Gm. to 11.1 Gm. translated to 9.9% benefit passed on. Accordingly, 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 statuto....
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....yond January, 2018 was beyond the direction of this Authority. In the event this Authority has a different view, the Respondent seeks finding of the Authority on the period up to which the investigation can be undertaken by the DGAP. 51. That the investigation done by the DGAP was in pursuant to the direction of this Authority relating to the provisional deposit of the amount set aside and to determine the actual amount of benefit of reduction that has not been passed on and hence, the methodology 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 asid....
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....urnished list of products/ SKUs impacted by the rate reduction of 25.01.2018 which have been wrongly considered in the calculation of rate reduction of 15.11.2017 amounting to Rs. 30 Lakh as per Exhibit-15 attached to his reply dated 07.12.2018. The DGAP has also wrongly included the GST in his calculations estimated to be Rs. 11.9 Crore. Therefore, after adjusting the amount of suo moto deposit of Rs. 16.58 Crore and the amounts mentioned above the balance profiteering alleged as per the impugned Report was estimated 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 A....
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.... base prices of supplies to each of the channels 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 product to the recipient for the pre-rate reduction period and the post rate reduction period and there was no legal basis for adopting the average base prices. Further, it was also not clear from the Report as to what was the methodology adopted to arrive at the average base prices and 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 adopte....
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....Keeping Unit (SKU) of a product for issues such as coinage, taste preference or manufacturing constraints, higher benefit was passed on other packs/ SKUs in the same product category. Higher benefit passed on SKUs across product categories, was an integral part of the methodology followed by the Respondent, so that the benefit to be passed for each product category, was commensurate to the benefit accruing. Additional benefit has not been passed for business promotion reasons, it was only to comply with Section 171 of the CGST Act. The benefit to be passed 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 ....
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....of excessive delegation. ii. Restrictions on prices tantamounted to 'price control' or 'price regulation' which was contrary to the freedom of trade and business granted under Article 19 (1) (g) of the Constitution of India. iii. In the absence of a judicial member, the constitution of the Authority was improper. 72. That the present proceedings were ex-facie without jurisdiction and also contrary to the relevant statutory provisions. 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 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 ....
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....gs are vitiated in law being without jurisdiction. 76. That this very Authority which has asked the DGAP to initiate the investigation against the Respondent was to decide the correctness or otherwise of the Report furnished by the DGAP and therefore, it was acting as a (1) complainant and (2) as an Authority to recommend initiation of investigation and (3) to decide whether the complaint and the impugned Report based on such investigation was correct or not. Therefore, the present proceedings were not maintainable as this Authority could not Act as a judge in its own case. 77. That the present proceedings have been initiated 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 equi....
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....) TMI 526 - SUPREME COURT. The Respondent has also placed reliance on the case of Collector of Central Excise v. ITC Ltd. 1994 (71) ELT 324 = 1994 (2) TMI 62 - SUPREME COURT, wherein the Hon'ble Supreme Court has observed that where an assessee was made responsible for higher duty, it must be given an opportunity of meeting the grounds. The extract of the relevant portion of the judgment was mentioned below:- "4. Before the first respondent is made liable for higher or enhanced duty, it must be told on what grounds it is sought to be made liable for additional duty and it must be given an opportunity of meeting those grounds. This is the minimum requirement of the principle of natural 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. ....
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....nd the mechanism for determination and calculation of profiteering, in the absence of which the calculation and methodology used in the impugned Report was arbitrary. Rule 126 of the CGST Rules contained provisions to determine the methodology and procedure, however, till date above Rule has not prescribed any procedure/ methodology/ formula/ modalities for determining/ calculating 'profiteering'. The 'Procedure and Methodology' issued on 19.07.2018 by this Authority only provided the procedure pertaining to the investigation and hearing. However, no method/formula has been notified/prescribed pertaining to the calculation of profiteering amount. There was no provision as to how the profiteering due to change in the rate of tax should 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 Deter....
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....the CGST Rules delegated the power to this Authority to determine the methodology as to whether the reduction in the rate of tax has been passed on to the recipient by way of commensurate reduction in prices or not. However, the sub-delegate ought not be given uncanalised and unguided legislative power. In the present case the Respondent has disclosed the methodology to this Authority which the DGAP was required to follow. It is submitted that in the present case the Respondent has passed on the benefit of reduction in the rate of tax by way of commensurate reduction in prices as he deemed fit in the absence of any methodology and hence, the impugned proceedings and the Report was liable to be set aside. 88. That the alleged profiteering, 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 o....
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....eep the registered person on one hand and the recipient on the another and then to find out whether the benefit has been passed on by 'commensurate' reduction in price. 92. That it was necessary to find out interpretation of the term 'commensurate' appearing in Section 171 and Rule 127 and if Section 171 (1) was read without the word commensurate it would read as under:- (1) Any reduction in rate of tax on any supply of goods or services or the benefit of 1TC shall be passed on to the recipient by way of (...) reduction in prices. 93. That therefore, it was clear that the reduction in the rate of tax should be passed on to the recipient by reduction in prices which must be exact/equal to the reduction in the tax rate or benefit of ITC, however, the Legislature, has qualified the word 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, magnitu....
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....ies on imports of Cotton-Type Bed Linen from India in which the Indian exporters faced an anti-dumping action by the EU as the exporters were exporting different variety of bed linen to the EU. In some cases, the exporters were exporting at positive dumping margins, wherein in many cases there was negative dumping margin, i.e., the export price was more than the normal value at which goods were sold in India. The European Commission applied their usual practice of not netting off the positive and negative dumping margins. In fact, they applied 'zero' (0) for negative dumping margins and cumulated only positive dumping margins and thereby arrived at higher dumping margins for Indian exporters. Government of India objected to this approach of European Commission and the matter was taken to the Dispute Settlement Body of the World Trade Organisation (WTO) which held in favour of Government 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 du....
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.... for furnishing Report and the DGAP vide his Report dated 01.02.2019 has submitted reply to the Respondent's contentions and stated that the present investigation has been launched by him on the basis of the OM F. No. D-22011/NAA/17/2018/1039-41 dated 10.04.2018, issued by this Authority to determine the actual amount of benefit of reduction in the GST rates not passed on by the Respondent to the recipients on perusal of which he had found that there was prima facie evidence to suggest that the Respondent had not passed on the benefit of reduction in the rate of tax on the supply of goods by way of commensurate reduction in prices and hence he had issued a Notice under Rule 129 of the Central Goods and Services Tax Rules, 2017 on 26.04.2018, to conduct a detailed investigation. Subsequently a Report dated 08.10.2018 was furnished to this Authority under Rule 129 (6) of the Central Goods and 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 s....
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.... of profiteering, impact of GST rate reduction w.e.f. 15.11.2017 was taken into account including on the products which the Respondent had contended were not impacted by the rate reduction. He has also furnished revised figure of profiteering in respect of Annexure-14 which was Rs. 85,30,77,868 instead of Rs. 96,55,64,579/- and he has also submitted revised Annexure-14 and Annexure-16 in this regard. 104. We have carefully heard the Applicant, the Respondent and have lso perused the record placed on the file and it is revealed that the Respondent has filed the following replies during the course of the present proceedings:- (i) Preliminary reply dated 07.12.2018 along with 18 Exhibits. (ii) Furnished additional documents on 20.12.2018. (iii) Filed Rejoinder dated 12.04.2019 to the Reports filed by the DGAP on 01.02.2019 and 15.03.2019. (iv) Reply dated 02.05.2019 furnishing confidential 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,....
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....f smaller denomination and ensuring that benefits at an aggregate level of all SKUs/ products are passed on to the consumers." 109. It is apparent from the above letters that the Respondent instead of commensurately reducing the MRPs of his impacted SKUs as per the provisions of Section 171 (1) of the CGST Act, 2017 had claimed to have given discounts on them to pass on the benefit of rate reductions. However, the investigation carried out by the DGAP has found that the above claim of the Respondent was not correct as the sample invoices submitted by him did not mention that the discounts were given due to the GST rate reductions. 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. He had also found that the pattern of discounts offered in the pre and post-GST rate reduction periods was the same and the 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....
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....d the rates of GST on certain specified items. Consequent upon that, permission is hereby granted under sub-rule (3) of rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011, to affix an additional sticker or stamping or online printing for declaring the reduced MRP on the pre-packaged commodity. In this case also, the earlier Labelling/ Sticker of MRP will continue to be visible. 2. Further, this relaxation will also be applicable in the case of unsold stocks manufactured/packed imported after 1st July, 2017 where the MRP would reduce due to reduction in the rate of GST post 1st July, 2017. 3. This order would be applicable upto 31st December, 2017 Yours faithfully (B. N. Dixit) Director of Legal Metrology Tel: 01123389489 / Fax.-011-23385322 Email: [email protected] Copy to: All Industries/ Industry Associations/ Stake Holders However, the Respondent had not complied with the above direction and had continued to sell his impacted SKUs at the pre-reduction MRPs. The Respondent 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....
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.... of lower priced SKUs. The financial year adopted by the Respondent starts from January and ends in December. For calculation of the benefit due to the rate reductions which had occurred on 15.11.2017 the Respondent has taken the actual sales of all the SKUs of that product category from January 2017 to September 2017 which were compared with the planned sales from October 2017 to December 2017 with annualized impact of price changes and new products and percentage benefit was worked out as has been shown in Exhibit-3. Similar methodology was adopted by the Respondent for the rate reductions effective from 25.01.2018. It is apparent from the above that the methodology adopted by the Respondent was based on a number of parameters which had no impact on the benefit which was to be passed on due to rate reductions. No justification has been given why the actual sales from January to September 2017 should be compared with the planned sales of October to December 2017 with annualized impact of price changes and new products by taking 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 t....
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.... connection it would be relevant to mention that the Respondent had not met this Authority voluntarily. He was requested by this Authority to intimate how he had passed on the benefit of tax reductions as he happened to be one of the biggest manufacturers selling his products to Crores of customers who were entitled to receive the benefit of tax reductions. It would also be pertinent to mention here that during the above meetings the Respondent had vehemently maintained that he had passed on the full benefit of tax reductions and at no stage he had disclosed that he had set aside an amount of Rs. 12.6 Crore on account of benefit which could not be passed on. He had also not sought guidance how to pass on the above benefit or adjust the expenses incurred on passing on of the benefit. The letter dated 02.04.2018 written by the Respondent was definitely an afterthought when the Respondent had realised that he had not passed on the benefit of tax reductions which he was legally bound to pass on and therefore, he had computed an amount of 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 pr....
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.....12.2017. Hence, the above claim of the Respondent is incorrect. Therefore, the amount of Rs. 12.6 Crore set aside by the Respondent has been arbitrarily calculated following a methodology which has already been held to be illogical, arbitrary and illegal and hence the above amount cannot be taken to have been correctly calculated and set aside. The Respondent had also not decided the amount to be set aside in respect of the Boiled Sugar Confectionery till 02.04.2018 although the rate of tax was reduced on 25.01.2018. The Respondent has also contended that he had spent an amount of Rs. 3.9 Crore on the unusable packing material, development of new cylinder for new packaging and advertisements which should be adjusted against the set aside amount. However, as has been submitted by the DGAP in para 20 of his Report dated 08.10.2018 the above expenses cannot be adjusted against the amount of benefit to reduce the entitlement of the consumers as he could have used the packaging material by fixing fresh stickers in terms of the letter dated 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....
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....hat has not been passed on by the Respondent. The above OM was sent to the Respondent due to the fact that the Respondent had conceded in his letter dated 02.04.2018 that he could not pass on the benefit of tax reductions amounting to Rs. 12.6 Crore which amounted to admission of profiteering as per the provisions of Section 171 of the above Act. As this amount could not have been passed on to those customers who had already bought the goods from the Respondent between the period from 15.11.2017 to 31.12.2017 and who were legally entitled to claim the above benefit and were also not identifiable hence the Respondent was asked to deposit the above amount in the CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. It was also necessary to find out whether the above amount computed by the Respondent as benefit of tax reductions was correct or not and therefore, the Respondent was directed to furnish the necessary documents/evidences to the DGAP who was empowered to investigate as per the provisions of Rule 129 (2) of the above Rules whether the above benefit has been passed on by the Respondent or not. 118. The Respondent has further contended that vide his letter....
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....) 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 to 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 21^st August, 2018 of Rs. 1,25,46,668/- set aside for the period from April-June 2018 with respect to the rate change effective from 25.01.2018. (Total Amount Rs. 15,32,86,055/- + Rs. 1,25,46,668/- = Rs. 16,58,32,723/-). In this connection it would be appropriate to mention that the above amount was not deposited by the Respondent suo moto but deposited on the specific direction of this Authority given vide OM dated 10.04.2018 as the Respondent had no intention to deposit the same in the CWF and wanted to pass it on to those customers who were legally not entitled to receive it, as is clear from his letter dated 02.04.2018 (Exhibit-6) mentioned above. The above amount was ....
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....n to each buyer. He has also passed the above benefit in the case of some SKUs whereas he has not passed it on in respect of other SKUs. He has also adopted that methodology to compute the benefit of rate reductions which has been found to be illogical, arbitrary and illegal as has been mentioned supra and hence, the same cannot be accepted. 124. The Respondent has also argued that in respect of the price point products the 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 option available was to pass on the benefit through extra quantity and reduction of MRP was not an option. In this connection it would be pertinent to mention that the Respondent had neither reduced the price point prices nor he had increased the quantity during the period of investigation as is clear from the perusal of Annexure-14 and 15 of the Report dated 08.10.2018. It is also clear from the example of MAGGI pack having MRP of Rs. 5/- in respect of which the rate of tax was reduced from 18% to 12% that the Respondent....
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....hat in respect of the single serve packs, more quantity was not a viable option as it would change the taste parameter. He has also cited the case of NESCAFE SUNRISE which is a single serve sachet of 2.2 Gms. bearing MRP of Rs. 2/-. However, the above claim of the Respondent is not based on any established or un-rebuttable evidence as a customer might use two sachets or use even half a sachet in one serve and may also purchase more than one sachet at a time. Moreover, the increase in the quantity would have been miniscule which would not have much difference to the taste. Further, in case the Respondent was not able to increase the quantity he should have reduced the price commensurate to rate reduction. Therefore, the above claim of the Respondent is farfetched and is incorrect. 127. The Respondent has also contended that in the case of KIT KAT the manufacturing involved the length of wafer and the use of mould for size of the product and for changing the wafer length a new mould was required which would take 6 to 9 months as per the statement of Mr. Jagdeep Singh Marahar, Factory Manager as per the Exhibit-21 of the rejoinder dated 12.04.2019 filed by the Respondent. Perusal o....
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....en discussed above there is no evidence that the Respondent has reduced his prices commensurate with the tax reductions as is clear from the perusal of Annure-14 and 15 of the Report of DGAP till 30.06.2018 and has even increased the same in respect of a number of products. The above amount of Rs. 192 Crore has also been wrongly calculated by the Respondent by applying arbitrary methodology and hence the above claim made by the Respondent is incorrect. 131. The Respondent has also stated that where it was not practical to pass on the benefit at SKU level, additional benefits were passed through other SKUs at the same product category level. The Respondent has also quoted that in the case of the MAGGI Noodles pack having MRP of Rs. 5/-, the MRP was required to be reduced to Rs. 4.75 and due to the absence of 25 paise tender, he had passed additional benefit on the MAGGI Noodles pack having MRP of Rs. 12/- which was reduced to Rs. 11/- although the MRP was required to be reduced to Rs. 11.39 only. The above claim of the Respondent is wholly illegal and unreasonable as he was bound to pass on the above benefit to the buyer who had purchased or wanted to purchase the SKU having MRP ....
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....of determining the sale contribution of the SKUs in the product category by aggregating the actual sales of the SKUs with their planned sales with annualized impact of price changes and new products. The above methodology is also illegal as it denies passing of the above benefit to every recipient without discrimination and hence the same cannot be accepted. In case the Respondent was not able to pass on the benefit immediately or any other ground he could have deposited the same in the CWF. The Respondent was not being asked to perform the impossible and hence the legal maxim "lex non cogit ad impossibilia" does not apply in his case. 134. The Respondent has also submitted break-up of the amount of Rs. 192 Crore vide revised Exhibit-5 attached to his submissions dated 20.12.2018. Perusal of the above Exhibit shows that the benefit was calculated for each product category based on the sales contribution of the SKUs in that product category with due consideration to the lower priced SKUs. As discussed in para supra the above methodology adopted by the Respondent runs contrary to the provisions of Section 171 (1) of the above Act and hence the above amount cannot be taken as the a....
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....ned in Column E of the above Chart submitted on 20.12.2018 (page 2-3). However, the computation of above grammage has been done by the Respondent by applying the methodology which has already been held to be incorrect and illegal and hence the above computation of grammage made by the Respondent cannot be held to be correct. Itis also apparent from the perusal of the details of the extra grammage given by the Respondent that it has been calculated as 7.8% in respect of the first 20 SKUs and 5.1% in respect of rest 7 SKUs which is again incorrect as the grammage cannot be the same in respect of all these SKUs as it will vary on account of the amount of the benefit to be passed on which would further depend on the price of the SKU and hence it cannot be same in respect of all the SKUs as their prices are not similar. Further, the percentage shown against SKU No. 1 to 20 is 7.8% which exactly coincides with the percentage of 7.8% which has been computed by the Respondent in respect of product categories of 'Chocolate Products' and 'Instant Coffee Products' as has been mentioned in Exhibit-5 of the submissions dated 20.12.2018, to which product categories these SKUs belong. The extra b....
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....The Respondent in Column No. I of the above Chart has shown the taxable turnover as Rs. 218.7 Crore, vide Column No. J the set aside and deposited amount as Rs. 13.2 Crore and the benefit passed on through invoices as Rs. 2.6 Crore as per Column K. However, as has been discussed above the benefit has been computed at the product category level and not at the SKU level and hence, the same cannot to taken to be correct. 141. The Respondent has also given the details of the grammage benefit in respect of all the 7 product categories vide pages 33 to 36 attached with his above submissions dated 20.12.2018 and also sales contribution and GST benefit passed on in respect of Wafer containing Chocolate, Noodles & Pasta and Seasoning product categories. However, as has been explained supra all these computations have been made at the product category level and not at the level of each SKU and hence the above calculations cannot be considered on account of passing on of the benefit in terms of Section 171 (1) of the above Act. 142. The next grammage benefit claim was made by the Respondent vide Exhibits-23 of his submissions dated 02.05.2019. Vide this Exhibit the Respondent has claime....
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....the rate reduction has been claimed to have been passed on in respect of 34 SKUs as has been mentioned in Column G. Less than the required benefit passed has been shown in Column No. H of the above Exhibit in respect of 31 SKUs. It is clear from the above details that the grammage benefit has again been computed at the product category level and not at the SKU level and hence the same has not been passed uniformly on all the SKUs which is not in consonance with the provisions of Section 171 (1) of the CGST Act, 2017. It will also be relevant to mention here that the benefit is required to be passed on to every consumer on each SKU and a customer cannot be compelled to buy all the SKUs in a particular product category in order to get the benefit of tax reduction. Therefore, the above claim of the Respondent cannot be accepted. 145. During his last submissions filed on 28.06.2019 the Respondent vide Exhibit-29 has claimed the grammage benefit as Rs. 14,86,43,439/- in Column D. However, no details of the SKUs have given in the above Exhibit showing the amount of grammage and the amount passed on each SKU. Vide Exhibit-31 he has given two examples of calculation of the grammage bene....
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....computed the benefit of tax reduction which has not been passed on or the amount of profiteering done by the Respondent as per the provisions of Section 171 (1) of the above Act on each SKU. He was not required to compute the benefit as per the mathematical methodology adopted by the Respondent which was wrong and illogical and hence the amount of Rs. 192 Crore claimed to have been passed on by the Respondent and the methodology adopted by the Respondent to compute it cannot be taken to have attained finality on the mere assertion of the Respondent. 148. The Respondent has also contended that the DGAP has also not raised any objection against the estimated amount of Rs. 204 Crore the benefit of which has been passed on and the actual benefit passed of Rs. 209 Crore and therefore, the above amounts should be considered as final. The above contention of the Respondent is far-fetched as the DGAP was not required to compute the benefit as per the methodology employed by the Respondent as it was arbitrary and illegal. It is also clear from his Report date 08.10.2019 that the DGAP has used a mathematical methodology which vastly differs from the methodology used by the Respondent, whi....
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....hrough the investigation conducted by the DGAP that the Respondent has profiteered more amount than what he has set aside. In case this Authority had accepted the methodology adopted by the Respondent it would not have asked the DGAP to conduct further investigation. Hence, the claim made by the Respondent in this regard is incorrect. 151. The Respondent has further submitted that he had met the Authority on 23.02.2018 and 26.03.2018 to discuss the manner in which the Respondent had passed on the benefit and vide his letter dated 02.04.2018 had recorded his above discussions by stating that he had passed the commensurate benefit at an aggregate product category level as there were practical difficulties in passing on the benefit and set aside an amount of Rs. 12.6 Crore on the Chocolate products, Instant Noodles and Pasta, Wafer containing Chocolate, Instant Coffee products and Curry Paste, Mixed Condiments and Seasoning products for passing on the benefit on other products. As already mentioned supra the Respondent had not met this Authority on his own as he was asked by this Authority to intimate how he had passed on the benefit of both the rate reductions. The Respondent had ....
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....f tax reductions and should have stamped/re-stickered/printed them as per the provisions of the letter dated 16.11.2017 mentioned above. Since, the Respondent has not complied with the directions given in the above letter hence he has acted in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 as well as the Legal Metrology Act, 2009. He could also not have passed the benefit on another SKUs in the same product category as he was required to pass it on each impacted SKU so that the benefit could reach the buyer who had purchased that particular SKU. The Respondent was also not entitled to adjust the cost incurred by him on the redundant packaging material as he could have used it by stamping or affixing stickers. He was also not entitled to adjust the amount spent by him on the purchase of the new cylinder for printing or the amount spent on issuing the advertisements as the above costs could not be adjusted against the tax reduction benefit which was only to be passed on to the customers as per the provisions of Section 171 (1) of the above Act. Therefore, the above pleadings of the Respondent cannot be accepted. 154. The Respondent has also contended that....
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....e DGAP given by this Authority that he should limit his investigation to the deposit of the set aside amount. As is evident from the perusal of the Reports furnished by the DGAP the amount set aside by the Respondent has been wrongly calculated. The direction given was to compute the actual amount of benefit which had not been passed on by the Respondent. Therefore, the DGAP was required to compute the above benefit by adopting reasonable and logical mathematical methodology which he has done by comparing the pre and post reduction prices of each SKU. The DGAP was not bound to follow the wrong methodology adopted by the Respondent as it was arbitrary and illegal. He was required to carry out the investigation as per the provisions of Rule 129 of the above Rules which he has done in the present case. 157. The Respondent has further claimed that the DGAP has submitted the Report dated 08.10.2018 based on his own understanding without seeking any explanation from the Respondent. The above claim of the Respondent is wrong as the DGAP had sought repeated explanations and also obtained data from the Respondent vide Annexure-6 and various e-mails which was furnished by the Respondent v....
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....ched to his reply dated 07.12.2018. In this connection it would be relevant to mention that the DGAP has re-computed the amount of the benefit and excluded the amount which he had computed on the non-impacted products and has also reduced the amount of benefit on those SKUs which were included in the tax reductions effective from 15.11.2017 although rate was reduced on them on 25.11.2018. The above claims made by the Respondent have been admitted by the DGAP vide his supplementary Report dated 15.03.2019 and he has revised the contents of Annexure-14 and 16 of his Report dated 08.10.2018 and intimated that the profiteering amount was Rs. 85,30,77,868/- instead of Rs. 96,55,64,579/- in respect of the rate reductions which were notified w.e.f. 15.11.2017. However, he has not revised the Annexure-15 pertaining to the rate reduction effected on 25.01.2018 as no correction was required to be made in it. Accordingly, he has revised the total profiteering amount as Rs. 89,73,16,384/- instead of the original amount of Rs. 100,98,03,096/- reducing the profiteering amount by Rs. 11 He has also revised the State wise profiteering vide Annexure-16 of his Report dated 15.03.2019. Therefore, the....
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....that all such errors have been duly considered by the DGAP and he has already revised the profiteered amount and therefore, nothing more is to be considered by this Authority. 165. The Respondent has also averred that the DGAP has not considered the benefit passed on by way of more grammage (extra quantity) at the SKU level amounting to Rs. 14.86 Crore and he has wrongly included the GST estimated to be Rs. 9.75 Crore 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 considered in the impugned Report, where the methodology for passing on the benefit was ignored during the calculation. He has also submitted his comments vide Exhibit-29 on Annexure-14 and Annexure-15 of the impugned Report and also attached Exhibit-30 which showed State wise break up of the suo moto deposit of the amount in the CWF aggregating to Rs. 16,58,32,723/-. As already discussed above the above amounts were wrongly computed, the GST was wrongly charged and the set side amount was incorrectly computed and hence the above contentions of the Respondent cannot be accepted. 166. The Respondent has also c....
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.... each SKU so that the benefit could be computed in respect of the each customer. Hence, the DGAP has adopted a very practical mathematical methodology while computing the profiteered amount which cannot be rejected on the mere contrary claim made by the Respondent. 168. The Respondent has further contended that the methodology adopted to arrive at the average base prices and to which period the base prices pertained was not disclosed by the DGAP. However, perusal of paras 21 and 22 of his Report dated 08.10.2018 shows that the DGAP has calculated the average price of each SKU which was impacted by the above two rate reductions in respect of all the three channels viz. CSD, Para-Military Force Canteens and Distributors/ Modern Trade and compared it with the price of each SKU which he had charged on all the taxable supplies of that SKU made by the Respondent from 15.11.2017 to 30.06.2018 and arrived at the amount of profiteering in case there was no reduction in the price of the SKU keeping in view the reduction due to change in the tax rates. The period which has been considered by the DGAP while calculating the average base prices has been mentioned in Annexure-14 and 15 submitt....
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....en mentioned above and hence, the above claim of the Respondent cannot be accepted. 173. The Respondent has further pointed out that in Malaysia 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", have been enacted and such Acts should also be implemented in India to determine the "commensurate reduction." In this regard it would be appropriate to mention that both the above Acts have been repealed by Malaysia as they were not found to be working properly. Moreover, these Acts were promulgated to control prices after introduction of GST in the above Country whereas no provision for controlling prices has been made in the CGST Act, 2017. This Authority has also not been mandated to work as a price controller or regulator and it is only empowered to ensure that the benefits of tax reduction and ITC are passed to the consumers as per the specific provisions of Section 171 (1) of the CGST Act, 2017. The above claim of the Respondent runs contrary to the argument of the Respondent whi....
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....s and the Central Government. Hence, the above Rules have been framed after thorough scrutiny and consultation at several levels and hence to claim that the above Rules amount to excessive delegation would be completely wrong and fallacious. 176. The Respondent has also argued that the Anti-Profiteering measure amount to restrictions on fixing prices and hence they tantamount to price control' or 'price regulation' which was contrary to the freedom of trade and business granted under Article 19 (1) (g) of the Constitution of India. As submitted above there is no provision in the CGST Act, 2017 which provides for price regulation nor this Authority is a price regulator. The only objective of Section 171 of the above Act is to ensure that both the benefits of tax reduction and ITC are passed on to the recipients by the suppliers as they are given by the Central and State Governments by sacrificing their own revenue. Hence, the Anti-Profiteering measures cannot the construed to be violative of the above Article of the Constitution as the Respondent is fully entitled to fix his prices and carry out his trade without any control being exercised under the above measures. It is rather ....
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....has powers and jurisdiction to order investigation against any person suo moto however, this assumption of jurisdiction by this Authority was legally untenable. In this connection it would be pertinent to mention that once the Respondent had voluntarily admitted commission of offence of profiteering which he had communicated to this Authority vide his letter dated 02.04.2018, it was bound to order investigation as per paras 9 and 12 of the Methodology & Procedure notified by it on 28.03.2018 under Rule 126 of the above Rules, which read as under:- "(9). The Authority may inquire into any alleged contravention of the provisions of section 171 of the Central Goods & Services Tax Act, 2017 on its own motion or on receipt of information from any interested party as defined in the Rule 137 (c), person, body, association or on a reference having been made to it by the Central Government or the State Government. (12) On receipt of the information as mentioned in Para 9 above, in case the Authority is of the opinion that there exists a prima facie case it shall direct the Director General of Anti-profiteering to cause an investigation to be made in a fixed time frame and ....
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....provisions which were proposed to be invoked against the Respondent. He was also asked to put in appearance and file his submissions. The Respondent was also heard in detail on 26.11.2018, 12.12.2018, 20.12.2018, 12.04.2019, 02.05.2019, 07.05.2019, 28.05.2019 and 01.07.2019 excluding the dates on which he had sought adjournments. He had also filed detailed written submissions on 07.12.2018, 20.12.2018, 12.04.2019, 02.05.2019, 07.05.2019 and 28.06.2019. Therefore, the allegations of violation of the principles of natural justice and non service of notice are frivolous and not tenable. 185. The Respondent has also claimed that a show cause notice formed the base of the principle of audi alteram partem as was settled in the case of Canara Bank and others v. Debasis Das and Others (2003) 4 SCC 557 = 2003 (3) TMI 664 - SUPREME COURT. In this connection it is mentioned that a notice was duly served on the Respondent and he was also given full opportunity to defend himself before this Authority and hence, the above principle has not been violated. Similarly, the law propounded in the cases of Uma Nath Pandey and Others v. State of UP (2009) 12 SCC 40 = 2009 (3) TMI 526 - SUPREME COURT,....
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..... 188. Therefore, it is clear from the above Section that the benefit of rate reduction has to be passed on by a registered person to the recipient on every supply of goods and services by commensurate reduction in the prices and in case it is not passed on the supplier shall be acting in contravention of the above provision. This Authority has been duly constituted under Section 171 (2) of the above Act and in exercise of the powers conferred on it under Rule 126 of the CGST Rules, 2017 it has notified the 'Procedure & Methodology' for determination of the profiteered amount vide its Notification dated 28.03.2018 and not on 19.07.2018 as has been claimed by the Respondent. However, the mathematical methodology for determination of the profiteered amount has to be applied on case to case basis depending on the facts of each case and no fixed formula can be set for calculating the same as the facts of each case are different. The mathematical methodology applied in the case where the rate of tax has been reduced and ITC disallowed cannot be applied in the case where the rate of tax has been reduced and ITC allowed. Similarly, the mathematical methodology applied in the case of Fa....
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....e establish the veracity of the complaints made against non-passing of the above benefits. Under Rule 129 a full-fledged investigating machinery has been provided by creating the office of DGAP to enquire in to the complaints made under the Anti-Profiteering measures. Under Rule 136 of the above Rules this Authority has been empowered to get its orders implemented through any field office of the State tax, the Central tax or the Union Territory Tax. Since appropriate and adequate machinery has been provided to implement the Anti-Profiteering measures provided under the above Act and the Rules, the claim of the Respondent that adequate machinery has not been provided to implement the Anti-Profiteering measures is not correct. It will also be worthwhile to mention here that the above Section does not impose any tax on the suppliers and hence no charge is created under the above provision and hence it is not similar to the provisions of the tax laws which create charge. therefore, the above contention of the Respondent is untenable. 190. As submitted above the provisions of the Malaysia 'Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Prof....
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....fore, the marginal notes attached to the above Section and the Rules are not required to be considered while interpreting them. Accordingly, the cases of Indian Aluminium Company v. Kerala State Electricity Board (1975) 2 SCC 414 = 1975 (7) TMI 158 - SUPREME COURT, Union of India v. Harbhajan Singh Dhillon (1971) 2 SCC 779 = 1971 (10) TMI 31 - SUPREME COURT and S. P. Gupta v. Union of India AIR 1982 SC 149 = 1981 (12) TMI 165 - SUPREME COURT do not support the cause of the Respondent. 194. The Respondent has also claimed that "Profiteering' has not been defined in the CGST Act or the Rules therefore, he has cited the definitions of "Profiteer/Profiteering' from The Chambers Dictionary, Allied Chambers (India) Ltd., New Delhi, The Collins Cobuild English Dictionary for Advanced Learners-Harper Collins Publication and Oxford English Reference Dictionary-Oxford University Press to support his argument. However, it would be worthwhile to mention here that the word "profiteered" has been duly defined in the Explanation attached to Section 171 of the above Act as under:- "Explanation : For the purposes of this section, the expression "profiteered" shall mean the amount determ....
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....efit not passed on certain SKUs will be subtracted from the amount of benefit passed on other SKUs and the resultant amount shall be determined as the profiteered amount. If this methodology is applied the Respondent shall be entitled to subtract the amount of benefit which he has not passed on MAGGI pack having MRP of Rs. 5/- from the amount of benefit which he has claimed to have passed on the pack having MRP of Rs. 12/-, which will result in complete denial of benefit to the customer who has purchased the pack having MRP of Rs. 5/-. Hence, this methodology of 'netting off' cannot be applied in the case of FMCGs as the customers have to be considered as individual beneficiaries and they cannot be netted off. This Authority has also clarified in its various orders that the benefit cannot be computed at the product, service or the entity level as the benefit has to be passed on each supply of goods and services. Hence, the above contentions of the Respondent are not correct as the Respondent cannot apply the above methodology of netting off as has been approved in the above Report of the WTO as it would result in denial of benefit to certain customers which would amount to violatio....
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....ing of this order failing which it shall be recovered by the concerned Commissioner CGST/SGST. The State/Union Territory wise amount of benefit to be deposited in the CWF is as under out of which the amount of Rs. 16,58,32,723/- shall be appropriately adjusted in respect of each State and the Central Government:- Annexure-16 (Revised) S. No. State Annex-14 Annex-15 Total 1. Andaman & Nicobar Islands 1585549.665 135583.6 1826776.51 2. Andhra Pradesh 18317915.28 2747327 26375714.5 3. Arunachal Pradesh 1368850.509 53501.58 1655540.09 4. Assam 24386709.02 852400.8 29901227.3 5. Bihar 31370216.35 930626.2 37024406.7 6. Chandigarh 2596457.442 40902.35 2913581.13 7. Chhattisgarh 17983763.27 114245.7 19183118.6 8. Delhi 32407126.76 312867.5 38132954.2 9. Goa 6697019.396 115909.9 7445587.77 10. Gujarat 43134078.85 586578.8 46103759.6 11. Haryana 19143358.11 463103.8 21606066.6 12. Himachal Pradesh 9311844.424 630989.2 10417494.7 13. Jammu & Kashmir 11953563 746947.2 13596344.2 1....