TaxTMI 
TaxTMI 
2020 (3) TMI 695
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.... w.e.f. 15.11.2017, had been passed on by the Respondent to the recipients. The DGAP in his report dated 13.12.2018 had stated that the Respondent did not pass on the benefit of the reduction in the tax rates to his recipients by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017. In the said report, the DGAP reported that the Respondent had contravened the provisions of Section 171 (1) of the CGST Act, 2017. 2. This Authority, after analysis of the submissions placed on record, decided to accord hearing to the concerned parties. During the hearings held on 28.01.2019, 13.02.2019 and 13.03.2019. the Respondent had submitted that there were inconsistencies in the DGAPs calculation of profiteering as there were certain SKUs profiteering on which had been computed twice or thrice and in respect of 6 SKUs on which rate had been reduced from 18% to 12% the reduction had been considered from 18% from 12% by the DGAP. 3. This Authority. after considering the submissions of the Respondent, had found discrepancies in the report of the DGAP dated 13.12.2018 which are as mentioned below:- a. The Report had not covered all the SKU's which were....
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....t. The DGAP also stated that the main issues to be examined were whether the rate of GST on the goods supplied by the Respondent was reduced from 28% to 18% & 18% tol2% w.e.f. 15.11.2017 and if so. whether the benefit of such reduction in the rates of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. It was observed by the DGAP that the Central Government, on the recommendation of the GST Council vide Notification No. 41/2017-Central Tax (Rate) dated 14.11 2017, had reduced GST rate on a number of goods supplied by the Respondent from 28% to 18% & from 18% to 12% w.e.f. 15.11.2017, which has not been contested by the Respondent. 7. The DGAP also stated that it was important to examine Section 171 of the Central Goods and Services Tax Act, 2017 which governed the anti-profiteering provisions under GST. Section 171 (1) reads as "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." Thus. the legal requirement was abundantly clear that in the event of the benefit of input tax ....
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....so been arrived by the DGAP in a similar way. 9. The Respondent informed the DGAP that there were various categories of recipients in his supply chain, viz. Institutional buyers, Patanjali Group companies, Others including Mega Stores. Vendors. Branches, Super Stockists, Distributors, Super Distributors, Super Stockist AASTHA, Scrap Dealers, buyers from Modern Trade, E-Commerce platforms. Bulk sale division. Dairy division. Swadeshi Smridhi Card (SSC), Canteen Service Company (CSC). Arogaya Kendras, Chikitsalayas, Central Police Canteen (CPC). Salt Distributors, Canteen Stores Department (CSD), Rice Distributors, other group companies. Jobworkers, etc.. Accordingly, the DGAP has done the calculations of profiteering category-wise. 10. The DGAP has also stated that from the invoices made available by the Respondent, it appeared to him that the Respondent had increased the base prices of the goods when the rate of GST was reduced from 28% to 18% & 18% to 12% w.e.f. 15.11.2017, so that the commensurate benefit of GST rate reduction was not passed on to the recipients. On the basis of aforesaid pre and post-reduction GST rates and the details of outward taxable supplies (other th....
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....,31,529 28. Andhra Pradesh 37 1,58,30,515 Total 1,03,20,08,903 12. After perusal of the DGAP's Report submitted under Rule 133 (4), this Authority in its meeting held on 17.09.2019 decided to hear the Applicants and the Respondent on 04.10.2019 and accordingly notice was issued to all the interested parties. A Notice was also issued to the Respondent on 19.09.2019 asking him to reply why the Report dated 13.09.2019 furnished by the DGAP should not be accepted and his liability for profiteering under Section 171 of the CGST Act, 2017 should not be fixed. On the request of the Respondent hearing was adjourned to 16.10.2019. On behalf of the Applicant none appeared whereas the Respondent was represented by Sh. Y.D. Arya, CFO, Sh. Aayush Varshney, Manager, Sh. Manish Gaur, Smt. Purvi Asati, and Smt. Disha, Advocates. Further hearings were held on 06.11.2019, 22.11.2019. 13.The Respondent filed submissions dated 16.10.2019, 06.11.2019, 22.11.2019 and 10.02.2020 and stated that the impugned proceedings initiated against him by this Authority under Section 171 of the CGST Act were not maintainable and therefore, should be dropped forthwith. Further, the DGAP's repo....
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....f input tax credit has not been passed on to the recipient by way of commensurate reduction in prices. Further, he claimed that the term 'interested party. has been defined in the explanation to Chapter XV as follows:- "(c) interested party" includes a. suppliers of goods or services under the proceedings; and b. recipients of goods or services under the proceedings; c. any other person alleging, under sub-rule (1) of rule 128, that a registered person has not passed on the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices." Rule 129 of the CGST Rules provided for the initiation and conduct of proceedings and it was clear that in case where the Standing Committee was satisfied that there was a prima facie evidence to show that the benefit of reduction of rate of tax has not been provided to the recipient, it would refer the matter to DGAP for a detailed investigation. Thereafter, the DGAP would conduct the investigation and would collect evidence for determining the contravention of Section 171 of the CGST Act. Before the ini....
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....ition, Volume 1, 2007' in the following words - Another principle of natural justice is that no persons should be a judge of his own cause i.e. impartiality. Bias' may be defined as a pre-conceived opinion or a predisposition or predetermination to decide a case or an issue in a particular manner, so much so that such predisposition does not leave the mind open to conviction. It is in fact a condition of mind, which sways judgement and the judge is unable to exercise impartiality in a particular case. Bias may be generally defined as partiality or preference, which is not founded on reason and is actuated by self-interest - whether pecuniary or personal. 19. Further, he submitted that on 'bias', Halsbury Laws of England has stated as follows - "At common law the rule is applied in two broad categories of case: (1) where an adjudicator has either a direct pecuniary or proprietary interest in the outcome of the matter or case otherwise by reason of a direct personal interest be regarded as being a party to the action, and (2) where either by reason of a different forms of, interest or by reason of his conduct or behavior there is a 'real danger'....
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....icator of that complaint. In this regard, the Respondent submitted that an element of bias against a supplier could be there in the mind of the complainant and this was why, independent statutory bodies were created to adjudicate a dispute. Accordingly, he submitted that the act of this Authority in the dual role of complainant and adjudicator violated the basic principles of natural justice. He also placed reliance on the observations made by Justice P.N. Bhagvati in the case of Ashok Kumar Yadav vs. State of Haryana 1985 4 (SCC) 417 = 1985 (5) TMI 243 - SUPREME COURT. 22. He further placed reliance on the case of Hardcastle Restaurants Pvt. Ltd. vs. Union of India 2019 (10) TMI 864 (especially para Nos. 30 and 31), wherein the Hon'ble High Court had discussed the importance of fairness and transparency in the decision-making process and held that for a newly established Authority, fair decision making should be the guiding principle. 23. He further submitted that in the instant case, the complaint of non-passing of benefit of reduction in rate of tax to the recipients by the Respondent had been received by the Standing Committee from this Authority in terms of Rule 128 of t....
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....uthority to initiate proceedings on its own motion, any such proceedings initiated by the authority were without any legal backing and hence deserve to be quashed. Since in the present case, the notice of investigation had been issued by the DGAP on the basis of suo moto direction issued by the Authority, the same was ex facie without jurisdiction and illegal and hence the investigation report furnished by the DGAP also had no legal basis. In this regard, reliance was placed on the case of Mohinder Singh vs. State 2013 SCC Online J&K 7 (especially para Nos. 31 and 40) = 2013 (1) TMI 999 - SUPREME COURT, wherein it was held that the authority was required to act within the four corners of the Act conferring power to it. Thus, he concluded that the Authority neither could take suo moth action against the Respondent nor could ask for any documents/information in this regard. In the instant case, the Authority has erred in taking suo moto action against the Respondent by providing a complaint of alleged profiteering by him to the Standing Committee as well as by asking the Respondent to appear before itself vide email dated 22.02.2018. 25. The Respondent also submitted that Rul....
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....e above procedure, the 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 said provision. In other words, proceedings under Section 171 of the CGST Act could commence against any registered person only when a written application alleging profiteering on the part of the registered person was received by the Standing Committee from anybody but, in the present case, no such application either in the prescribed form or in any other manner had been made by the interested party or any other person either to the Screening Committee or the Standing Committee alleging any profiteering against the Respondent. Neither the DGAP's report nor the notice in question referred to any such application or complaint by any interested party against the Respondent. Thus, he submitted that the very fundamental requirement which gave jurisdiction to this Authority to initiate proceedings against the Respondent was not satisfied in the present case. Thus, the entire proceedings initiated against the Respondent were ex facie without jurisdiction and hence. liable to be ....
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....D.C.E.I. Chennai 2010 (255) ELT 161 (Mad.) = 2010 (6) TMI 249 - MADRAS HIGH COURT d) Lekhraj vs. Commissioner of C. Ex. & S.T. Allahabad 2014 (310) ELT 381 (Tri. - Del.) = 2014 (9) TMI 810 - CESTAT NEW DELHI 30. The Respondent also submitted that as per Rule 128 (1) of the Central Goods and Service Tax Rules, 2017, on receipt of an application, the Standing Committee shall examine the accuracy and adequacy of the evidence provided in the application to determine whether there was prima facie evidence to support the claim of an applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has not been passed on to the recipient by way of commensurate reduction in prices. Rules 128 (1) of CGST Rules, as amended. provides that - '(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 period of one month for reasons to be recorded in writing as may be allowed by the Authority, in such form and manner as may be specified by it. from an interested party or from a Commissioner or any ot....
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....ine that there was prima facie evidence, without referring to any document, information, evidence, etc. The relevant portion of the minutes of the meeting of the Standing Committee held on 25.05.2018 is extracted below for ready reference:- "IV. Annexure A-4:- The total 12 complaints, as mentioned in the Annexure have been described in the following manner.-- (a) There are three complaints (mentioned at S. No. 8.9 and 10) received from National Anti-Profiteering Authority against M/s Mondelez India Foods Pvt. Ltd. M/s HP Printers and M/s Patanjali Ayurved Ltd. for not passing on the benefit of input credit or benefit of reduced tax rate to the consumer. The Committee found these complaints bring out prima facie case for investigation by the DG Safeguards therefore these are referred to DG Safeguards for further investigation." 33. Further, the Respondent has placed reliance on the case of Nand Kishore Naik vs. Sukti Dibya AIR 1953 Ori 240 wherein it was held that the use of the word 'prima facie' would indicate that there was no possibility of an alternative construction being put on the Act, for it was on the face of its prospective and also placed reliance on....
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....o give the person proceeded against a reasonable opportunity of making his objection against the proposed charges and at the same time, the authorities must act with an open mind. The Respondent also placed reliance on the ruling of the Hon'ble Supreme Court in the case of Gorkha Security Services vs. Govt. (NCT of Delhi) (2014) 9 SCC 105 = 2014 (8) TMI 1081 - SUPREME COURT (especially para No. 1) wherein the Hon'ble Apex Court had discussed the necessity of issuance of a show cause notice along with its purpose. Further, he submitted that it was imperative that this Authority on its own website had provided for the 'Procedure and Methodology' to be followed by the Authority. SI. No. 6 of the said procedure and methodology provided for adherence to the principles of natural justice by this Authority while exercising its functions and duties. 37. The Respondent also submitted that as per Rule 122 of the CGST rules, this Authority should consist of the following:- i. A Chairman who has held a post equivalent to Secretary to Government of India and ii. Four Technical Members who were or have been Commissioners of State Tax or Central Tax for at least a year. 38....
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....tners on the same day itself and thus, the benefit of the reduction in tax has been passed on by the Respondent by way of post supply discounts for a certain period in terms of Section 15 of the CGST Act by way of credit notes. The said point was brought to the notice of DGAP, however, the DGAP had not considered the same and had used the average base prices for the period 01.11.2017 to 14.11.2017 and compared the same to invoice-wise transaction value for calculating the profiteering amount. He has explained the calculation of profiteering made by the DGAP and him with respect to a particular invoice No. 3691038159 and the difference in profiteering arising thereon in detail as is shown below:- Invoice No. 3691038159 and Credit Note No. 1360378 (enclosed as Exhibit-10) a. Description of SKU is Kesh Kanti Hair Cleanser Natural 200 ML b. Item Code of SKU is 1131 c. Quantity of SKU in the said invoice is 10800 d. Average base price during the period 01.11.2017 to 14.11.2017 (exclusive of GST) (A) = Rs. 47.07 e. Average base price during the period 01.112017 to 14.11.2017 (inclusive of GST) (B) = Rs. 47.07 + 18% of 47.07 = 55.5426 ....
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....red in calculating the alleged profiteering by not taking into consideration the discount given in terms of cashback scheme. He claimed that he had introduced 'Swadeshi Samridhi Card' Scheme ('hereinafter referred to as "SSC scheme"), from 2017 vide which the customers of the Respondent who had opted for the Scheme, received a top-up card through which the customers could buy the desired goods on the top-up value card along with extra cash back. As per the Scheme of the Respondent, every customer who recharged his card, got a certain amount as Swadeshi Nishta Cashback (hereinafter referred to as "cashback") as per the following terms: SI.No. Top Up Amount "Swadeshi Nishta" (Cashback) 1. Upto Rs. 4000 5% 2. Rs. 4001 and above 7% * Maximum cash back in a month will be Rs. 355/- Note- Upper Limit of Balance in Card at any point of time is Rs. 50000/- 42. He submitted that this cashback given by the Respondent to the customers on each recharge was a cost to him vide which the Respondent supplied a product at a price lower than the normal selling price. This cashback was nothing, but a form of discount given to the customers for using the SSC as a for....
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....onsidered the return of such 250 units, which were supplied back by the recipient to the Respondent. and has calculated the alleged profiteering with respect to to 400 units. He explained the calculation of profiteering by the DGAP and by the Respondent (if any) with respect to a particular invoice No. 190000931 and the difference in profiteering arising thereon in detail as is given below:- Invoice No. 190000931 and Credit Note No. 170000099 (enclosed as Exhibit-14) i. Description of SKU is Pristine Glass Cleaner 500 ML - T ii. Item Code od SKU is 80981 iii. Quantity of SKU in the said invoice is 180 (I) iv. Total Taxable amount as per the invoice (inclusive of GST) = Rs. 10197.32 v Average base price during the period 01.11.2017 to 14.11.2017 (exclusive of GST) (A) = Rs. 44.26 vi. Average base price during the period 01.112017 to 14.11.2017 (inclusive of GST) (B) = Rs. 44.26 + 18% of 44.26 = Rs. 52.23 vii. Selling price calculated by DGAP (inclusive of GST) (C) = Total taxable amount in invoice / total units = Rs. 10197.32/1 = Rs. 56.65 viii, Profiteering per unit as per the DGAP (D) = Difference of ....
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....which had been arrived at by summing up the sales value mentioned in each of the invoices with respect to which profiteering had been calculated. Thus. from the above. he submitted that the DGAP had erred by not deducting the sales returned amount of Rs. 1,08,31,05,673.23/- from the total turnover of Rs. 7,84,79,26,951.49/-, while calculating the profiteering amount and thus the profiteering amount calculated by the DGAP was incorrect. He further submitted that it was pertinent to note that the number of units supplied by the Respondent would be reduced, if the cases of the goods returned by way of purchase by the Respondent from his recipients, had been incorporated. the amount of alleged profiteering calculated by the DGAP was incorrect and thus, needed to be revised. 45. He also submitted that the lack of judicial members in the Authority was violative of the principles of Natural Justice. In this regard, he has cited the following cases:- • Madras Bar Association vs. Union of India 2014 (308) ELT 209 (SC) = 2014 (9) TMI 821 - SUPREME COURT • Rojer Mathew vs. South Indian Bank Limited and Ors. 2018 (13) GSTL 129 (SC) = 2018 (5) TMI 726 - SUPREME COUR....
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....pients. 3) Liquidation scheme: Discount offer to retailer to sell off aging inventory. The calculation of this scheme was the same as the secondary scheme. 4) Paid visibilities: Discount offered to the retailer for providing space inside shop for visibility of product. Calculation of this scheme was same as secondary scheme. 5) Consumer offer: Discount offered to consumer, which were printed on consumer pack. a. Price off: Discount offer in terms of reduction on MRP. b. Combo packs: MRP reduction for consumer to purchase pre-defined bundle of products. c. Free article: Additional article being offered to consumer on buying pre-defined quantity. 47. He submitted that it was imperative to note that the DGAP while calculating the profiteering amount had failed to consider the above discounts given through the secondary and retailer schemes due to which, the profiteering calculated had been arrived at a higher side than the actual profiteering (if any). He reiterated that the net invoice value of the goods would be reduced when such schemes were considered. In this regard, he placed reliance on the his ledger which he had enclose....
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....ng the period 1.11.2017- 14.11.2017 had been taken as a basis then the base prices during the period 15.11.2017 to 31.03.2019 should also had been taken in terms of average net realisation and thereafter, profiteering should have been calculated by comparing the both. Thus. firstly discounts given to the customers should be considered and then using weighted method, average should be derived. These two figures should be then compared to determine if the allegation of profiteering stood its ground, The DGAP had adopted an arbitrary approach- firstly while calculating the average base price for period 01.11.2017 to 14.11.2017, he had considered the discount given by the Respondent, however, while calculating the invoice prices for the period after 15.11.2017 discounts have been ignored. Secondly, average price had been taken for the period from 1.11.2017 to 14.11.2017 against the invoice value for the period after 15.11.2017. 52. Further, he submitted that the DGAP himself in various cases had taken the average net realisation during the period post 14.11.2017 as a basis for computing the profiteering by the assesses. In this regard, he placed reliance on the case of Kiran Chimira....
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....anism 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. These regulations have been set as barometers for calculating profiteering. He has also stated that. In the case of Commissioner of Income Tax Bangalore vs. B. C. Srinivasa Setty (1981) 2 SCC 460 = 1981 (2) TMI 1 - SUPREME COURT, the Hon'ble Supreme Court held that charging section was not attracted where corresponding computation provision was inapplicable. He also placed reliance on the case of Eternit Everest Ltd. vs. UOI 1997 (89) E.L.T. 28 (Mad.) = 1996 (6) TMI 90 - MADRAS HIGH COURT, where the Hon'ble Madras High Court had held that in absence of machinery provisions pertaining to determination and adjudication upon a claim or objection, the statutory provision would not be applicable. He also submitted that the Hon'ble Supreme Court in the case of Commissioner Central Excise and Customs Kerala v. Larsen and Toubro Limited (2016) 1 SCC 170 = 2015 (8) TMI 749 - SUPR....
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....rence to common parlance meaning of the term 'profiteering', and provided definitions of the term "Profiteer/Profiteering' from various dictionaries as below:- a) The Chambers Dictionary, Allied Chambers (India) Ltd., New Delhi, Profiteer is a person who takes advantage of an emergency to make exorbitant profits. b) The Collins Cobuild English Dictionary for Advanced Learners-Harper Collins Publication, Profiteering involves making large profits by charging high prices for goods that are hard to sell. c) Oxford English Reference Dictionary-Oxford University Press. Profiteer means to make or seek to make excessive profits, esp. illegally or in black market conditions. 57. On the basis of the aforementioned meanings, he submitted that only where an entity made exorbitant or large profits in an unlawful manner, it could be referred to be a Profiteer. He submitted that from the reading of Section 171. it was clear that a registered person should pass on the benefit of reduction in rate of tax or input tax credit to the recipient by way of commensurate' reduction in prices. Thus, the section and the rule kept the registered person....
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....rison of reduction in the tax rate it was to be determined whether profiteering has been undertaken by such registered person as an entity or not. 59. The Respondent further submitted that the DGAP, in his calculations had incorrectly applied a methodology similar to the 'zeroing methodology' which was used by anti-dumping authorities in certain countries like European Union (EU). According to the said methodology, while calculating the dumping margin only those SKUs were considered which were being dumped and those SKU's which were not being dumped were not considered. The Government of India had taken a stand against such methodology at the WTO and argued that while determining the dumping margin. all SKUs should be taken into consideration rather than only those which showed positive dumping. In this regard, he invited attention to Report No. WT/DS141/AB/R dated 1.3.2001 of the Appellate Body, WTO regarding Anti-Dumping Duties on imports of Cotton-Type Bed Linen from India. in the above case, Indian exporters faced an anti-dumping action by EU and the exporters were exporting different varieties of bed linen to EU. In some cases, the exporters were exporting at positive dumpi....
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....r, the same has not been considered by the DGAP while calculating the alleged profiteering. He submitted that he had also borne the additional GST burden on those inventories which were lying with his channel partners as on 30.06.2017 and the same were cleared by the channel partners post-GST at the rate of 28%. This additional burden of GST that has been borne by the channel partners was recovered by them from the Respondent vide issuance of credit notes. however, the same has not been considered by the DGAP while calculating the alleged profiteering amount. He mentioned that the Respondent in toto has borne this additional GST burden of Rs. 48.59,41.402.35/- during the period of 2017-18 to 2018-19. 61. He submitted that the period covered under the present investigation was from 15.11.2017 to 31.03.2019, while the GST rate was reduced from 15.11.2017, there was no reason adduced by the DGAP as to the date of 31.03.2019 being reckoned for conducting the investigation. The Report was silent on the grounds or reasons based on which such period was selected by the DGAP for investigation. He further stressed that the period covered under investigation did not have any statutory bas....
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....HORITY and in the case of NP Foods, 2018-VIL-08-NAA = 2018 (10) TMI 1338 - NATIONAL ANTI-PROFITEERING AUTHORITY, loss of input tax credit had been factored-in for determination of net profiteering. According to the provisions of Section 171 of the CGST Act, this Authority was mandated to check if the benefit of reduction in GST rates or availability of input tax credit alone has been passed on. Therefore, the provision merely allowed evaluation of the passing of benefits during an increase in ITC and not reduction of ITC. Loss of input tax credit similarly resulted in an increase in costs. By allowing reduction of ITC to be set-off against the reduction in GST rates. this Authority has in effect allowed adjustment for the increase in costs. Therefore, he concluded that the investigation undertaken by the DGAP covering the period from 15.11.2017 to 31.03.2019, has the effect of placing an unlawful restraint on his fundamental right to carry on his business and was therefore violative of Article 19 (1) (g) of the Constitution of India. He submitted that the increase in costs should be taken into consideration for determination of the alleged profiteering (if any) as costs usually inc....
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....ged profiteering amount, the DGAP had incorrectly added 18% to the alleged profiteered amount without adducing grounds as to why this amount has been added. This was evident from the DGAP's finding in Para 14 of the DGAP report wherein it has been stated that the excess GST so collected from the recipients, is also included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased price". The Respondent submitted that such computation was ab initio incorrect, baseless and liable to be rejected and it was an undisputed fact that the amount charged as GST by the Respondent. has been duly deposited in the government account and hence this amount could not be made liable to be deposited in the Consumer Welfare Fund. He further stated that assuming. without admitting. that he had profiteered and GST had been collected thereon, then instead of him. the Government could transfer the amount equivalent to GST on the profiteered amount to the Consumer Welfare Fund. He added that the addition of 18% would have been correct if the case of the DGAP was that the amount has been collected and retained by the Respondent and....
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.... tax rate reduction in monetary terms which was normally the price. Section 171 did not use the words 'pass on the benefit by reduction in price only'. The effect of commensurate reduction in price was extending the benefit to the recipient which had arisen due to tax rate reduction. Thus, what was pertinent to be seen was whether the objective of Section 171 was being achieved or not. If a recipient was extended the benefit in monetary or non-monetary form proportionate to the tax rate reduction. Section 171 was duly complied with in the strict sense. Price in this regard was the consideration paid or payable for the overall supply of a product. In light of the aforementioned submission. he contended that as per the Indian Contract Act. 1872. consideration included any act or abstinence. While consideration for the supply was generally measured in monetary terms, the same could also include non-monetary elements. Thus. price was not only what was reflected in the invoice. The monetary component may already be factored in the invoice price. However. the parties could also choose to settle the consideration partly in non-monetary terms. In the present case, the Respondent had reduce....
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....11.2017 to 06.12.2017 which were in the nature of post supply discounts (Section 15 of CGST Act). If the discounts were considered, the alleged profiteering amount would be reduced by Rs. 7,10.84,798.30/-. v. Profiteering in terms of non-consideration of discounts given by way of cashback scheme. The DGAP had erred in calculating the alleged profiteering by not taking into consideration the discount given in terms of cashback scheme. In this regard, he placed reliance on his ledger vide which the total cashback (discount) given by him to his customers during the relevant period came to Rs. 37.29,90.605.55/-. Further, he submitted that the total turnover during the relevant period on which profiteering had been calculated by the DGAP was Rs. 7,84.79,26.951.491- as against Rs. 7,47,49.36.345.94/-(derived after deducting cashback amount from total turnover). vi. Profiteering in terms of non-consideration of sales return through credit note or through the purchase He submitted that the DGAP has calculated the alleged profiteering by not taking into account the quantity of SKUs which after their initial supply were supplied back to him by the customers either through t....
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.... or bill of supply were not mentioned in the credit notes. Hence. the DGAP has stated that the claim regarding the admissibility of these credit notes issued in compliance with Section 171 of the CGST Act was not sustainable. V. Profiteering in terms of non-consideration of discounts given by way of cashback scheme:- The DGAP stated that the cashback was given by the retailer to the final customer and not by the manufacturer to his distributers. Since the investigation was being done against the manufacturer, no benefit of the cashback scheme could be given to the manufacturer. VI. Profiteering in terms of non-consideration of sales return through credit notes: During the hearing held before this Authority on 22.11.2019, the Respondent had submitted the sales return data. The DGAP stated that the sales return information has been considered and the profiteering amount has been re-calculated. VII. Profiteering in terms of non-consideration of sales return through purchase: - In this regard, the DGAP stated that it was seen that the Respondent had given lump sum figure and details have been given for only 3 Invoices. Even in these....
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....03.2019 with the commensurate price based on the average of the base price of such products sold during the period 01.011.2017 to 14.11.2017. The excess GST so collected from the recipients has also been included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased base prices. The place (State or Union Territory) of the supply-wise break-up of the total profiteered amount of Rs. 75,08,64,019/- is furnished in the Table below Table Amount in Rs S.No. State Name State Code Final profiteering 1 JAMMU AND KASHMIR 1 49,67,133/- 2 HIMACHAL PRADESH 2 1,14,78,261/- 3 PUNJAB 3 1,95,79,263/- 4 CHANDIGARH 4 59,254/- 5 UTTARAKHAND 5 2,42,28,501/- 6 HARYANA 6 3,33,35,289/- 7 DELHI 7 3,33,57,375/- 8 RAJASTHAN 8 3,93,69,459/- 9 UTTAR PRADESH 9 10,65,05,367/- 10 BIHAR 10 5,25,82,483/- 11 ARUNACHAL PRADESH 12 155/- 12 TRIPURA 16 35,031/- 13 MEGHLAYA 17 7,126/- 14 ASSAM 18 1,95,25,832/- 15 WEST BENGAL 19 3,93,74,502/- 16 ....
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....dent's objection regarding period of investigation from 15.11.2017 to 31.03.2019, the DGAP stated that the Government, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, reduced the tax rates from 28% to 18% on various consumer goods, effective from 15.11.2017. A reference was received on 08.06.2018 from the Standing Committee on Anti-profiteering to conduct a detailed investigation against the Respondent. The investigation report was submitted to this Authority on 13.12.2018. Order No. 02/2019 was issued by this Authority on 14.03.2019 in respect of the Respondent. This Authority had extended the period for investigation upto March, 2019. Further, the revised investigation report was submitted to this Authority on 13.09.2019. 74. In respect of the Respondent's submissions that he was required to pass on the benefit of tax rate reduction to his recipients i.e. to super distributors and distributors etc., which was done by him and shown as Exhibit-14 in his submissions dt. 22.11.2019, the DGAP stated that first of all, after issuing of notice on 21.06.2018, on completion of seventeen months and even after submission of final investigation report to this Authority ....
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....prices vis-å-vis changes in the rate of tax 2. The DGAP while calculating the alleged profiteering amount has failed to consider the discount given by the Respondent by way of cashback schemes. That the cashback is given by the retailers to the final customer and not by the manufacturer (Respondent) to his distributors. Thus, the benefit of the cashback scheme could not be given to the Respondent. The Respondent submitted that the observation of the DGAP was incorrect and without any basis. As the cashback scheme is a form of discount which an end consumer receives while buying goods from the Respondent through the distributors/super distributors/retailers etc. Thus, the said cashback the amount was a cost Respondent and was borne by him. 3. The DGAP while calculating the alleged profiteered amount has failed to consider the sales return made through purchase. The Respondent with respect to his contention of sales return made through purchase had provided a lump sum amount and details with respect to only 3 invoices, which lacked the corresponding reference of the original sales invoice. Thus, the benefit of the same could not be given to the Respondent. ....
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....ent of the discount should be given to the purchaser. 76. This Authority has carefully considered the DGAP's Reports and the written submissions of the Respondent. The issues to be decided by this Authority in the present case are as under:- 1) Whether the Respondent is liable to pass on the benefit of tax reduction w.e.f. 15.11.2017 to his buyers ? 2) Whether there has been any violation of the provisions of Section 171 of the CGST Act, 2017 by the Respondent? 3) If yes then what is the quantum of profiteered amount? 77. In this connection it would be appropriate to refer to the provisions of Section 171 of the CGST Act, 2017 which provide as under:- "(1). Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. (2). The Central Government may, on recommendations of the Council. by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether ITC availed by any registered person or the reduction in the tax rate have actually resulted in a co....
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.... the computation of profiteering. 80. The DGAP has compared the average pre rate reduction base prices with the actual post rate reduction prices due to the reasons that (i) it was not possible to compare the average base prices pre and post rate reductions as the post rate reductions the benefit has to be legally passed on to each buyer on the actual transaction value received by the Respondent from each of such buyer (ii) it was also not possible to compare the actual to actual base prices pre and post rate reduction as the same buyer may have not purchased the same product during both the above periods and some of the buyers may have purchased some products during the post rate reduction period and not during the pre rate reduction period or vice versa (iii) the Respondent had charged different base prices to his customers during the pre rate reduction period and therefore, the only alternate available was to compute the average base prices for the above period so that comparison could be made with the post rate reduction actual base prices (iv) the average pre rate reduction base prices have been computed for a very short period of 14 days....
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....t this Authority as per Para 9 of the 'Methodology & Procedure' notified by it on 28.03.2018, under the powers given to it under Rule 126 of the CGST Rules, 2017, has jurisdiction to take suo mato cognizance of the contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The above Para states as, "(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 Rule 137 (c), person, body, association or on a reference having been made to it by the Central Government or the State Government" Therefore, it is clear that this Authority can suo moto examine the violation of the provisions of Section 171 of the CGST Act, 2017 or can direct the DGAP to launch investigation. In the instant case, under the powers granted to it under the above provisions, this Authority had asked the Respondent to intimate how he has passed on the benefit of GST rate reduction w.e.f. 15.11.2017, which was announced vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017, to the customers as he was one of the largest s....
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....e High Court of Delhi passed in the case of M/s. Nestle India Ltd. & Anr. V. Union of India & Ors. (W.P.(C) 969/2020 = 2020 (2) TMI 671 - DELHI HIGH COURT, wherein the Hon'ble High Court has held that:- "We however, make it clear that this interim order shall not come in the way of the National Anti-Profiteering Authority in cases where it has suo moto taken action" Therefore, all the contentions of the Respondent relating to suo-moto investigation being started by the Authority cannot be accepted. 83. The Respondent has argued that no Show Cause Notice was issued to him before the investigation started. However. this contention of the Respondent is baseless as it is observed that the DGAP had issued a notice dated 21.06.2018 (as per Annexure-3 of the DGAP report dated 13.12.2018) to the Respondent as per the provisions of Rule 129 (3) of the above Rules intimating him that he would be investigated whether he had passed on the benefit of tax rate reductions or not. Therefore, the Respondent had duly been issued show cause notice before initiation of the investigation by the DGAP. Further, during the course of investigation, the DGAP had been continuously interacting ....
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....nological history of the proceedings that the Respondent was given twelve opportunities of being heard wherein he has filed eight written submissions and the Authority has not only heard the Respondent in detail but has also considered all the submissions/objections raised by him in a fair and just manner. Further, the profiteering amount has been revised twice according to the fresh facts and submissions filed by the Respondent. It is evident from the above facts that full opportunity has been provided to the Respondent in the instant case and there has been no violation of the principle of Audi Alteram Partem. The contention of the Respondent that the legal maxim, Nemo Judex in cause sua applies in this case is baseless and cannot be accepted as this Authority has not investigated the present case itself as it has been done by the DGAP as per the provisions of Rule 129 of the CGST Rules, 2017. Further, the Respondent's citation of the cases of Oryx Fisheries Private Limited v. Union of India 2011 (266) E.L.T. 422 (S.C.) = 2010 (10) TMI 660 - SUPREME COURT and Gorkha Security Services vs. Govt. (NCT of Delhi) (2014) 9 SCC 105 = 2014 (8) TMI 1081 - SUPREME COURT in this respect doe....
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....ssed on to the recipient by way of commensurate reduction in prices." It is clear from the perusal of the above provision that it mentions "reduction in the rate of tax or benefit of ITC" which means that the benefit of tax reduction or ITC has to be passed on by a registered dealer to his customers since it is a concession which has been granted from the public exchequer which cannot be misappropriated by a supplier. It also means that the above benefits are to be passed on each Stock Keeping Unit (SKU) or unit of construction to each buyer and in case they are not passed on, the profiteered amount has to be calculated for which investigation has to be conducted on all such impacted SKUs/units. These benefits can also not be passed on at the entity/organisation/branch level as the benefits have to be passed on to each recipient at each SKU/unit level. Further, the above Section mentions any supply" which connotes each taxable supply made to each recipient thereby clearly indicating that a supplier cannot claim that he has passed on more benefit to one customer therefore he would pass less benefit to another customer than the benefit which is actually due to that customer. Each cus....
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....ompletely 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. 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) which are abundantly clear, unambiguous and mandatory which truly reflect the intent of the Central and State legislatures. Therefore, the above contention of the Respondent is frivolous and hence the same cannot be accepted. The Respondent cannot deny the benefit of tax reduction to his customers on the above untenable ground as Section 171 provides clear cut methodology to compute both the above benefits. 86. The Respondent had submitted new factual information and submissions which could not be incorporated by the DGAP in his initial investigation Report. He had also pointed out some mathematical errors in the computation made by the....
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.... in the manner prescribed under the CGST Act, during the course of investigation. Therefore, the benefit of returned SKUs merely on the basis of the claim of the Respondent cannot be allowed when there is no evidence that can help match the purchase invoices with the sales-return invoices and there is also no proof to the effect that the input tax credit in lieu of these sales-return invoices has been reversed at the recipient's end in the manner stipulated under Rule 42 of the CGST Rules, 2017. Non-consideration of Secondary and Retailer Schemes - As per Section 15 (30) of CGST Act, 2017 the transaction value will not include any discount after the sale has been effected, if(i) such discount is not proved in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoice: & (ii) Input tax credit as is attributable to the discount on the basis of documents issued by the supplier has been reversed by the recipient of the supply. Since the discounts given through secondary & retailer scheme are not specifically linked to relevant invoices, the benefit could not be given on account of reduction in the tax rates. The invoices....
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....n 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." The Respondent was also required to stamp or re-sticker or reprint the MRPs on all the SKUs on which rate of tax was reduced in terms of the letter written by the Ministry of Consumer Affairs, Food and Public Distribution, Govt. of India on 16.11.2017which reads as follows: - "WM-10 (31)12017 Government of India Ministry of Consumer Affairs, Food and Public Distribution Department of Consumer Affairs Legal Metrology Division Krishi Bhawan, New Delhi Dated: 16.11.2017 To, The Controller of Legal Metrology, All States/ UTS Subject: Labelling of MRP of pre-packaged commodities due to reduction in GST-reg. Reference is invited to this office letter No. WM-10 (31)/2017 dated 29.9.2017 regarding declaration of MRP on unsold stock of pre-packaged commodities manufactured/packed/Imported prior to 1stJuly 2017. Subsequent to that. Government has reduced the rates of GST on certai....
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....ed the excess GST the customers would have paid less price while purchasing goods from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent. The above amount can also not be paid to the eligible buyers from the CVVFs as the Respondent has not deposited it in the above Fund. Therefore the above contention of the Respondent is untenable and hence they cannot be accepted. 91. The Respondent has also alleged that the DGAP has ignored the negative values and resorted to 'zeroing' to compute higher profiteering which was used by the anti-dumping authorities in certain countries which was opposed by the Government of India before the WTO and vide Report No. WT/DS141/AB/R dated 1.3.2001 of the Appellate Body of WTO, regarding Anti-Dumping Duties on imports of Cotton-Type Bed Linen from India, the stand of the Indian Government was accepted and it was held that the practice of 'netting off' should be applied and hence the above methodology was binding on the DGAP while calculating 'profiteering'. The above contention of the Respondent is not correct as no netting off can be applied in th....
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....onsumers of the product, In the instant case, it is not possible to trace each and every consumer of the product which is manufactured by the Respondent. Therefore, to prove the legislative intent of the law, profiteered amount must be used for the welfare of the consumers and it must be deposited in the Consumer Welfare Fund in the absence of passing on the benefit to the actual consumers of the products. Hence, this contention of the Respondent does not hold good and cannot be accepted. 93. The Respondent has also placed reliance on the case of Commissioner Central Excise and Customs Kerala versus Larsen and Toubro Limited (2016) 1 SCC 170 = 2015 (8) TMI 749 - SUPREME COURT to substantiate his point that no machinery has been prescribed under the anti-profiteering provisions. On this aspect it is to be noted that no tax has been imposed under the above measures and hence the law settled in the above cases is not applicable. However, to enforce the Anti-profiteering measures. as provided under Section 171 (2) of the above Act, this Authority has been established to determine whether both the above benefits have been passed on or not to the consumers. Under Rule 123 Standing and....
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....tigated him beyond that date. The Respondent cannot claim protection under Article 14 of the Constitution when he has violated the above Article himself by denying benefit of tax reduction to millions of customers. 95. The Respondent has also cited the definitions given in Black's Law Dictionary, Shorter Oxford English Dictionary and Law Lexicon on profiteering. In this connection it would be appropriate to refer to the definition of profiteered amount given in the Explanation attached to Section 171 which states as under:- "Explanation : For the purposes of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of ITC to the recipient by way of commensurate reduction in the price of the goods or services or both." Therefore. the definition of profiteering cited by the Respondent is not applicable as the definition of profiteered amount has been clearly given in the above Explanation and hence the above claim of the Respondent is not correct. 96. The Respondent has further argued that the methodology adopted by the DGAP for c....
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....he rate of tax, therefore to calculate the commensurate benefit, the benefit of ITC loss was taken into consideration. However, in the instant case, no such benefit of ITC has been denied to the Respondent as it is only a case of reduction of tax rates, and hence the Respondent is liable to reduce the prices of his products by way of commensurate reduction in prices as per the provisions of Section 171 (1) of the CGST Act. 2017. Therefore, the facts of the cases referred by the Respondent are different from his case and hence, they cannot help him. 98. The Respondent has also argued that he had to bear loss with the introduction of GST, as rates were increased and he did not increase his prices. In this regard, it is mentioned that Section 171 (1) of the CGST Act, 2017 is very clear which requires to reduce the prices with the reduction in rate of tax commensurately. The Respondent had no restriction on increasing his prices when the rates of tax were increased and it was solely his business call not to increase them. However, he cannot deny the benefit of tax reduction on this ground. 99. The respondent has contended that the investigation is violative of Article 19 (1) (g) ....
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....ode Final profiteering 1 JAMMU AND KASHMIR 1 49,67,133/- 2 HIMACHAL PRADESH 2 1,14,78,261/- 3 PUNJAB 3 1,95,79,263/- 4 CHANDIGARH 4 59,254/- 5 UTTARAKHAND 5 2,42,28,501/- 6 HARYANA 6 3,33,35,289/- 7 DELHI 7 3,33,57,375/- 8 RAJASTHAN 8 3,93,69,459/- 9 UTTAR PRADESH 9 10,65,05,367/- 10 BIHAR 10 5,25,82,483/- 11 ARUNACHAL PRADESH 12 155/- 12 TRIPURA 16 35,031/- 13 MEGHLAYA 17 7,126/- 14 ASSAM 18 1,95,25,832/- 15 WEST BENGAL 19 3,93,74,502/- 16 JHARKHAND 20 1,65,33,796/- 17 ODISHA 21 2,58,76,775/- 18 CHATTISGARH 22 2,26,43,709/- 19 MADHYA PRADESH 23 3,57,74,111/- 20 GUJARAT 24 5,38,81,902/- 21 MAHARASHTRA 27 9,55,47,656/- 22 KARNATAKA 29 5,08,06,578/- 23 GOA 30 26,32,131/- 24 KERALA 32 76,57,830/- 25 TAMIL NADU 33 2,15,35,149/- 26 PUDUCHERRY 34 1,239/- 27 ANDAMAN AND NICOBAR ISLANDS 35 7,45,902/- 28 TELANGANA 36 2,01,39,678/- 29 ANDHRA PRADESH (NE....