TaxTMI 
TaxTMI 
2020 (5) TMI 285
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....Fly Ash Blocks" supplied by the Respondent. The Applicant had also enclosed two invoices of "Fly Ash Blocks" supplied by the Respondent along with his application viz. Invoice No. 4204 dated 18.12.2018 and Invoice No. 4481 dated 02.01.2019. 2. The Applicant No. 1 had also alleged that the Respondent did not pass on the benefit of reduction in the GST rate from 12% to 5% w.e.f. 01.01.2019 notified vide Notification No. 24/2018- Central Tax (Rate) dated 31.12.2018 and instead increased the unit base price. The Applicant No. 1's invoice details have been furnished by the DGAP in the Table-A given below:- Table-A Sr. No. Name of the product supplied Pre GST rate revision on 31.12.2018 Post GST rate revision on 01.01.2019 Difference (in Rs.) Invoice No. & Date GST Rate Price excluding GST (in Rs. Per cu.mt. Invoice No. & Date GST Rate Price excluding GST (in Rs. Per cu.mt. 1. Fly Ash Blocks 4204 dated 18.12.2018 12% 2232.14 4481 dated 02.01.2019 5% 2380.95 148.81 3. The Gujarat State Screening Committee on Anti-profiteering had conducted prima facie verification of the application and after having satisfied itself ....
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....e increase in the cost of raw materials ranged from 0.28% to as high as 22%. b. That the cumulative effect of increase in the prices of raw materials when factored with their proportion in the total cost of the product came to 1.73%. Thus, out of the total percentage increase in the base price of the product on and from 01.01.2019 when compared with December, 2019, 1.73% was attributable to the increase in the cost of production as demonstrated by the cost sheet furnished by him. c. That the product was made taxable @ 5% from 01.01.2019 but the inputs, capital goods and input services for the final product "Fly Ash Blocks" attracted taxable rate higher than 5% leading to accumulation of ITC. The Respondent has also stated that:- (i) All the inputs were taxable at the rate of more than 5%, such as Soluble Oil, Cement and the like. (ii) All the input services were taxable at the rate of more than 5% such as legal services, security services, telephone/mobile/internet services and the like. Barring transportation, all the input services of the Respondent were taxable at the rate of 18%. (iii) All the capital goods were taxable at the rate o....
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....of the GST Council, had reduced the GST rate on the "Fly Ash Blocks" supplied by the Respondent from 12% to 5% w.e.f. 01.01.2019, vide Notification No. 24/2018-Central Tax (Rate) dated 31.12.2018 and the same had also not been contested by the Respondent. 13. The DGAP has also examined Section 171 of the CGST Act, 2017 and stated that the legal requirement in the event of benefit of ITC or reduction in the rate of tax was that there must be a commensurate reduction in the prices of the goods or services. Such reduction could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of ITC. This was the only legally prescribed mechanism to pass on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method which a supplier could adopt to pass on such benefits. 14. The DGAP has also submitted regarding the contention of the Respondent that the base prices were increased to offset the increase in prices of the raw materials, increase in cost of production and blockage of accumulated ITC due to inverted duty structure etc. that his con....
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....01.2019) Post Rate Reduction (From 01.01.2019) 1. Product Description (Item Code) A Fly Ash Blocks 600 x 200 x 75 2. Period B December, 2018 3. Total quantity of item sold C 15845 4. Total taxable value D 295015.35 5. Average base price (without GST) E=D/C 18.62 6. GST Rate F 12% 5% 7. Commensurate Selling price (post Rate reduction) G=E*1.05 19.55 8. Invoice No. H GST/ 4462/1819 9. Invoice Date I 01.01.2019 10. Total quantity (above invoice) J 1490 11. Total Invoice Value K 30173 12. Actual Selling price (post rate reduction of item (size) L=K/J 20.25 13. Difference (Profiteering) M=L-G 0.70 14. Final Profiteering N=M*J 1043 17. The DGAP has thus stated that the Respondent did not reduce the selling price of the "Fly Ash Blocks 600 x 200 x 75", when the GST rate was reduced from 12% to 5% w.e.f. 01.01.2019, vide Notification No. 24/2018 Central Tax (Rate) dated 31.12.2018 and hence profiteered an amount of Rs....
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.... the Table given below:- Table Sr.No. State Code State Profiteered Amount (Rs.) 1. 24 Gujarat 13,39,998 2. 25 Daman and Diu 3,051 3. 26 Dadar and Nagar Haveli 2,52,843 4. 27 Maharashtra 39,64,448 Grand Total 55,60,340/- 20. The DGAP has also clarified that in this case, the allegation of the Applicant No. 1 that the base prices of the "Fly Ash Blocks" were increased when there was a reduction in the GST rate from 12% to 5% w.e.f. 01.01.2019, so that the benefit of such reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in prices, was sustainable and it appeared that the base prices of the "Fly Ash Blocks" were indeed increased by the Respondent post GST rate reduction w.e.f. 01.01.2019. Thus, by increasing the base prices of the goods subsequent to the reduction in the GST rate, the commensurate benefit of reduction in the GST rate from 12% to 5%, was not passed on to the recipients. The total amount of profiteering covering the period from 01.01.2019 to 31.03.2019 was Rs. 55,60,340/-. 21. The above Report was considered by this Authority in its meeting held on 25.....
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.... sold, the DGAP had arrived at totally wrong and inconsistent figures of alleged profiteering. g. That the DGAP had further not considered the freight expenditure incurred in the alleged profiteered amount although the fact was that the freight element was factored in the selling price. 25. The Respondent has also submitted that the reasons given by the DGAP for not considering the rise in the prices due to rise in the prices of the raw materials before arriving at the amount of profiteering seemed to be purely whimsical in nature. 26. The Respondent has further submitted that he had furnished his reply dated 29.05.2019 before the DGAP and the same along with all its annexures should be considered as part and parcel of this reply. He has also contended that the fact of increase in the prices of the raw materials has led to an increase in the prices of the final product which was specifically brought to the notice of the DGAP. He has also furnished cost sheet, copies of purchase registers and sample purchase invoices vide Annexures A to F. 27. The Respondent has further contended that it was specifically brought to the notice of the DGAP that on an average 1.73 % o....
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....nd capital goods, vide Central Board of Indirect Tax and Customs (CBIC) Circular No. 79153/2018-GST dated 31.12.2018. Thus, the Respondent was compulsorily required to increase the base prices of his final products to absorb the ITC on input services since it was now non refundable. This important aspect and legislative amendment had been ignored by the DGAP. 31. The Respondent has also argued that the DGAP had also completely ignored the comparative data of other customers of the Respondent submitted along with cogent evidence, on the perusal of which it was clearly forthcoming that increase in the prices in the case of other customers ranged only from 1.71% to 1.99 %. 32. Clarifications were sought from the DGAP on the Respondent's above mentioned submissions. The DGAP has filed his clarifications on 06.12.2019 vide which he has submitted that the allegations of the Respondent were improper as the findings in his investigation Report were based on the documents and record furnished by the Respondent himself. The DGAP has also submitted that the contention of the Respondent regarding fundamental and basic errors in the quantification of the profiteered amount was incorre....
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.... vide its order dated 02.01.2020. 35. The Respondent has filed his next written submissions on 11.01.2020 via e-mail vide which he has stated that the DGAP's clarifications were non comprehensive and were factually unacceptable. He has also stated that on perusal of the DGAP's clarifications, it transpired that the rate of the product being Fly Ash Blocks 625 x 200 x 100 was Rs. 2261/- and this rate was per cubic metre, thus Rs. 2261/- * 18.75 cubic metre led to taxable value of Rs. 42,410.63/-. Thus, it was amply clear that the Respondent was selling the Fly Ash Blocks on the basis of per cubic metre quotation and not on the basis of number of pieces or the various types of Fly Ash Blocks. He has further stated that the DGAP, even in his clarifications has failed to comprehend the method of billing of sales adopted by the Respondent. 36. The Respondent has also contended that the DGAP has arrived at the new profiteered amount of Rs. 1,15,67,524/- and the said figure would hold true if each different volume was taken as a distinct item. However, the DGAP had also clarified that the said method and working was inappropriate. Thus, the DGAP has himself accepted that his....
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....by the CBIC on 31.12.2019 i.e. on the date of reduction in the GST rate from 12 % to 5 %, which was also elaborated in his submissions dated 11.11.2019. 39. The Respondent has also claimed that as stated in his submission dated 09.11.2019, the calculation of average price lacked rationale. He has further claimed that the DGAP has himself mentioned the transport charges / freight charges separately in the sales sheet. However, the freight incurred by the Respondent has not been taken in to account while quantifying the profiteering amount. The Respondent has also submitted that the statement of the DGAP that freight was not mentioned separately in the invoices was absolutely incorrect and misleading. Thus, the DGAP has not considered the freight expenditure and has arrived at highly overstated and totally unrealistic figures of profiteering. The Respondent has also furnished sample invoices wherein freight has been charged separately. The Respondent has also requested to decide the case on the basis of his submissions and waived his right of personal hearing. 40. Clarifications were again sought from the DGAP on the Respondent's above mentioned submissions. The DGAP vide h....
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....e ITC was nothing but cost which had to be passed on to the customers otherwise viability and survival of the business would get threatened. The second was the demonstrated and substantiated rise in the prices of the raw materials. 42. He has also stated that the DGAP has only questioned the timing of the price rise whereas no submissions on merits of the two reasons given above for price rise had been given by the DGAP. The Respondent has further stated that regarding the unit of measurement at which the product was sold by the Respondent, the DGAP has finally accepted that the Respondent was selling his product on per cubic metre basis whereas the DGAP has made calculations on per piece basis. The Respondent has also submitted that the difference in the prices per cubic metre was of no consequence since such a difference would also percolate down to per unit selling price. He has also claimed that such per piece calculation lacked objectivity as for a single product, two different prices were adopted. He has also reiterated his previous submissions on the issue of freight expenditure. 43. We have carefully considered the Reports filed by the DGAP, submissions of the Respond....
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....ase price would have been denied the benefit of tax reduction although the base price charged from them might have been more than the commensurate price which was required to be charged from them by the Respondent keeping in view the tax reduction. The average base price computed by the DGAP for the pre-rate reduction period is also based on the GSTR-1 Return filed by the Respondent for the month of December, 2019 and since it is spread over a period of 31 days only it gives more accurate and representative value of the average base price. On the basis of the average base prices so computed by the DGAP in respect of each unit of the product dimension wise, commensurate price has been computed by the DGAP in respect of each unit, keeping in view the reduction in the rate of tax, which has been compared with the actual selling price of the unit having similar dimension supplied post rate reduction and in case the price charged was more than the commensurate price, profiteered amount has been calculated. Accordingly, the DGAP has computed the base prices in respect of all the 66 dimension wise units of the product being sold by the Respondent as per Annexure-16 of his Report and has c....
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....ering has been on the higher side per unit. Therefore, the above claim of the Respondent is wrong and frivolous and hence, it cannot be accepted. 47. The Respondent has further submitted that the DGAP has not considered the expenditure incurred on freight although it was factored in the selling price. Perusal of the record shows that the DGAP has not taken in to account the freight as it was not mentioned separately by the Respondent in his invoices which were submitted by him during the course of investigation. Had he done so the same would have been considered by the DGAP while computing the profiteered amount. The invoices produced by the Respondent mentioning the freight separately during the course of the present proceedings as an afterthought cannot be relied upon as it was incumbent on the Respondent to produce them before the DGAP during the investigation. Since, the transaction value realised by the Respondent mentioned in each invoice which was issued during the pre and the post GST period, on which tax was paid by the Respondent, has been taken in to account by the DGAP, while computing the profiteered amount, no fault can be found in the computation of the profiteere....
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....ted tax structure which was not allowed by the CBIC w.e.f. 01.01.2019, the date from which the rate of tax was reduced, which has increased his cost. In this connection it would be relevant to mention that the Respondent was eligible to claim the benefit of ITC on all the inputs which formed major part of his cost and hence he has benefitted more than what was his output tax liability. The Respondent was only not eligible to claim benefit of ITC on the input services and the capital goods. The Notification dated 31.12.2019 issued by the CBIC has only clarified the above aspect and it has nowhere denied him the benefit of ITC on input services and capital goods as it was not available to him under Section 54 of the CGST Act, 2017 w.e.f. 01.07.2017. Moreover, the Respondent has not claimed ITC on the capital goods during the period of investigation. Since, the benefit of ITC on input services and capital goods was not available to the Respondent since coming in to force of the CGST Act, 2017 w.e.f. 01.07.2017 and the Respondent had fixed his prices keeping in view the above denial during the period from 01.07.2017 to 31.12.2018 for the last one and half year, he cannot claim that suc....
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....Row No. 28 are 625 X 200 X 225 and not 600 x 200 x 75 as has been claimed by the Respondent. The commensurate price without tax has been shown as Rs. 33.40 and not Rs. 22.90 in Row No. 28 as has been claimed by the Respondent. The number of the invoice has also been wrongly mentioned as GST/4493/1819 whereas it is GST/4483/1819 in the above Row. The above sheet has been prepared after taking in to account the prices per cubic meter wise and not unit wise as has been claimed by the Respondent otherwise the profiteered amount would not have come to Rs. 1,15,67,524/-. Therefore, all the above claims made by the Respondent are misleading and frivolous and hence they cannot be entertained. 54. The Respondent has further pleaded that he failed to understand as to how there could be two commensurate prices for a given product of specific dimension. However, the above claim of the Respondent is falsified by the copies of the invoices submitted by him which have been mentioned above. In each invoice the dimensions of the product have been found to be different. The DGAP has correctly computed the profiteered amount on the basis of the dimensions of the product and there is no error in th....
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....eered amount of Rs. 55,60,340/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited in terms of the Rule 133 (3) (b) of the CGST Rules, 2017. Since, rest of the recipients in this case are not identifiable, the Respondent is directed to deposit the amount of profiteering of Rs. 55,60.340/- along with interest in the CWFs of the Central and the concerned State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 in the ratio of 50:50 along with interest (c) 18% till the same is deposited. Accordingly, an amount of Rs. 27,80,170/- will be deposited in the Central CWF while the balance will be deposited in the State CWFs as has been shown in the Table given below:- Sr.No. State Code State Profiteered Amount (Rs.) 1. 24 Gujarat 6,69,999 2. 25 Daman and Diu 1,525.50 3. 26 Dadar and Nagar Haveli 1,26,421.50 4. 27 Maharashtra 19,82,224 Grand Total 27,80,170/- 58. The above amount shall be deposited within a period of 3 months by the Respondent, from the date of receipt of this order, failing....