TaxTMI 
TaxTMI 
2020 (3) TMI 184
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....ly of "Samsung 80 CM (32 inches) HD ready LED TV 32FH4003". The above Applicant alleged that the Respondent did not reduce the selling price of "Samsung 80 CM (32 inches) HD ready LED TV 32FH4003", when the GST rate was reduced from 28% to 18% w.e.f. 01.01.2019, vide Notification No.24/2018 Central Tax (Rate) dated 31 12 2018 and the price of the product remained the same after tax reduction and thus the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. 2. The Standing Committee in its meeting held on 11.03.2019, decided to refer the same to the DGAP in terms of Rule 129 of the Rules to conduct a detailed investigation in the matter. The DGAP issued a notice under Rule 129 of the Rules calling upon the Respondent to submit his reply as to whether he admitted that the benefit of reduction in the GST rate w.e.f. 01.01.2019, had not been passed on to his recipients by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the Notice as well as furnish all documents in s....
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....at the sales were made to Canteen Stores Department (CSD) at a specially negotiated price. As a process, the Respondent negotiated an exclusive Index price for a product with CSD and once fixed, while the Respondent could sell the products at a price lesser than the fixed agreed price, it could not sell the products at a price higher than the agreed price. Generally, the price agreed with CSD was lesser than the price at which the Respondent sold such goods in the open market/trade. 5. Vide the aforementioned letters/e-mails, the Respondent submitted the following documents/information to the DGAP: a) GSTR-1 & GSTR-3B returns for the period from November, 2018 to March, 2019. b) Details of invoice-wise outward taxable supplies during the period November, 2018 to March, 2019. c) Sample copies of the invoices, pre & post 01.01.2019. d) Purchase register and sample Purchase Bills. 6. The DGAP stated that the main issues for determination were whether the rate of GST on the "Samsung 80 CM (32 inches) HD ready LED TV 32FH4003" supplied by the Respondent was reduced from 28% to 18% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST had been pa....
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....not against the two intermediate suppliers, as had been claimed by the Respondent. (ii) Further, the DGAP has reported that in the application (complaint) of the Applicant No. 1, the name of the supplier was mentioned as M/s Samsung India Electronics Pvt. Ltd. Further, against Sr.No. C-5 of the APAF form, it was mentioned that after GST rate applicable on the said goods was reduced from 28% to 18% in January, 2019. the MRP of Samsung 80 cm (32 inches) HD Ready LED TV 32FH4003 had remained the same. To authenticate his contention, the Applicant No. 1 had included screenshots of certain e-commerce portals such as amazon etc. The DGAP has further stated that though these screenshots carry an entry of sold by____, it was not relevant as both, the Applicant No. 1, and the Standing Committee had mentioned that the subject complaint was against the Respondent. i.e. M/s Samsung India Electronics Pvt. Ltd. 9. The DGAP has further reported that the Respondent, vide his Notice dated 08.04.2019, was asked to provide the details of all the outward taxable supplies of the product impacted by the above said GST rate reduction w.e.f. 01 01.2019. Accordingly, Respondent provided the details of ou....
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....l B Other Regional Retail Partners - Moderate volume 3. Period C December, 2018 4. Total quantity of item sold D 577 5. Total taxable value E 8492605 6. Average base price (without GST) F=E/D 14718.55 7. GST Rate G 28% 18% 8. Commensurate Selling price (post Rate reduction) H=G*1.18 17367.89 9. Invoice No. I 32S4I0020610 10. Invoice Date J 02.01.2019 11. Total quantity (above invoice) K 1 12. Total Invoice Value M 17834 13. Actual Selling price (Post rate reduction) N=M/K 17834 14. Difference O=N-H 466.11 From the above table, the DGAP has derived that the Respondent did not reduce the selling price of the "Samsung 80 CM (32 inches) LED TV UA32N4003ARXXL", even when the GST rate was reduced from 28% to 18% w.e.f. 01.01.2019, vide Notification No.24/2018 Central Tax (Rate) dated 31 12.2018. Hence, the DGAP found that the Respondent had profiteered by an amount of Rs. 466.11/- on each of the said item sold. in as much as the benefit of reduction in GST rate was not passed on by the Respondent to his recipients by way of commensurate reduction i....
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....ount of contravention of provisions of Section 171 of Central Goods and Services Tax Act, 2017, was Rs. 37,85,342/-. The place (State or Union Territory) of supply chain-wise break-up of the total profiteered amount of Rs. 37,85,342/- as provided by the DGAP is furnished in the Table below: Table-2 (Amount in Rupees) Sr.No. State Name State Code LED TV (Rs.) Power Banks (Rs.) Total (Rs.) 1 Jammu & Kashmir 1 10201 0 10201 2 Himachal Pradesh 2 3081 0 3081 3 Punjab 3 67223 3593 70816 4 Chandigarh 4 1560 0 1560 5 Uttarakhand 5 18002 0 18002 6 Haryana 6 243115 0 243115 7 Delhi 7 74390 4997 79388 8 Rajasthan 8 83155 0 83155 9 Uttar Pradesh 9 315668 0 315668 10 Bihar 10 63059 0 63059 11 Sikkim 11 283 0 283 12 Arunachal Pradesh 697 0 697 13 Nagaland 13 2623 0 2623 14 Manipur 14 104 0 104 15 Mizoram 15 2915 0 2915 16 Tripura 16 0 0 0 17 Meghalaya 17 5407 0 5407 18 Assam 18 60060 0 60060 19 West Bengal 19 500530 0 500530 20 Jharkhand 20 47957 0 47957 21 Odisha 21 57314 0 57314 22 Chhattisgarh 22 32877 0 32877 23 Madhya Pra....
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....were sold to the distributors, where in-turn, sold then the small dealers/ retailers for making sales to the end customers. * Brand Shops - These were exclusive stores dealing only in Samsung products. * Direct Dealers - There were dealers who in-turn sold to the end customers. * Online - These products were sold to partners for making sales through their online marketplace portals. Within the above supply channel structures, there could be multiple sub-channels, depending on factors such as business volume, and presence, etc. of the dealers. 16. The Respondent also submitted that the business model for Power Bank was the same as aforementioned television and computer monitors (except for sales made to Authorised Service Centers which were in-turn engaged in making supplies directly to end customers). Further, he stated that the Maximum Retail Price ('MRP') and Dealer list price (i.e. standard catalogue price considered for passing on discount referred as 'DP') of these products remained same for all the dealers across India, also the discounts provided to such dealers varied on account of aforementioned six chain structure and various other parameters (not relating to GST)....
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....rity may only exercise the powers conferred on it specifically under the provisions. He has also stated that he understood that an Application dated 18 February 2019 was filed by The Applicant No.1 alleging profiteering on the part of the Respondent based on two screenshots of 32" LED television with Model No. 32FH4003 ('the subject product') being sold on a third party online marketplace i.e. Amazon. He further submitted that Respondent was not the "supplier" of the goods for the transaction in question. The suppliers were two separate dealers namely 'Jumbo Distributors Pvt. Ltd'. and 'EP Electronic Paradise Pvt. Ltd'. 19. In this regard, he submitted the relevant provision of the CGST Act and CGST Rules as mentioned below: Section 171 of the CGST Act: "(1) any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices" Rule 129 of Central Goods and Service Tax Rules, 2017 ('CGST Rules') "(1) The Standing Committee shall, within a period of two months from the date of the receipt of a written application, or within such extended period not exceeding a further....
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.... support of his contention, he has cited the decision of the Hon'ble Delhi High Court in the case of M/s. Abbott Healthcare Pvt. Ltd. Vs Union of India & others = 2019 (5) TMI 563 - DELHI HIGH COURT, wherein it has been held that the investigation should be limited to the product in question and should not be extended to other products being sold by the supplier. Citing the said decision and applying the same ratio to his case. he has pointed out that the application alleging profiteering by him (which itself was not factually correct as the supplier was a third party) as received only in respect of supply of 32" LED television having Model No. 32FH4003 and hence the investigation of the DGAP should have been restricted to the product in question only, i.e. 32" LED television having Model No. 32FH4003 and should not have been extended to cover other SKUs of Televisions, Computer Monitors and Power Banks being supplied by him. 23. The Respondent has also submitted that the pricing for B2C sales was highly dynamic and the price varied depending upon the supply channel structure and other market factors such as size of the supply chain partner. his business. operating cost, his locat....
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....ority under the law passed by the Parliament or State legislature under Entry 34 of the Concurrent List (List III) of the Seventh Schedule to the Constitution of India He has also added that only in exceptional cases, and in respect or only a few specified goods, the Government has enacted laws to control prices which did not include the goods supplied by him, and since the provisions of Section 171 of the CGST Act were not akin to the price control regulations enacted in terms of Entry 34 of the Concurrent List, any such effort of controlling the prices would be nothing but a violation of the freedom of trade guaranteed under the Constitution of India. He has further argued that the price control exercised by DGAP was ultra vires of the fundamental right guaranteed under Article 19 (1) (g) of the Constitution of India and has cited the decision of the Hon'ble Delhi High Court in the give case of M/s. Abbott Healthcare Pvt. Ltd. Vs Union of India & others = 2019 (5) TMI 563 - DELHI HIGH COURT, wherein, the same issue of the constitutional validity of anti-profiteering provisions of the CGST Act was considered and it was observed that there were similar petitions pending with the Ho....
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....e proceedings would be a futile exercise. He has placed reliance on the Apex Court decision in the case of CIT vs. B.C. Srinivasa Shetty = 1981 (2) TMI 1 - SUPREME COURT, wherein, the question of imposition of tax on capital gains on the goodwill of a newly commenced business was involved. In that case the Apex Court had held that the computation and charging provisions form the essence of any tax legislation and that the failure of the computation provision would automatically result in failure of the charging provisions. He has reproduced the relevant extract of the Hon'ble Apex Court's decision in his defences which is as below:- "Section 45 is a charging section. For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by Section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by Section 45 to be the subject of the charge." 28. He furt....
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.... and there was no stipulation in the law to restrict the investigation only to the alleged product. b) The supply channel wise profiteering method has been adopted in the course of the investigation and that the same was the suitable method based on the facts and circumstances of the case. c) That the amount paid by a customer on the increased base price, was more than the amount which the customer was supposed to have paid. Further, under the anti-profiteering provisions specified in the CGST Act, 2017 and Rule 127 of the CGST Rules, 2017, the customers must get their rightful due in the form of commensurate reduction in price arising out of reduction in the tax rate. 31. The above reply of the DGAP was forwarded to the Respondent and the Respondent vide letter dated 02.12.2019 stated that he had no further submissions to make. 32. We have carefully considered the Reports furnished by the DGAP and the submissions made by the Respondent and the record of the case and it is revealed that that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the "Television Sets above 26" & upto 32" screen size, Computer Monitors upto 20" & upto 32" ....
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.... the transaction in question and the suppliers were two separate dealers namely 'Jumbo Distributors Pvt. Ltd'. and 'EP Electronic Paradise Pvt. Ltd' On perusal of the complaint of The Applicant No.1 it is revealed that the name of the supplier was written as M/s. Samsung India Electronics Pvt. Ltd. in Sr. No. C-5 of the APAF form and to authenticate his contention, the above Applicant had included screenshots of certain e-commerce portals like Amazon etc. As a manufacturer the Respondent and not the wholesale distributors, dealers or retailers. were responsible for fixing the MRPs as only he could the MRs fix, round off and print the MRPs as per the provisions of Rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011 which state as follows:- "(m) 'retail sale pace' 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 ....
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....of the base price of the "Samsung 80 CM (32 inches) LED TV and Power Bank" sold during the period from 01.11.2018 to 31.12.2018, with the actual invoice-wise base prices of "Samsung 80 CM (32 inches) LED TV and Power Bank" sold during the period 01.01.2019 to 31.03.2019. The DGAP has computed the average base prices of the products on the basis of the details of the invoices and the price list submitted by the Respondent himself. The DGAP has also computed the average pre rate reduction prices as the Respondent was not selling his products on single base price and was charging different prices from different buyers. It was also not possible to compare the actual pre rate reduction prices with the post rate reduction prices for every customer as the same customer may not have bought the same goods during the pre and the post reduction periods. A customer may also not have purchased goods in the pre rate reduction period at all and may have bought them in the post reduction period or vice versa. The DGAP was required to compare the pre rate reduction prices with the actual post reduction prices as the benefit was required to be passed on to each buyer and it could not have been calcu....
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....e CGST Rules, 2017. However, one formula which fits all cannot be set while determining such a "Methodology and Procedure" as the facts of each case are different. The facts of the cases relating to the Fast Moving Consumer Goods (FMCGs), restaurants, construction and cinema houses are completely different and therefore, the mathematical methodology employed in the case of one sector cannot be applied in the other sector otherwise it would result in denial of the benefit to the eligible recipients. Both the benefit of ITC and reduction in rate of tax are required to be mathematically calculated which can be done by any Accountant. Moreover, both the above benefits have been granted by the Central as well as the State Governments by sacrificing their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and hence they have to pass on the above benefits as per the provisions of Section 171 (1). 38. The Respondent also submitted that there are no machinery provisions and in absence of it, the entire proceedings would be a futile exercise. This argument of the Respondent does not hold ground because as mentioned in....
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....rease his prices exactly equal to the reduction in the rate of such tax. Such an uncanny coincidence is unheard off and hence there is no doubt that the Respondent has increased his prices for appropriating the benefit of tax reduction with the intention of denying the above benefit to the consumers. 41. Based on the above facts the profiteered amount is determined as Rs. 37,85,342/-as per the provisions of Rule 133 (1) of the above Rules as has been computed vide Annexure-18 of the Report dated 12.09.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of Rs. 37,85,342/- in the CWF of the Central and the concerned State Government, as the recipients are not identifiable, as per the provisions of Rule 133 (3) (c) of the above Rules along with 18% interest payable from the dates from which the above amount was realised by the Respondent from his recipients till the date of its deposit. The above amount shall be deposited within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned Commissioners ....