TaxTMI 
TaxTMI 
2020 (5) TMI 286
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.... Hard Trolley" which was being supplied by the Respondent. The Applicant No. 1 had alleged that the Respondent did not reduce the selling price of the above product when the GST rate was reduced from 28 % to 18% w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and he had kept the MRP of the above product unchanged at Rs. 9100/- and thus, the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in its price. The Standing Committee on Anti-profiteering had examined the aforesaid application in its meeting held on 22.03.2019 and forwarded the same to the DGAP for detailed investigation in terms of Rule 129 (1) of the above Rules. 2. The DGAP on receipt of the application and the supporting documents from the Standing Committee on Anti-profiteering, had issued Notice under Rule 129 (3) of the CGST Rules, 2017 on 09.04.2019 calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in the GST rate w.e.f. 15.11.2017 had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate t....
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....act of GST rate reduction and therefore, they did not fall under the purview of the anti-profiteering provisions. (ii) Sales made to Canteen Stores Department (CSD): These sales were made at specially negotiated prices which had been agreed upon exclusive of GST and once fixed, the Respondent could sell the products at lesser price than the agreed price but not at a price higher than the fixed agreed price. The price fixed for CSD was lesser than the price at which the Respondent was selling his products in the open market. Thus, for the sales made to the CSD there was no reference point for comparison with the previous sales and also the sales made to the CSD had no impact of GST rate reduction as the said sales pertained to the sales made to the Government organizations. Therefore, the supplies made to the CSD should be excluded from the ambit of the ongoing investigation into alleged profiteering as they did not attract Section 171 of CGST Act, 2017. (iii) Scrap Sales: The prices negotiated for these sales were exclusive of GST and the GST applicable on the date of supply was charged on the negotiated prices. Therefore, the scrap sales should be excluded from t....
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....as also stated that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the goods supplied by the Respondent from 28% to 18% w.e.f. 15.11.2017 vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and the same had also not been contested by the Respondent. 11. The DGAP has also examined the provisions of Section 171 of the CGST Act, 2017 and submitted that the legal requirement in the event of benefit of ITC or reduction in 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 benefits 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. 12. The DGAP has further submitted that the Respondent's contention that his products were sold through different channels in the market like Franchisees, Hyper Markets, Departmental Stores, E-commerce pl....
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....relevant invoices; and (ii) ITC as was attributable to the discount on the basis of document issued by the supplier had been reversed by the recipient of the supply." 14. The DGAP has also reported that since the Respondent had failed to give proof of satisfaction of the conditions mentioned in Section 15 (3) (b) above, thus, the discounts given through credit notes were not liable to be excluded from the value and hence the benefit of discounts could not be given to the Respondent. He has further reported that the Respondent had not considered the discounts offered through credit notes during the period before 15.11.2017, for which the base prices were calculated and hence they were not liable to be considered in the subsequent period also. The DGAP has also intimated that the items mentioned at Sr. No. (i) to (v) above were not liable to be considered for calculation of the profiteered amount. However, the benefit of reduction in the value on account of credit notes issued subsequent to the issue of invoices did not appear to be admissible. 15. The DGAP has also contended that the methodology adopted for determining the amount of profiteering could be explained by ....
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....om 15.11.2017 to 31.03.2019 has been computed in the similar manner for each channel of sale, separately. He has further submitted that the average base prices for others channels would be different from the channel as has been shown in the Table above and accordingly, profiteering has been calculated channel-wise. 17. The DGAP has also reported that the issue that remained to be settled was the determination and quantification of profiteering by the Respondent, due to his failure to pass on the benefit of the reduction in the rate of GST on the goods supplied to his recipients, in terms of Section 171 of the CGST Act, 2017. From the invoices and the details of the outward supplies made available by the Respondent, the DGAP has claimed that the Respondent has increased the base prices of the goods when the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017, therefore, the commensurate benefit of GST rate reduction was not passed on to the recipients. The DGAP, on the basis of the aforesaid pre and post-reduction GST rates and the details of the outward taxable supplies (other than zero rated, nil rated and exempted supplies) of the impacted products during the period from....
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....d 5 8,15,385 33 West Bengal 19 1,45,00,669 Grand Total 25,73,82,482 19. The DGAP has thus came to the conclusion that the allegation that the base prices of the goods were increased when there was reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017, so that the benefit of such reduction in GST rate was not passed on to the recipients by way of commensurate reduction in prices appeared to be correct and from the details furnished in Annexure-18, it appeared that the base prices of the goods under investigation were indeed increased post GST rate reduction w.e.f. 15.11.2017. Thus, by increasing the base prices of the goods consequent to the reduction in the GST rate, the commensurate benefit of reduction in the GST rate from 28% to 18%, was not passed on to the recipients and the total amount of profiteering covering the period from 15.11.2017 to 31.03.2019 has been worked out by the DGAP as Rs. 25,73,82,482/-. 20. The above Report was considered by this Authority in its meeting held on 26.09.2019 and it was decided to hear the Applicants and the Respondent on 24.10.2019. Accordingly, a show cause notice dated 30.09.2019 was i....
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....rating price of a product, which remained same till the time above factors remained constant. 24. The Respondent has further claimed that the DGAP's computation of levying 18% GST on the net profiteering amounting to Rs. 3,92,61,734.43, was unjustifiable. He has also submitted that in terms of Section 171 of the CGST Act, 2017, any reduction in the rate of tax on the supplies of goods and/or services or the benefit of enhanced ITC was to be passed on to the recipients by way of commensurate reduction in prices. However, the term profiteering had not been defined under the CGST Act or the rules made thereunder. He has further cited the definition of the term 'profiteering' as per the various dictionaries viz. the Oxford, the Black's Law, the major Law Lexicon and the Judicial Dictionary. He has also claimed that profiteering referred to the excessive, exorbitant and unjustifiable profits arising due to supply of essential goods. However, the DGAP had alleged that the Respondent had profiteered to the extent of GST which was charged on the profiteered amount and had further alleged that it violated the provisions of Section 171 of the CGST Act. But the DGAP had not provided any le....
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.... of the CGST Act, 2017 and Rule 129 (1) of the CGST Rules, 2017 and has further pleaded that the structure and framework under the statute conferred powers of investigation only against the "supplier" of the goods. Despite the above, the DGAP had completely ignored the factual details of the aforementioned application and proceeded to investigate the Respondent due to incorrect mention of his name in the Application. The fundamental basis for complaint was the same MRP being mentioned on the third party website, which was beyond the control of the Respondent and the MRP was the maximum sale price and not the actual sale price. No evidence had been produced to establish that the supply of the above product had taken place on the price mentioned on the website. 27. The Respondent has also contended that the scope of the DGAP's investigation should have been restricted to the product in respect of which the complaint was made and it could not be simply expanded to other products. He has further contended that as per Section 171 of the CGST Act, the emphasis was to pass on the reduction in price to 'the recipient'. Thus, the DGAP's attempt to cover all his products was beyond the sc....
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....r ITC in terms of Section 171 of the above Act. The methodology to be prescribed by this Authority must capture the basic principles that would be relevant to all industries keeping in view the common trade practices. This would also ensure that Section 171 of the CGST Act was interpreted in an uniform manner across all tax payers. He has further contended that such methodology was the crux of Section 171 of the CGST Act because the same would ensure equity, consistency and uniformity in defining the scope of Section 171 of the CGST Act. 30. The Respondent has also submitted that in the absence of machinery provisions, the entire proceedings under the anti-profiteering provisions would be a futile exercise. Reliance in this regard has been placed by the Respondent on the Hon'ble Apex Court's judgement passed in the case of CIT v. B. C. Srinivasa Shetty 1981 (2) SCC 460 = 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. The Hon'ble Court had held that the computation and charging provisions formed essence of any tax legislation and failure of the computation provision would auto....
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....f input tax credit has to be passed on to the recipient by way of commensurate reduction in price. Every recipient of goods or services has to get the benefit from the supplier and hence, this benefit has to be calculated for each and every product supplied. He has also stated that during the investigation, the Respondent had not passed on the benefit of rate reduction for the other categories of travel bags/goods supplied by him; accordingly, he had covered those categories of travel bags/goods also which were impacted by the rate reduction Notification. As regards the exclusion of excess GST amount collected by the Respondent from the recipients, it was submitted by the DGAP that Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017, required the supplier of goods or services to pass on the benefit of tax rate reduction to the recipients by way of commensurate reduction in prices. Price received from the recipients included both, the base price and the tax paid on it. If any supplier increased his base price, it would result in increased base price and GST charged over and above it from the recipients, and the aforesaid statutory provisions would require that s....
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..... The DGAP has also stated that under the provisions of Rule 126 of the CGST Rules, 2017, this Authority was the statutory authority to determine the methodology and procedure for determination as to whether the reduction in the rate of tax or the benefit of input tax credit has been passed on by the registered person to the recipients by way of commensurate reduction in prices. The said Rule nowhere stipulated that this Authority shall prescribe methodology and procedure to quantify the amount of profiteering. Thus, the extent of profiteering has to be arrived at on a case to case basis, by adopting suitable method based on the facts and circumstances of each case as well as the nature of goods or services supplied. He has further stated that there could not be any uniform methodology for determination of the quantum of benefit to be passed on. In Rule 126, the word used was 'determine' and not 'prescribe'. He has also submitted that this Authority has already notified the methodology and procedure under Rule 126 on 28.03.2018. He has also argued that the entire investigation was conducted under the provisions of Section 171 of the CGST Act, 2017 read with Rule 129 of the CGST Rul....
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....the CGST Act, it was clear that the emphasis was on to pass on the benefit of tax reduction by way of reduction in the price to 'the recipient'. He has further submitted that by computing profiteering on all the products the DGAP had not restricted himself to the product sold to the complainant recipient but has extended it in respect of all the recipients, which was beyond the scope of this investigation. In terms of Rule 129 (3) information and description of the goods was required to be provided to the supplier in respect of which investigation was to be conducted, however, in the present case the above requirement has not been complied. The Respondent has also stated that the intention of Section 129 (1) was that where the Standing Committee was satisfied that there was prima facie evidence to show that the supplier has not passed on the benefit of reduction in the rate of tax or input tax credit to the recipients by way of commensurate reduction in prices, it would refer the matter to the DGAP. He has further stated that the Standing Committee had evidence, in the form of screen shot from the e-commerce website, limited to 'American Tourister Sky Tracer' Hard Trolley only and ....
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....erce web-site. The provisions of the CGST Act and the Rules, conferred powers of investigation only against the "supplier" of goods. Therefore, there was an apparent misunderstanding, which had probably resulted in the Notice being issued to the Respondent as he was not the supplier. 40. We have carefully considered the Reports filed by the DGAP, submissions of the Respondent and other material placed on record and it has been observed that the Respondent is engaged in the business of designing, manufacturing and trading of luggage, luggage accessories, travel bags, hard and soft luggage items, duffels, small bags, briefcases, laptop bags, laptop strollers, backpacks, wallets, belts and travel accessories etc. It has also been observed that the Respondent is selling the above products through offline channels such as distributors, retailers and online channels. It has further been observed that the Respondent is making exports to his overseas customers, is also making inter-company stock transfers, is also selling to the CSD and is also supplying to the domestic market. 41. It is also revealed from the record that an application dated 30.07.2018 was filed before the Standing ....
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....by dividing the total taxable value by total quantity of this item sold during the period from 01.11.2017 to 14.11.2017. The average base price of this item was compared with its actual selling price during the post-GST rate reduction period on or after 15.11.2017, when it was sold through the above channel. On the basis of above calculation profiteering in respect of all the impacted goods of the Respondent for the period from 15.11.2017 to 31.03.2019 has been calculated in the similar way for each channel of sale separately by the DGAP. The methodology adopted by the DGAP for computation of profiteered amount by comparing the average base prices of the products in respect of which the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017, with the actual post rate reduction base prices of these products appears to be correct, reasonable, justifiable and in consonance with provisions of Section 171 of the CGST Act, 2017 as it was not possible to compare the actual base prices prevalent during the pre and the post GST periods due to the reasons that the Respondent was (i) selling his products at different rates to different customers in the same channel (ii) the same customer m....
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.... excessive, exorbitant and unjustifiable profits arising due to supply of essential goods. However, the above claim of the Respondent is not correct as what would constitute the 'profiteered' amount has been mentioned and defined in Section 171 of the CGST Act, 2017 itself 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 Input Tax Credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3). The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered....
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....nt No. 1 and name of the Respondent was duly mentioned. The product against which the complaint was filed was mentioned as "American Tourister Sky Tracer HL Blue 68 cm (hard trolley)". It was also stated in the application that the Earlier Price/ Value per unit of the above product was Rs. 9,100, Present Price/ Value per unit was Rs. 9,100.00, Earlier MRP was Rs. 9,100.00 and Present MRP was Rs. 9,100.00. It was further stated that "After GST rates were reduced from 28% to 18% the MRP by Samsonite still remains the same". It was also mentioned that the benefit of tax reduction had not been passed on. Additional information was also provided in the Form by stating that The supplier Samsonite India seems to have maintained the same MRP despite reduction in GST from 28% to 18%. The above complaint is received from a member of Local Circles, Local Circles is India's leading Community Social Media Platform". A copy of the complaint received from Sh. Anil Mehta a member of the Local Circle mentioned above was also attached with the e-mail which stated as under:- "Profiteering Complaint against American Tourister/Samsonite I am thankful all members of the circles who hav....
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....sary that such a person should have purchased the product himself. Therefore, the Applicant No. 1 is legally competent to maintain the above complaint against the Respondent. Accordingly, it is established that the above complaint fully satisfies the provisions of Rule 128 (1) which state that the Standing Committee on Anti-Profiteering can receive application "from an interested party or from a Commissioner or any other person. examine the accuracy and adequacy of the evidence provided in the application to determine whether there is prima-facie evidence to support the claim of the 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." Accordingly, all the above claims of the Respondent are frivolous and hence they cannot be accepted. 47. The Respondent has also contended that it was well settled in the cases of M/s Miles India v. Assistant Commissioner of Customs 2002 TIOL 501 SC CUS = 1984 (4) TMI 63 - SC ORDER (Annexure-E) and M/s Northern Plastics Ltd. v. Hindustan Photo Films Mfg. Co. Ltd. 1991 (91) ELT 502 SC = 1997....
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....pective of the fact whether any complaint has been made against them or not. 49. It would also be pertinent to mention that the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs through its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a) Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices, in terms of Section 171 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder. b) Responsibility for coordinating anti-profiteering work with the National Anti-profiteering Authority, the Standing Committee and the State level Screening Committees." Therefore, it is clear from the above OM that the DGAP is required to investigate and collect evidence necessary to determine whether both the above benefits have been passed on or not. No res....
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....as also argued that the provisions of Section 171 of the CGST Act, 2017 violate Article 19 (1) (g) of the Constitution. In this connection it would be pertinent to mention that Section 171 only requires the Respondent to pass on the benefit of tax reduction to the buyers and does not require him to fix his prices. The above benefit has been granted to the general public by the Central and the State Governments by sacrificing their tax revenue which the Respondent cannot be allowed to misappropriate and enrich himself at the expense of common consumers who are unorganised, voiceless and vulnerable. The Respondent is free to exercise his right to trade and fix his prices keeping in view the cost of goods, market conditions, competition and his business strategy but he cannot deny the above benefit under the pretext that it infringes his right to trade. Neither the DGAP nor this Authority has mandate to direct the Respondent to fix his prices as per their directions nor they have directed so and hence all such claims made by the Respondent are farfetched and are not maintainable. 52. The Respondent has also placed reliance on the directions passed in in WP (C) 4213/2019 in the matt....
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....ld pass less benefit or no benefit to another customer than what is actually due to that customer on another SKU. Each customer is entitled to receive the benefit of tax reduction or ITC on each SKU or unit or service purchased by him limited to his entitlement. The term "commensurate" mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each SKU or unit or service based on the tax reduction or the additional ITC which has become available to a registered person after coming in to force of the CGST Act, 2017. Accordingly, the benefit of additional ITC would depend on the comparison of the ITC/CENVAT which was available to a builder in the pre-GST period with the ITC available to him in the post GST period w.e.f. 01.07.2017. Similarly, the benefit of tax reduction would depend upon the quantum of reduction in the rate of tax. Computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from SKU to SKU or unit to unit or service to service and hence no fixed mathematical methodology can be prescribe....
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....ory and legally enforceable. The above provisions also reflect that the true intent behind the above provision, made by the Central and the State legislatures in their respective GST Acts is to pass on the above benefits to the common buyers who bear the burden of tax. The Respondent is trying to grossly mislead by claiming that he was required to carry out highly complex and exhaustive mathematical computations for passing on the benefit of tax reduction which he could not do in the absence of the principles, procedure and methodology framed under the above Act and the Rules. However, his claim is absolutely wrong as he was only required to maintain the same base prices of his products which he was charging before the tax reduction was notified w.e.f. 15.11.2017 and charge 18% GST instead of 28%. Accordingly, MRPs of his impacted products were required to be the re-fixed by him as manufacturer and conveyed to his dealers. However, the Respondent had increased his base prices and continued to charge the same prices which he was charging before the tax reduction and had also not re-fixed his MRPs which he was bound to do in terms of Section 171 of the CGST Act, 2017 as well as the L....
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....RT, Rai Ramkrishna v. State of Bihar AIR 1963 SC 1667 = 1963 (2) TMI 2 - SUPREME COURT, State of A. P. v. Nalla Raja Reddy AIR 1967 SC 1458 = 1967 (2) TMI 98 - SUPREME COURT, Vishnu Dayal Mahendra Pal v. State of U. P. (1974) 2 SCC 306 = 1974 (5) TMI 116 - SUPREME COURT and D.G. Gose and Co. (Agents) (P) Ltd. v. State of Kerala (1980) 2 SCC 410 = 1979 (9) TMI 189 - SUPREME COURT and the case of Natural Resources Allocation Special Reference No. 1 of 2012 = 2012 (10) TMI 596 - SUPREME COURT in his support. In this regard it is respectfully submitted that as has been mentioned in para supra no tax has been imposed under Section 171 of the above Act and hence the law settled in the above cases cannot be followed. 56. The Respondent also furnished a few invoices issued during the pre and post GST rate reduction periods on a sample basis to establish that he has passed on the benefit of tax reduction. Perusal of the invoices shows that they have been issued by the Respondent in favour of M/s Future Retail Limited which is running the Big Bazar Stores, during the pre and the post rate reduction periods. However, it is revealed that the Respondent was charging Rs. 9100/- as MRP on the ....
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....radesh 12 2.50 4 Assam 18 9,77,010.00 5 Bihar 10 21,63,319.50 6 Chandigarh 4 7,00,265.00 7 Chhattisgarh 22 11,40,989.50 8 Delhi 7 1,61,71,761.00 9 Goa 30 15,67,558.00 10 Gujarat 24 48,24,160.00 11 Haryana 6 58,84,711.00 12 Himachal Pradesh 2 3,041.50 13 Jammu & Kashmir 1 5,38,228.50 14 Jharkhand 20 11,94,712.50 15 Karnataka 29 1,55,00,971.00 16 Kerala 32 30,41,608.00 17 Madhya Pradesh 23 26,98,684.50 18 Maharashtra 27 2,13,71,847.50 19 Manipur 14 40,698.00 20 Meghalaya 17 2,11,435.50 21 Mizoram 15 86,487.00 22 Nagaland 13 1,77,444.50 23 Orissa 21 16,28,534.00 24 Puducherry 34 9,33,026.00 25 Punjab 3 21,75,653.50 26 Rajasthan 8 21,88,727.50 27 Sikkim 11 4,752.50 28 Tamil Nadu 33 1,69,27,348.50 29 Telangana 36 71,18,256.00 30 Tripura 16 45,913.00 31 Uttar Pradesh 9 82,39,956.00 32 Uttarakhand 5 4,07,692.50 33 West Bengal 19 ....