TaxTMI 
TaxTMI 
2020 (6) TMI 573
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....nd Services Tax (CGST) Act, 2017. In this regard, the Applicant No- 1 had relied on two invoices issued by the Respondent, the details of which are furnished in the Table given below:- Table Particulars Pre-GST Post-GST Invoice No. A 1214654736 913210006167 Invoice Date B 11.09.2016 03.08.2017 Quantity Solid (No.) C 2 5 MRP as per Annexure-7 (Rs.) D 39,250 40,100 Basic price before discount per unit (Rs.) E 32,578 29,824 Discount per unit (Rs.) F 3,860 3,349 Basic price after discount per unit (Rs.) G=E-F 28,716 26,475 Less Excise Duty @ 12.5% (35% abatement on MRP)(Rs.) H=(D*65%)*12.5% 3,189 - Basic Price (excluding duties & taxes) (Rs.) I=G-H 25,527 26,475 VAT @ 14.5% (Rs.) J=G*14.50% 4,164 - GST @ 28% (Rs.) K=G*28% - 7,413 Total Tax (Rs.) L=H+J or K 7,353 7,413 Total Tax (in%) M=L/I 28.80% 28% Selling Price (As per Invoice) (Rs.) N=G+J or G-L 32,880 33,888 Increase in Basic Price Diff. of I Rs. 948/-(3.71%) 2. The above complaint was examined by the Standing Committee on Anti-prof....
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....ffective Bill of Manufacture (BOM) cost as per the Systems Applications and Products (SAP) software). (ii) Increase in Freight Cost: Impact of Rs. 29 per unit (on account of various market factors like availability driven by demand supply gaps, loading regulations and overall inflation etc.). (iii) Reduction in Sales Realization due to GST Impact of Rs. 441 per unit. The Respondent has furnished comparison of the impact on the profit & loss due to transition to GST on the impugned product i.e. Refrigerator FP313D PROTTON ROY MIRROR', considering the pre-GST figures as mentioned in the Notice and by working out the post-GST Basic Price treating the DP as constant (same as pre-GST), as per the details furnished in Table-'B' below:- Table-'B' (Amount in Rs.) Rs. Per Unit Pre GST Example {Inv 1214654136) Kerala Only VAT @ 14.5% Pre-GST Example All India VAT @ 13.82% Same DP Post GST Example All India GST @ 28% Same DP Change All India same DP MRP 39250 39250 39250 Dealer Price 37300 37300 37300 VAT/GST Rs. 14.50% 13.82% 28.00% VAT/GST Rs. 4724 4529 8159 &n....
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....t-GST with Constant Discount). Sales Realization in Column B was Rs. 25,722/- and in Column D, it was Rs. 25,964/-. It could be concluded that with a DP increase of Rs. 875/- per unit (Rs. 38,175- Rs. 37,300), the impact in Sales Realization was only Rs. 242/- (Rs. 25,964- Rs. 25,722). However, the total impact on margins has been furnished in Table-'D' below:- Table 'D' Particulars Amount in Rs. Increase in Sale Realization 242 Less: Increase in Material Cost 365 Less: Increase in Freight Cost 29 Net Impact on Margins (-) 152 (e) The Respondent has also compared the total discounts passed on to M/s. Pittappillil Agencies for the period July-December, 2016 and July December, 2017. The summary has been furnished in Table-'E' given below:- Table 'E' (Amount in Rs.) Jul-Dec 2016 Jul-Dec 2017 Change Sales Volume Sales Value Rs Lacs 8360 1137 8705 1117 345 -20 On Invoice Discount Rs. Lacs On Invoice Discount % 117 10.3% 109 9.8% -8 -0.5% Off Invoice Discount Rs. Lacs Off Invoice Discount % 92 8.0% 117 10.5% 25 2.4% Total Discount Rs. Lacs Total Disco....
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....nt has contended that the total incidence of tax on the impugned product has increased from 26.1% (pre-GST) to 28% (post-GST). However, on examining the documents submitted by the Respondent he has observed that the impugned product was manufactured at Pune (Maharashtra) only while it was sold in Maharashtra and in other States. Therefore, it liable to Central Sales Tax @ 2% apart from the VAT (ranging between 12.50% to 15 95%) and the Central Excise Duty @12.50% on the abated MRP. In some States, Entry Tax (1% to 2%) was also levied on the impugned product. Therefore, the average tax incidence in pre-GST period was about 31.5% which had got reduced to 28% on the introduction of GST w.e.f. 01.07.2017. The State-wise details of pre-GST tax incidence have been furnished in Annexure-19 by the DGAP, Therefore, the DCAP has claimed that the contention of the Respondent that the total tax incidence on the impugned product has increased in the post-GST period was not correct. 8. The DGAP has also submitted that the Respondent has contended that there was gap in the discounts offered on two Invoices relied upon by the Applicant No, I and the mechanism of passing on the discounts depende....
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....m the details of the outward supplies made during the period from 01.07.2017 to 31.08.2018 furnished by the Respondent the amount of net higher sale realization due to increase in the basic price of the impugned product, despite the reduction in the GST rate or in other words, the profiteered amount came to Rs. 5,06,921/- The details of transaction wise computation of the profiteered amount have been furnished by the DGAP vide Annexure-20 attached to his Report dated 06.12.2018. The profiteered amount has been arrived at by comparing the State- wise average basic price (after discount) of the impugned product during the period from 01.042017 to 30.06.2017, with the transaction-wise basic price (after discount) during the period from 01 07.2017 to 31,08.2018. 12. The place of supply and the break-up of the total profiteered amount of Rs, has been furnished by the DGAP in Table-G below:- Table-G (Amount in Rs.) S. No. State / Union Territory (Place of Supply} No. of Units Sold Amount of Profiteering (Rs.) 1 Andhra Pradesh 20 32,089 2. Assam 5 8,662 3. Delhi 31 4,547 4. Gujarat 51 52,485 5. Haryana 13 12,....
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.... Maharashtra. He has also claimed that he was manufacturing and marketing electronic goods and all his products to various dealers across India were sold on a standard pricing model. He has further claimed that his price remained identical for all the dealers irrespective of the location which included the basic price plus taxes. The Respondent has also stated that the impugned product was manufactured and sold from April 2014 and was discontinued in December 2017, He has provided details of the MRP and DP during this period as has been given in the Table below:- Month and Year MRP (Rs.) Dealer's Price (Rs.) April 2014 36,750/- 34,990/- August 2014 36,875/- 35,115/- December 2014 37,075/- 35,115/- February 2015 37,575/- 36,200/- October 2015 38,150 36,200/- April 2016 38,300/- 36,850/- July 2016 39,175/- 37,300/- October 2016 39,250/- 37,375/- July 2017 40,100/- 38,175/- December 2017 onwards (Product discontinued) 42,550/- 38,675/- 16. The Respondent has also submitted that the contention of the DGAP that the rate of tax on the product was reduced from 31.5% to 28% w.e.f. 01.07,20....
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....AP's Report has erred in not considering the discounts which were given out of his own profit margin, He has also submitted that this Authority in the cases of M/s. Asian Paints Ltd. vide order dated 27.12.2018 = 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY. Rishi Gupta v. M/s. Flipkart Internet Pvt. Ltd. vide order dated 18.07.2018 = 2018 (7) TMI 1490 - NATIONAL ANTI-PROFITEERING AUTHORITY and M/s. Maruti Suzuki India Ltd. vide order dated 02.01.2019 = 2019 (1) TMI 139 - NATIONAL ANTI-PROFITEERING AUTHORITY has held that reduction in the discount did not amount to profiteering. The Respondent has further submitted that if these discounts of Rs. 2,47,020/- were considered the net realisation would be Rs. (-) 1,18,853/-. 19. The Respondent has also stated that the DGAP has taken into account the Pre-GST invoice of September 2016 for comparison while the Respondent had undertaken price revision in October 2016. The DGAP had taken DP and the basic price as Rs- 37,300/- and Rs. 32,576/- respectively while the DP and basic price from October 2016, prior to introduction of GST was Rs. 37,375/- and Rs. 32,642/- respectively. Thus, there was an increase in the basic price to t....
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....ncome/Sales) 2016 6.2% 6.1% 2017 6.0% 5.4% Reduction in profits 0.2% 0.7% 21. The Respondent has also averred that the ITC of Maharashtra factory was Rs. 682/- which included the in-eligible credit of 185/-, The balance of Rs- 497/- which was the eligible ITC has been wrongly deducted from the pre-GST basic price as VAT credit reversal has no relation with the basic price at which the Respondent was selling his products. Therefore, the basic price mentioned in Annexure-19 of the DGAP's Report should be considered after excluding VAT credit reversal amount He has also submitted that inadvertently in his earlier communication to the DGAP he has provided the eligible credit of Rs. 497/- instead of the reversed ITC of Rs. 185/-. 22. The Respondent has also stated that inter-state sales made by him in Assam and Gujarat have not been considered while computing the pre-GST tax incidence and therefore, the tax incidence should be considered after including the aforesaid inter-state sales. Relying on this Authority's decision in the case of M/s. Panasonic India Pvt. Ltd. the Respondent has claimed that the indirect tax incidence (pre-GST)....
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.....2018 (Annexure-4), 25. The Respondent has further stated that Section 171 of the CGST Act, 2017 was inapplicable on reduction of tax incidence due to change in the tax regime, He has also claimed that the penalty could not be imposed in the absence of substantive provision in the CGST Act because as per Rule 133 of the CGST Rules, 2017, penalty could be imposed if it was specified in the CGST Act, He has further claimed that Section 122 of the CGST Act, 2017 could be invoked on y in the case of evasion of tax and violation of Section 171 did not amount to evasion of tax as he has duly paid the entire tax which was legally required to be deposited with the Government, He has further stated that Section 122 (1) (i) was not attracted as he has complied with all the requirement of a tax invoice specified under Rule 46 of the CGST Rules. 2017 and the 'value' mentioned in the tax invoice was in accordance with Section 15 Of the CGST Act, 2017 read with CGST Rules with respect to 'determination of value of supply'. He has also mentioned that the Hon'ble Supreme Court, in plethora of judgments, has held that penalty could not be imposed in the absence of sanction by the parent Act- He ....
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....ST? 3) If yes to re-determine the profiteered amount after taking Into account all the submissions made by the Respondent during the hearings before this Authority 28. The DGAP has accordingly submitted his Report under Rule 133 (4) of the CGST Rules. 2017 which was received on 07.10.2019 in which he has stated that the Respondent has made various submissions before this Authority which were divergent to those made before his office during the investigation. He has also stated that after considering the workings submitted by the Respondent before this Authority, vide Annexure-15 at Page 123 of the Respondent's submissions dated 11.01.2019, it was observed that the ITC of VAT available to the Respondent was Rs. 682/- per unit out of which the Respondent has availed Rs. 497/- and reversed Rs. 185/- in lieu of the CST on the inter-state stock transfers- Further, the Respondent has also submitted the details of the Entry Tax of Rs. 45.45 per unit, vide Annexure-16 (Page 127) of his submissions dated 11.01.2019, before this Authority. 29. It has also been submitted by the DGAP that the Central Government. on the recommendation of the GST Council, had levied 28% GST on the....
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.... 10 4,973 14. Telangana 36 24 24,805 15. Tripura 16 3 4,287 16. Uttar Pradesh 9 62 43586 17. Uttarakhand 5 1 394 18. West Bengal 19 38 52,774 Grand Total 407 4,07,451 31. On perusal of the DGAP's Report, this Authority in its meeting held on 11.10.2019 decided to hear the Applicants and the Respondent on 04.11.2019 and accordingly notice was issued to them. The Respondent was also directed to show cause why he should not be held liable for violation of the provisions of Section 171 (1) of the CGST Act, 2017. The Respondent had sought adjournment and accordingly the hearing took place on 25.11.2019. On behalf of the Applicants none appeared and the Respondent was represented by Sh. Yatin Malhotra Chief Financial Officer, Sh. Suresh Kumar, General Manager (Indirect Taxation), Sh. Manish Gaur and Smt. Disha Jain, Advocates, On the request of the Respondent further hearings were held on 03.01.2020 and 06.02.2020. 32. The Respondent has made submissions on 25.11.2019 and stated that in his Report, the DGAP has agreed that ITC reversal was Rs. 185/- and after considering the....
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...., and 05.04.2019 should be considered as part and parcel of his present submissions. 34. The Respondent has further submitted that no guidelines or procedure has been framed by this Authority in order to determine whether profiteering has been undertaken by a supplier or not, In the absence of the same, it was open for each supplier including the Respondent to decide and undertake steps in order to ensure that provisions of Section 171 of CGST Act were followed by passing on the commensurate benefits of GST rate reduction or availability of additional ITC. 35. The Respondent has also argued that the word "commensurate reduction" mentioned in the above Section denoted reduction in the price after taking into account all the factors which impacted pricing of goods. Had the legislative intention been otherwise, instead of the word 'commensurate', the word 'equal' or 'equivalent' would have been used in this Section. 'Commensurate' connoted proportionality and adequacy. The Respondent has further argued that while determining the required 'commensurate reduction', the cost of raw materials, packing materials, overheads, market factors, labour cost, inflation and other such elemen....
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....rice along with applicable taxes was to remain identical for alt his dealers (category specific) irrespective of their location. Thus, the task of determining new pricing/MRP was also done at the national level. 39. The Respondent has also pleaded that when the pricing was decided by the Respondent at the national level as an entity, the calculation of the alleged 'profiteering' should also be done at an entity level. Thus, the methodology adopted by the DGAP to ascertain whether the Respondent has undertaken profiteering or not at a State level was incorrect and on this basis, alone the impugned report was liable to be rejected. 40, He has further pleaded that the basic prices (without any tax incidence) for the purpose of making comparison of average tax incidence (%) for the pre-GST and the post-GST periods (i.e. taxes/duties suffered divide by the basic price (without any tax incidence), should be considered as pre-discount This was due to the fact that similar to all other business entities, the Respondent was also offering discounts to his distributors based on various commercial considerations like achievement of targets, sales trend in the market and festivities at di....
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....n the revised Annexure-20 of the revised DGAP Report should be reduced to Rs. 1,02,567/- from Rs. 4,07,451/- as per Exhibit-5. 43. The Respondent has also alleged that the DGAP has computed profiteering by comparing the State-wise average basic price (after discount) of the impugned product during the period from 01.04.2017 to 30.062017. with the transaction-wise basic price (after discount) during the period from 01.07.2017 to 31 08.2018 for all the States (except Delhi and Haryana where tax incidence has increased on introduction of GST), The calculation of "State-wise average basic price (after discount) of the impugned product' was based on the supplies made to the distributors other than E-commerce customers during the period from April,2017 to June, 2017, However for the post GST period, the supplies made to E-commerce operators have been considered as well. By comparing the State-wise average basic price (after discount) pre-GST, which was based on supplies to the distributors other than E-commerce customers, with the supplies to E-commerce customers post-GST, the DGAP has erred while computing profiteering. He has further alleged that in the case of E-commerce operators ....
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....s liable to be set aside as has been computed vide Exhibit-8. 46. He has also contended that there were various other factors that had a direct bearing on the price of the impugned product. None of these factors had been taken into account by the DGAP- These factors were as under:- a) Change in direct bill of material ('BOM') cost. b) Change in other variable costs like freight, warranty, installation. 47. He has further contended that the cost of manufacture of the impugned product had witnessed an increase since August 2016 (the base period taken for comparison in the investigations) on the following counts:- 1) Increase in raw material cost: • The Respondent was purchasing various raw materials such as granules, hips, coils, polyol and isocynate, These raw materials were used in the manufacture of the impugned product and their cost formed part of the manufacturing cost of the impugned product. The Respondent was maintaining his accounts in SAP' and Enterprise Resource Planning ('ERP') soft wares, The BOM cost i.e. per product raw material cost was computed every month on moving average basis, Under the moving average mechanism, ....
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....tronic industry. Keeping in mind the ever-changing technology in Washing Machines, the Respondent and his competitors undertook frequent price revisions of the product, He has reiterated that various factors played a decisive role in it. However, the DGAP has not factored these reasons while coming to the conclusion of profiteering. Further, the increase in the cost of production of the product has also not been considered in his calculation, 50. He has further submitted that the DGAP has understood the provisions of Section 171 incorrectly and has followed an incorrect approach to calculate the alleged profiteering, Thus, the demand in respect of alleged profiteering insofar as the same pertained to the price increase was not sustainable, Accordingly. he has contended that the demand to the tune of Rs. 1,24,356/- was liable to be set aside, Detail calculation has been enclosed as Exhibit-12 by him. 51. He has also stated that if the basic price, as submitted above, was taken as pre-discount and the effect of price increase (MRP and DP) was also excluded from the computation of profiteering made by DGAP vide Annexure-20 of his Report dated 07.10.2010, the alleged profiteering....
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....eason adduced by the DGAP as to why the investigation has been extended to 31108.2018. He has further submitted that the Report was silent on the grounds or reasons based on which such a long period has been selected by the DGAP for investigation. The period covered under investigation did not have any statutory basis and the manner of deciding the period was arbitrary. 56. He has further submitted that the alleged profiteering has been calculated upto the month of August, 2018 without considering the fact that the prices of the products undergo change on frequent basis. The ad-hoc approach Of the DGAP implied that with each event of price change by the Respondent, DGAPs eyebrows would be raised. 57, The Respondent has also submitted that undertaking investigation for such a long period without any basis, was contrary to the true intent and spirit of the anti- profiteering provisions contained in the CGST Act which by their very essence were transitionary in nature and therefore, could not be applied in perpetuity. The DGAP with such an act has become a "Profit Checking" body Thus, the manner in which the provisions pertaining to anti-profiteering were being applied by the DG....
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.... 15,11,848 27,333 14. Madhya Pradesh 30.91% 28.00% 2.91% 4,66,935 13.605 15. Maharashtra 28.59% 28.00% 0.59% 11,84,349 6,964 16. Orissa 30.77% 28.00% 2.77% 4,07,883 11,282 17. Rajasthan 31.10% 28.00% 3.10% 6,49,644 20,105 18. Tamil Nadu 30.09% 28.00% 2.09% 2,49,644 5,216 19. Telangana 30.86% 28.00% 2.86% 5,93,207 16,985 20. Uttar Pradesh 29.74% 28.00% 1.74% 16,09,755 27,937 21. West Bengal 31.44% 28.00% 3.44% 9,15,698 31,530 22. Goa 29.57% 28.00% 1.57% 43.257 681 23. Nagaland 29.98% 28.00% 1.98% 1,88,191 3,734 24. Puducherry 30.09% 28.00% 2.09% 26,544 555 25. Punjab 27.86% 28.00% -0.14% 2,35,075 (323) 26. Tripura 20.98% 28.00% 1.98% 79,736 1,582 27. Uttarakhand 29.74% 28.00% 1.74% 26.007 451 223,880 Accordingly, he has claimed that the profiteering, if at all, should be Rs. 2,23,800/- as per Exhibit-14. 60. The Respondent ....
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....a AIR 1982 SC 149. He has also made reference to the common parlance meaning of the term 'profiteering' from the following dictionaries:- 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. 62, He has further contended that on the basis of the aforementioned meanings it was clear that only where an entity made exorbitant or large profits in an unlawful manner, it could be referred to be a Profiteer He has also submitted that the Respondent in the instant case has not made exorbitant profits in an unlawful manner as was evident from the comparison of operating profits of FY 2016-17, 2017-18 and 2018-19. 63. The Respondent has also submitted that the DGAP has computed ....
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....hodology at the WTO and argued that while determining the dumping margins, all SKUs should be taken into consideration rather than only those which showed positive dumping. In this regard, he has invited attention to Report No. WT/DSI41/AB/R dated 01.03.2001 of the Appellate Body of the WTO regarding Anti-Dumping Dunes on imports of Cotton-Type Bed Linen from India, In the instant case, the Indian exporters were facing an anti-dumping action by the EU as they were exporting different varieties of bed linen to the EU. In some cases, the exporters were exporting at the positive dumping margins, wherein in many cases there were negative dumping margin i.e. the export price was more than the normal value at which goods were being sold in India. The European Commission had applied Its usual practice of not netting Off the positive and negative dumping margins. In fact, it had applied Zero' (0) for negative dumping margins and cumulated only positive dumping margins and thereby arrived at higher dumping margins for Indian exporters. The Government of India had objected to this approach of the European Commission and the matter was taken to the Dispute Settlement Body of the World Trade O....
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....en computed vide Exhibit-19. 67. The Respondent has also contended that while arriving at the total alleged profiteering amount, the DGAP has incorrectly added 28% to the alleged profiteered amount without adducing grounds as to why this amount has been added and such computation was ab initio incorrect. It was an undisputed fact that the amount charged as GST by the Respondent has been duly deposited in the Government account- There has been no allegation that the amour-it termed as excess GST in the Report was not GST per se and that such excess tax has not been paid to the Government and once it has been accepted that this amount was also tax and the public exchequer was not deprived of this sum, it failed to appeal to reason that the same tax amount could be demanded again from the Respondent or deposit of such tax amount in the Consumer Welfare Fund (CWF) could be ordered. It was an undisputed fact that the Respondent has charged GST from his customers, over and above the value of goods supplied by it i e. on ex-tax basis. Therefore, the amount of GST collected by the Respondent from his customers on the alleged profiteering amount stood paid to the Government exchequer. Ev....
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....o calculate the alleged profiteering amount was not sustainable, He has further stated that on re-computation of the alleged profiteering amount extending the benefit of cum-tax to the Respondent, the alleged profiteering amount would be further reduced by Rs. 79,403/- as per Exhibit-20. 70. The Respondent has also submitted that the calculation of profiteering arrived at by the DGAP was incorrect due to the reason that benefit of credit notes on account of sales returned was not extended. He has further submitted that he has provided details of credit notes with respect to the cases where sold goods were returned by his customers- However, the same had not been considered by the DGAP. He has also claimed that the DGAP while comparing the average basic price has considered all the invoices which also contained cases where the product was not finally supplied and was returned to the Respondent. As the same did not form part of the supplies undertaken by the Respondent, such returns should be excluded from the calculation of the alleged profiteering amount and accordingly, the alleged profiteering should be reduced to the tune of Rs. 7,619/- as per Exhibit-21. 71. The Responden....
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.... to be done invoice-wise, product-wise, business vertical-wise or entity-wise etc. Thus, in absence of the same, there was lack of transparency and the results could vary from case to case resulting in arbitrariness and violation of Article 14 of the Constitution of India, It would be impossible for the Respondent to defend his case and explain how the observations and findings of the DGAP with respect to profiteering were incorrect, thus, violating the principles of natural justice. 73. The Respondent has further submitted that absence of mechanism or framework within which this Authority/ DGAP must discharge their duties, would also lead to arbitrariness. In this regard he has made reference to other countries where GST was in place and claimed that in order to control rise in inflation on Int Of implementation Of the GST, the Malaysian Government has introduced the Price Control and Anti-profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations 2014 which provided 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' serv....
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....eering, the DGAP was adopting an ad-hoc and arbitrary methodology, In the absence of prescribed method/formula for calculation of profiteering, following a method on case-to-case basis was arbitrary and thus, the Report was liable to be rejected. 76. The above submissions of the Respondent were forwarded to the DGAP for his reply and the DGAP vide his Report dated 06.12.2019 has stated that his office had considered all the submissions of the Respondent and calculated the profiteered amount, The DGAP has also stated in respect of calculation of wrong profiteering in respect of E-commerce customers that it was a new fact which was never raised by the Respondent. 77, The DGAP has also claimed that in pre-GST regime the tax was being charged and collected by the seller's State (origin based tax), however the GST was a destination based tax where it was levied and collected by the State where recipient was located and as the GST was uniform across the States, comparison of seller's State pre-GST tax incidence and prices with that Of CST rate was correct and appropriate. The DGAP has further claimed that the legal requirement was abundantly clear in Section 171(1) that in the even....
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....0.67% - 28.170% 5. Chhattisgarh 12.50% 14.50% 0.78% 1.00% 28.780% 6. Delhi 12.50% 12.50% 0.74% - 25.739% 7. Gujarat 12.50% 15.00% 0.75% - 28.245% 8. Gujarat-CST Sale 12.50% 2.00% 0.72% - 15.221% 9. Haryana 12.50% 13.13% 0.71% - 26.334% 10. Jammu and Kashmir 12.50% 14.50% 0.68% - 27.730% 11. Jharkhand 12.50% 14.50% 0.73% 27.742% 12. Karnataka 12.50% 14.50% 0.74% - 27.723% 13. Kerala 12.50% 14.50% 0.72% - 30.249% 14. Madhya Pradesh 12.50% 15.00% 0.75% 2.00% 26.000% 15. Maharashtra 12.50% 13.50% 0.00% - 29.769% 16. Orissa 12.50% 14.50% 0.77% 2.00% 28.257% 17. Rajasthan 12.50% 15.00% 0.76% - 27.737% 18. Tamil Nadu 12.50% 14.50% 0.74% - 27.773% 19. Telangana 12.50% 14.50% 0.77% - 27.720% 20. Uttar Pradesh 12.50% 14.50% 0.72% - 28.801% 21. West Bengal 12.50% 14.50% 0.80% 1.00% 25.766% 22. Goa 12.50% 12.50% 0.7....
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....3% 14.50% 0.72% - 26.05% 21. West Bengal 10.83% 14.50% 0.80% 1.00% 27.13% 22. Goa 10.62% 12.50% 0.77% - 23.88% 23. Nagaland - CST sale from Assam 10.83% 2.00% 0.73% - 13.55% 24. Puducherry 10.83% 14.50% 0.74% - 26.06% 25. Punjab 10.98% 15.95% 0.74% - 27.67% 26. Tripura - CST Sale from Assam 10.72% 2.00% 0.73% - 13.45% 27. Uttarakhand 10.83% 14.50% 0.72% - 26.05% Average Pre-GST tax rate 24.32% 81. Thus. the Respondent has claimed that on addition of the rates of applicable duties/taxes and the VAT/CST reversal, it could be seen that the rates of taxes were nominally more than 28% in only 2 states. In Orissa, the earlier rate was 28.10% which on application of Section 170 of the CGST Act (Rounding off) was to be read as 28%. Thus. the only State where the pre-GST rate was more than 28% was Madhya Pradesh where it was 28.63%. He has also submitted that applying the principal of rounding off, the rate of tax would be 28% in one of these States. Further this decrease in tax rate in other States would be very no....
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.... data to arrive at the pre-GST (%) and the percentage of rate was arrived at by adding all the pre-GST tax rates which were applicable on the impugned product. Therefore, he has claimed that the DGAP's observation was not relevant. He has also submitted that it was pertinent to note that even though the "All India Dealer price is same", the price at which the goods were sold to the dealers were different in the Pre-GST regime due to various factors such as difference in the tax rates (VAT), differences in negotiations and discounts thereof etc., therefore, for the purpose of computing profiteering amount, a single average price for the respective State could not be taken as the base. Instead. the dealer level comparison should be made i.e. the average commensurate price, at the dealer's level, during pre-CST period should be compared with the transaction-wise actual price during the GST period for the respective dealer, due to the reason that Section 171 of CGST Act envisaged benefit on account of reduction in the tax rate to be passed on to the recipients. Therefore. the computation should also be at the recipient's level (i e, dealers level). He has further stated that in any cas....
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....nvestigation whereby he has computed the profiteered amount as Rs. 4,07,451/- as per the revised Annexure-20 87. It is further revealed from the record that the Central Government, on the recommendation of the GST Council, had levied 28% GST on the 'Refrigerators, freezers and other refrigerating or freezing equipment electric or other, heat pumps other than air conditioning machine of heading 8415", vide S. NO. 120 Of Schedule- IV attached to Notification No. 01/2017-central Tax (Rate) dated 28,06.2017. The impugned product "Refrigerator Whirlpool FP313D PROTTON ROY MIRROR" was covered by the aforesaid Notification. Therefore, the Respondent is liable to pass on the benefit of tax reduction to the buyers of his above product in terms of Section 171 Of the above Act. 88. It is also evident from the methodology adopted by the DGAP for computation of profiteered amount that he has compared the State wise average basic price of the product after discount during the period from 01.04.2017 to 30.06.2017 with the transaction wise basic price after discount during the period from 01.07.2017 to 31.08 2018. The DGAP vide Annexure-19 of his Report dated 07.10.2019 has also compute....
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....ble. wrong and unheard off which shows that the Respondent has deliberately tried to pocket the benefit of tax reduction to enrich himself at the expense of the vulnerable customers. Accordingly, on the basis of the pre and post reduction tax rates and the details of the outward taxable supplies of the impacted product made during the period from 01 07.2017 to 31.08.2018 the profiteered amount in respect of the Respondent has been rightly computed as Rs. 4,07,451/- including the GST, the details which have been mentioned in Annexure-20 (Revised) of the Report dated 07.10.2019 submitted by the DGAP. The State wise profiteered amount has been mentioned in Table-A of the above Report 89. The Respondent in his submissions has claimed that no principles or guidelines or methodology or procedure or formula or modalities have been framed by this Authority or in the CGST Act or the Rules in order to determine whether profiteering has been undertaken by a supplier or not in the absence of which the Respondent was free to decide how the benefit of tax reduction was to be passed on as per the provisions of Section 171 of CGST Act, The above contention of the Respondent is frivolous as the ....
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....red person. The legislature has deliberately not used the word 'equal' or 'equivalent' in this Section and used the word 'Commensurate' as it had no intention that it should be used to denote proportionality and adequacy, 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 price and quantum of reduction in the rate of tax from the date of its notification. 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 prescribed to determine the amount of benefit which a supplier is required to pass on to a buyer. Similarly, computation of the profiteered amount is also a mathematical exercise which can be done by any person who has elementary knowledge of accounts. However, to further explain the legislative intent behind the above provision, this Authority has been authorised to det....
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....rry 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 / guidelines/ procedure/ methodology/ modalities/ formula framed by this Authority or under the above Act and the Rules, However, his claim is absolutely wrong as he was only required to maintain the same basic price of his product which he was charging before the tax reduction was notified w.e.f. 01.07.2017 and charge 28% GST on the basic price, Accordingly, MRP of his impacted product was required to be the re-fixed and stickered by him as manufacturer and conveyed to his dealers. However, as is evident from the invoices mentioned in Table-A supra the Respondent had increased his basic pre GST price from Rs. 25,527/- to post GST basic price amounting to Rs. 26,475/- and the MRP from Rs. 39250/- to Rs, 40, 100/- 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 Legal Metrology Act, 2009 after the rate of tax was reduced to 28% w.e.f. 01.07,2017. Hence, no principles, methodology and procedure or guidelines or elaborate mathematical calculations are re....
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....on has to be passed on to each customer on each purchase which cannot be done if the benefit vs computed at the entity level as it would deny the required benefit. Therefore, the benefit has to be computed at the State level and not at the national level. 92. He has also contended that with the introduction of GST he had to revisit his pricing in the background of the revised rate Of tax and ITC availability. The above argument of the Respondent is untenable as there was no ground to refix the price of the impugned product as the Respondent was required to maintain the basic price which he was charging during the pre GST period and charge GST after coming in to force Of the GST which had no connection with his cost of production and ITC. There was no cause for the Respondent to increase his price w.e.f. 01.07.2017 the date from which the rate of tax had been reduced. Such a coincidence is deliberate and unheard off and shows that the Respondent had no intention of passing on the benefit of tax reduction and he had illegally appropriated the same. 93. He has also claimed that the basic price for the purpose of making comparison of average tax incidence (%) for the pre-GST and ....
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....ence the anti-profiteering provisions were not attracted in the above case. Accordingly, the orders passed in the above cases are of no help to the Respondent. As has been discussed above the basic price cannot be computed pre-discount and therefore, the profiteered amount cannot be considered as (-) Rs. 43,558/- as per Exhibit-4 attached by the Respondent with his submissions. 94. The Respondent has also submitted that even if the methodology adopted by the DGAP as per Annexure-19 of his Report dated 07.10.2019 is accepted the profiteering should be computed for only 5 States viz. Assam, Bihar, Gujarat, Madhya Pradesh and Rajasthan, in case the basic price was considered pre-discount. It would be pertinent to mention here that the basic price cannot be computed pre discounts on the grounds mentioned supra and hence profiteering in respect of all the 18 States as per Annexure-19 has to be computed including the States of Assam, Bihar Gujarat, Madhya Pradesh and Rajasthan, Accordingly, in respect Of these five States the profiteering amount as computed in the revised Annexure-20 of the revised DGAP Report dated 07.10.2019 cannot be reduced to Rs. 1,02,567/- from Rs. 4,07,451/- as....
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....rtion. Accordingly, the profiteered amount in respect of the E-commerce customers to the tune of Rs. 36,357/- cannot be reduced as per the details given in Exhinit-6. 96. The Respondent has also stated that in respect of the States Of (a) Goa (b) Nagaland (c) Puducherry (d) Punjab (e) Tripura and (f) Uttarakhand the DGAP has wrongly computed profiteering in the absence of comparable pre-GST base prices which could be substantiated from Annexure-19 (revised) of the DGAP Report dated 07.10.2019 wherein column (C) to (H) against rows (29) to (34) were intentionally left blank. In the absence of such comparable pre-GST base prices. the DGAP has arbitrarily adopted the pre-CST base prices of other States for computing profiteering. For instance - the pre-GST base price for 'Goa' was the same as that of "Maharashtra', The pre-GST base price for 'Nagaland' was same as that of "Assam'. In this regard it is revealed from the perusal of Table-A of the Report dated 07,10.2019 that no profiteered amount has been computed for the State of Goa and hence the pre GST rate of tax in respect of the above State has no impact on the liability of the Respondent. In respect of the States of Nagaland,....
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....ed every month to arrive at the 'MAP' at the end of each month, There was an increase of Rs. 365/. per unit of the impugned product when compared between the pre-GST and the post-GST periods from August 2016 to July 2017 which was included in the MRP of the product. The comparison of the BOM for the pre-GST period vis-å-vis the BOM when the MRP was increased under the GST regime has been given by the Respondent vide Exhibit-9 and the Cost Accountant's Certificate vide Exhibit-10 has also been attached certifying such increase. In this connection it would be relevant to mention that there was no ground for the Respondent to increase his basic price on the very date from which the rate of tax was reduced. There is also no justification to establish why the Respondent had not increased his price during the period from August 2016 to June 2017 every month when he was computing the MAP every month. It is also apparent from the details of the life cycle of the product submitted by the Respondent that he has increased the MRP and DP of the product during the months of July and October 2016 which falsifies the claim of the Respondent that he had not increased his prices from August 2....
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....g their precious tax revenue which the Respondent cannot be allowed to misappropriate and enrich himself at the expense of the common buyers who are unorganized, voiceless and vulnerable. The Respondent is free to exercise his right to trade and fix his prices keeping in view his 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 tenable. 102. The Respondent has also submitted that the period covered under the investigation was from July, 2017 to August, 2018 covering 14 months and no grounds have been given by the DGAP for selecting such a long period which should be restricted to 3 months, In this regard it would be appropriate to note that the rate of tax on the products being supplied by the above Respondent was reduced w.e.f. 01.07-2017 and therefore, he was legally required to pass on the benefit of tax reduction from the above date as per the prov....
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.... not and therefore, the claim of the Respondent that it is a profit checking body is wrong and untenable. 104. He has further submitted that the correct methodology to compute profiteering would be by comparing the tax incidence (%) pre and post GST and applying the difference to the supplies post-GST (taxable value). Accordingly. he has claimed that the profiteering should be Rs. 2,23,800/- as per Exhibit-i4. He has also furnished details of computation of the profited amount in the Tables prepared by him Perusal of the Tables prepared by the Respondent shows that he has computed the profiteered amount on the basis of the total taxable supplies made in each State multiplied by the reduction in the rate of tax. Such a methodology adopted by the Respondent is not in consonance with the provisions of Section 171 (1) as profiteered amount has to be computed on each supply so that the benefit could be passed to every buyer. In case the above methodology is applied the eligible buyers would not be able to get the due benefit as the Respondent has charged different prices to different dealers by giving them different discounts on the basis of various considerations, Any denial of bene....
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....he benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both." (Emphasis supplied) 106. Therefore, it is evident from the perusal of Sub-Section 171 (1), 171 (3A) and the Explanation attached to this Section that profiteering pertains to the amount of benefit which has been denied to the recipients by a registered person by not reducing the prices of his products commensurately on which the rate of tax has been reduced. Hence, the definitions quoted by the Respondent from the various dictionaries are not applicable, Similarly, his contention that the above term refers to excessive, exorbitant and unjustifiable profits arising due to supply of essential goods is also not correct. The argument of the Respondent that the marginal notes on anti-profiteering measures attached to Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017 were required to be considered while interpreting the anti-profiteering measures is also not relevant as profiteered amount has been clearly, concisely and appropriately defined in the above Section. Marginal note was only required to be considered in case the above pro....
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....ced/considered from the alleged profiteering computation as per Exhibit-16, 17, 18 and 19. 109. The Respondent has also contended that while computing the profiteered amount the DGAP has incorrectly added 28% GST which has already been deposited with the Government. In this regard it is mentioned that the Respondent has not only collected excess basic price from his customers which they were not required to pay due to the reduction in the rate of tax but he has also compelled them to pay additional GST on the excess basic price which they should not have paid. The Respondent has thus defeated the objective of both the Central and the State Governments to provide the benefit of rate reduction to the ordinary customers by sacrificing their tax revenue. The Respondent was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act. 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of tax reduction to the ordinary buyers by charging excess GST. Had he not charged the excess GST the customers would have paid less price while purchasing goods from the Res....
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....teering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations 2014 as they were not properly working and has also Withdrawn the GST. These provision were also regulating and controlling the prices in Malaysia. As far as the 'Net Dollar Margin Rule' framed by the Government of Australia is concerned the same also regulates the prices. The intention and objective of the provisions of Section 171 (1) of the above Act is only to pass on the above two benefits and they do not propose to control and regulate the prices, It is strange that the Respondent is not willing to pass on the benefit of tax reduction which he is not to pay from his own pocket as it is being given out of the tax revenue of the Central as well as the State Governments but is advocating fixing of prices of his products by the Government. Therefore, the above contention of the Respondent is frivolous and hence, it cannot be taken in to consideration. 112. In this regard, the Respondent has also placed reliance on the cases of Eternit Everest Ltd. v, Union of India 1997 (89) EL.T. 28 (Mad.)., Commissioner of Income Tax Bangalore v. B. C. Srinivasa Setty (1981) 2 SCC 460 and Samsung (India....
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....spective of the fact whether any complaint is received or not and whether all the impacted goods are mentioned in the complaint or not. However, the profiteered amount has to be calculated on the facts of each case as has been mentioned supra. Therefore, the above contention of the Respondent is frivolous 114. The Respondent has also contended that Section 171 (1) of CGST Act, 2017 contemplated reduction in the "rate of tar and not reduction in the "incidence of tax' and thus, the methodology followed by the DGAP was incorrect. In this regard it would be appropriate to note that the DGAP has computed the profiteered amount on the basis of the actual tax charged by the Respondent in each State during the pre GST period as is clear from the perusal of Annexure-20 (Revised). The above amount has not been calculated on the basis of the incidence of tax but on the basis of the actual amount of tax charged during the pre and the post GST periods and hence the above argument of the Respondent is not tenable. 115. He has also stated that for the pre-GST the tax rates (%) should be added to arrive at the pre-GST tax rate applicable on the impugned product and the same should be compar....
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.... With an intention to deny the benefit of tax reduction. The Respondent cannot fasten his liability on his dealers. In case he does not pass on the benefit of tax reduction there is no possibility of its getting passed on to the ultimate customer down the supply chain. Therefore, the above contention of the Respondent is wrong and hence it cannot be accepted. Accordingly, the profiteering amount cannot be reduced to Rs. 1,50,122/- from Rs. 4,07,451/- 117. The Respondent has also stated that even though the "All India Dealer price is same", the price at which the goods were sold to the dealers were different in the Pre-GST regime due to various factors therefore, for the purpose of computing profiteering amount the dealer level comparison should be made, As discussed in para supra the comparison has to be made at the level of the Respondent as he is fixing the basic price and the MRP and the same cannot be made at the level of the dealers. 118. The Respondent has further stated that penalty could not be imposed on him in the absence of substantive provision in the CGST Act, He has also claimed that Section 122 of the CGST Act. 2017 could be invoked only in the case of evasion ....
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....,451 120, Accordingly, the Respondent is directed to reduce the price of the above product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit of tax reduction is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount mentioned above along with the interest to be calculated @ 18% from the date from which 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, the recipients in this case are not identifiable, the Respondent is directed to deposit the above amount of profiteering 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 @ 18%, till the same is deposited as per the details mentioned in Table-A mentioned above 121. The above amount shall further be deposited within a period of 3 months by the Respondent, from the date of receipt of this order, failing which the same shall be recovered by the concerned Commissi....