TaxTMI 
TaxTMI 
2020 (11) TMI 915
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....fit of reduction in the rate of GST from 28% to 18% w.e.f. 15.11.2017 to the recipients by way of commensurate reduction in the prices of the products being sold by them in terms of Section 171 of the CGST Act, 2017. The DGAP had also stated that the base prices of 1383 goods had been increased by the Respondents after the rate of tax was reduced on them and hence, the Respondents had contravened the provisions of Section 171(1) of the CGST Act, 2017. The DGAP had further reported that the Respondents had profiteered an amount of Rs. 2,43,93,90,580/- by denying benefit of tax reduction to their customers. 2. The DGAP in his Report had also submitted that the Respondents had claimed in their reply to the notice issued by him that the net price for a product (i.e. post reduction of discount allowed by way of claims) charged to the various trade partners should be considered for the purpose of the investigation into the alleged profiteering by the Respondents. In this regard the DGAP had claimed that perusal of the documents submitted by the Respondents revealed that the invoices raised by the Respondents's trade partners pertained to the "Sales Promotion" services to the Respondents....
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....ndustrially backward areas of various States had reduced, which had resulted in increase in the cost, which was directly attributable to the reduced GST rate and accordingly, the same should have been considered for the purpose of investigation into the alleged profiteering by them, was not correct. DGAP had argued that as could be seen from the Notification 10(1)/2017-DBA-ll/NER dated 05.10.2017, eligible units were entitle to a refund of 58% of CGST or 29% of IGST paid through debit in the cash ledger account, in terms of Section 49 (1) the CGST Act, 2017, after utilization of the input tax credit of the CGST or IGST. Accordingly, prior to 15.11.2017, the Respondents were entitled to proportionate refund of CGST or IGST paid through cash ledger and w.e.f. 15.11.2017 the liability of the Respondents to make payment in cash had got reduced due to reduction in the rate of GST which had resulted in reduced refund in absolute terms. However, the DGAP had stated that there was no loss to the Respondents in relative terms as they were still eligible to get the same proportionate refund of actual CGST/IGST paid in cash as was available to them prior to the reduction in the rate of GST. M....
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.... to Rs. 2,43,93,90,580/-. The details of the computation were given in Annexure-17 of the DGAP's Report dated 05.04.2019. The profiteered amount had been arrived at by comparing the average of the base prices of the impacted products sold during the period from 01.11.2017 to 14.11.2017 with the actual invoice-wise base prices of the products sold during the period from 15.11.2017 to 30.09.2018. The excess GST so collected from the customers had also been included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the additional base price. 7. The DGAP had furnished the place(s) (State or Union Territory) of supply-wise break-up of the total profiteered amount of Rs. 243,93,90,580/- as has been given in Table below:- Table S.No. Name of the State State Code Profiteering (Rs.) 1. Andaman & Nicobar Islands 35 2,998,170 2. Andhra Pradesh 37 118,885,664 3. Arunachal Pradesh 12 893,820 4. Assam 18 39,525,176 5. Bihar 10 72,090,126 6. Chandigarh 22 2,659,906 7. Chhattisgarh 07 25,861,763 8. Delhi 30 133,267,551 9. Goa 24 13,993,388 10. Gujarat 06 1....
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....2019 which was continued on 06.06.2019. During the course of the hearing the Applicant was represented by Sh. Sachin Kodnani, Superintendent and the Respondents were represented by Sh. Gagan Sawhney, Sh. Ghanashyam Thegde and Sh. Sachin Wani, Company Employees, P&G Group, Sh. V. Lakshmikumaran, Sh. K. Srikanth, Sh. G. Gokul Kishore, Advocates and Sh. K. Santhalia and D. Machchhar, Consultants. The Group had addressed combined oral submissions with power point presentation on behalf of the Respondents during the above hearing and requested for two days time for filing written submissions, which they had filed separately on 19.06.2019, which were forwarded to the DGAP on 20.06.2019 for report. The DGAP was also directed to submit clarifications on the objections raised by the Respondents under Rule 133(2A) of the CGST Act, 2017 by this Authority vide its Order dated 03.07.2019. 9. The DGAP had submitted clarification vide his Report dated 12.07.2019 however, perusal of the same showed that he had not addressed all the objections raised by the Respondents against his Report dated 05.04.2019. Therefore, this Authority had directed the DGAP to furnish fresh clarifications. The DGAP had....
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....ments:- For Canteen Stores Department (CSD): l. Sample letter dated 21.06.2017 showing the revised rate (Nett) which was excluding tax and GST rate of 28%. II. Sample letter dated 23.11.2017 received post reduction in GST rate from 28% to 18% showing the GST rate of 18%. As stated by CSD in the letter, there was no change in procurement rates, terms and conditions and HSN Code. III. Sample invoice pre and post reduction in rate of tax from 28% to 18%, showing that the base price excluding tax had remained the same, depicting the fact that the price was negotiated ex-tax. For Central Police Canteens (CPC): l. Sample letter dated 25.07.2017 showing the revised rate (Nett) which was excluding tax and GST rate of 28%. II. Sample invoice pre and post reduction in rate of tax from 28% to 18% showing that the base price excluding tax had remained the same, depicting the fact that the price was negotiated ex-tax. 13. The DGAP has also submitted the point wise clarifications in regard to the objections raised by the Respondents as was mentioned in the I.O. No. 11/2019 dated 04.10.2019 as follows:- Clarification on the issue of "commensurate" and use of word "any", reg....
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....ction 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." Thus, the legal requirement was abundantly clear that in the event of benefit of ITC or reduction in rate of tax, 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 consumer got reduced commensurate with the reduction in the tax rate or benefit of input tax credit. This was the only legally prescribed mechanism to pass on the benefit of ITC or reduction in rate of tax to the consumers under the GST regime and there was no other method which a supplier could adopt to pass on such benefits. This issue was also covered in Para-15 of his Report dated 05.04.2019. Thus the benefit of extra quantity (grammage) could not be given to the Respondents. c) Extension of promotion schemes: The DGAP has further stated that the provisions contained in Section 171 of the CGST Act, 2017 did not provide for any means of passing on the benefit of reduction in the rate of tax or benefit of ITC other than by way of commensurate reduc....
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....at the contention of the Respondents that the base prices were increased with the increase in the BCD could not be accepted. The increased cost of raw materials/input services had no relevance in the context of GST rate reduction w.e.f. 15.11.2017. Section 171 provided that benefit of any reduction in tax had to be passed on to the recipients and increased cost of materials could not be a ground to offset this benefit. d) Profiteering also alleged on supply of promotional SKUs: Section 171 of the CGST Act, 2017 did not provide for any other means of passing on the benefit of reduction in rate of tax or ITC other than by way of commensurate reduction in prices. The deduction claimed on account of "Sales Promotion" services offered by the trade partners to the Respondents, could not be considered towards the benefit of GST rate reduction w.e.f. 15.11.2017. The DGAP had considered the taxable value of outward supplies made by the Respondents, as reflected in the GST Returns filed by the Respondents, as the basis for comparing the pre and post GST rate reduction base prices. e) Reduction in area based fiscal incentives not considered: The DGAP has also claimed that with regard to ....
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....ion base prices. The DGAP had also not submitted how the supplies made to the CSD and the CPC channels were liable to computation of profiteering : The DGAP has also contended that the Respondents vide e-mail dated 24.10.2019 had submitted that the base prices excluding tax had remained the same, depicting the fact that the prices were negotiated ex-tax and they had also provided copies of the correspondence made with the CPC/CDS channels. On the basis of the submissions of the Respondents the profiteered amount of CSD/CPC channels had been excluded. The DGAP had also not made submissions on the issue of considering 10 months period for calculation of the profiteered amount : The DGAP has further contended that the period of investigation had not been prescribed in the CGST Act, 2017 or the corresponding Rules/Notifications or this Authority. As the rate reduction happened w.e.f. 15.11.2017 and the complete reference from the Standing Committee to investigate the matter was received in 08.10.2018, the period from 15.11.2017 till the date of receipt of reference was taken i.e. from 15.11.2017 to 30.09.2018. It had also not been clarified why the higher benefit passed in resp....
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....imachal Pradesh 53,70,479 Jammu & Kashmir 2,12,77,761 Jharkhand 3,30,18,668 Karnataka 18,93,66,820 Kerala 7,12,40,333 Madhya Pradesh 6,26,61,366 Maharashtra 34,45,85,159 Manipur 37,07,951 Meghalaya 41,10,394 Mizoram 24,75,171 Nagaland 33,32,336 Orrisa 4,38,01,116 Puducherry 46,11,560 Punjab 7,46,00,558 Rajasthan 7,86,14,977 Tamilnadu 21,19,64,315 Telangana 13,69,84,859 Tripura 46,90,362 Uttar Pradesh 28,74,31,916 Uttarakhand 2,26,21,786 West Bengal 15,20,40,632 Total 2,41,51,14,485 15. The DGAP has further mentioned that the allegation in this case was that the base prices of the impacted goods were increased when there was a reduction in the GST rate from 28% to 18% i.e. 15.11.2017, so that the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in prices. From the details furnished in Annexure-6 of the DGAP's Report dated 31.01.2020, the DGAP has stated 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 reduction in the GST rate, the ....
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....sions have been mentioned as follows:- l. Submissions on Price Revision: The Respondents have submitted that they have the practice of revising the prices of their products once in about six months and such increase may not cover the entire range of the products supplied by them at the same time. The reason for this frequency was that any revision in prices has a significant impact on the operations of the Respondents in terms of implementing the price changes on packaging and necessary systems changes etc. and on the customers of the Respondents in terms of implementing such price changes and hence, the revision in prices must be well thought out and planned in advance. They have further submitted that every price revision decision undertaken by the Respondents took into consideration multiple factors of cost increase and tax rate changes etc. that would have happened in the past 6 months. At the time of introduction of the GST, cost of raw materials, input services, overheads, effective tax rate and other factors had increased warranting price increase in respect of the products supplied by the Respondents. Stability was considered important as the entire distribution chain c....
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.... the Respondents's Group of companies as a whole asking them to show cause as to why the report of the DGAP should not be accepted and liability of the Respondents for alleged profiteering should not be determined. The said notice directed the Respondents to appear for personal hearing on 29.4.2019. On the request of Respondents, the hearing was re-scheduled to 15.5.2019, 24.5.2019 and 31.5.2019. Further, the hearing was rescheduled to 04.06.2019 by this Authority on its own which the Respondents accepted vide e-mail dated 30.05.2019. The Respondents had in response to the DGAP's 1st Report dated 05.04.2019 made their detailed submissions and filed the same on 19.06.2019. Pursuant to the Respondents's submissions, this Authority vide its Interim Order No. 11/2019 dated 04.10.2019 had observed that the replies submitted by the DGAP in response to the Respondents's submissions filed on 19.06.2019 were incomplete and did not consider all the issues and were not comprehensive. Accordingly, this Authority had directed the DGAP to further investigate the issues specified in the order dated 04.10.2019 under Rule 133(4) of the CGST Rules and submit a comprehensive investigation report ther....
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.... the Respondents vide order F. No. 22011/NAA/30/P&G/2019/2091-93 dated 26.05.2020, were directed to file their consolidated written submissions and the personal hearing was to be given subsequently through video conference based on the specific request of the Respondents. The Respondents had filed their submissions on 09.06.2020 and 25.06.2020 and appeared before this Authority on 25.06.2020. During the hearing, the DGAP had requested for more time to submit reply to the submissions made by the Respondents and accordingly this Authority had granted time and directed the DGAP to submit the response before 30.06. 2020 and fixed the next hearing on 13.07.2020. The Respondents had received DGAP's reply under Rule 133(2A) dated 30.06.2020 on 07.07.2020 and appeared before this Authority on 13.07.2020, wherein the had made oral submissions on preliminary objections as well as merits of the case. This Authority, after hearing the Respondents, had directed the Respondents to file consolidated submissions on or before 20.07.2020. For the sake of ready reference and easy understanding, a list of relevant dates and events has been tabulated by the Respondents as follows:- LIST OF DATES AND ....
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....pondent's request and personal hearing fixed on 31.05.2019 30.05.2019 Respondent vide e-mail dated 30.05.2019 confirmed the change in date of personal hearing to June 4, 2019 suggested by office of NAA. 04.06.2019 & 06.06.2019 Respondent through its authorized legal representative appeared for a personal hearing before this Authority and made oral submissions along with a power point presentation covering all arguments in response to the findings given by DG Report. 19.06.2019 Respondent filed written submissions directing the DGAP to carry out further investigation u/r 133(4) 04.10.2019 Interim order passed by NAA directing the DGAP to carry out further investigation u/r 133(4) 31.01.2020 Pursuant to the directions given by the NAA, DGAP furnished a fresh report dated 31.01.2020 (mistakenly mentioned in report as 31.01.2019). This report was furnished under Rule 133(4) of the CGST Rules. 06.02.2020 to 26.05.2020 NAA issued a notice to the Petitioners fixing personal hearing in the matter and directing them to show cause as to why the report dated 31.01.2020 furnished by the Respondents No.3 should not accepted. Pursuant to the receipt of the Notice whereby the date o....
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....dent argued on preliminary objections as well as on the merits of the case before the NAA through Video Conference mode. Respondent also presented the case by means of power point presentation slides covering various issues. The NAA, after hearing the matter, was pleased to direct the Respondents to file its consolidated written submissions before 20.07.2020. III. Submissions on COVID-19 Challenges: The Respondents have further submitted that in these difficult circumstances, where the entire industry has been facing head winds due to COVID-19 and where the manufacturing activity of the Respondents has been severely impacted, the sales and profitability of the P&G group was impacted by more than 20% and 30% respectively (based on quarter ended June 2020 details). The Respondents were already facing financial setback and any amount if held as profiteered would be similar to the last straw on the camel's back. The Respondents have submitted that the conclusions drawn in the 2nd DGAP Report were incorrect and devoid of legal merits. The Respondents have not retained any benefit from the reduction in rate of GST and hence they have not profiteered. IV. Submissions on Delay in p....
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....3(5). The rule making authority has picked up rule 133(5) and provided that a fresh time limit would be available for the new investigation. The same has not been done for Rule 133(4). This implied that the fresh time limit was not available under Rule 133(4) which was required to be completed and the final order of this Authority was to be passed within the overall time limit of 6 months from the date of receipt of original report of DGAP provided in Rule 133(1). The Respondents have further submitted that every time an order was passed by this Authority under Rule 133(4) of the CGST Rules, if a fresh time limit was made available to the DGAP to furnish report based on further investigation to be carried out by it and for this Authority to pass an order, it would lead to a situation where the proceedings would not attain finality at any point of time and would lead to a situation of ever greening, which could not be permitted. Further, the sole purpose of setting defined timelines in the rules was to ensure that the investigation did not continue indefinitely so as to cause a prolonged prejudice to the affected party. The timelines required that the investigations be conducted as ....
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....ent of the Hon'ble Supreme Court in L. Chandra Kumar v. Union of India (1997) Supreme Court Cases 261, wherein it had been held that the Tribunals shall act as the only courts of first instance in respect of areas of law for which they have been constituted. Accordingly, as per the direction of the Hon'ble Delhi High Court, the Respondents have requested this Authority to consider their aforesaid submissions and hold that no additional time limit was available in respect of further investigation under Rule 133(4) and that the order needed to be passed within the time limit from the report as furnished by the DGAP under Rule 129(6). The Respondents have also contended that this Authority has the power to declare that Rule 133(4) which provided for further investigation did not grant additional time for the same and hence the order should have been passed within the time limit fixed under Rule 133(1) upon furnishing of the report by the DGAP under Rule 129(6) i.e. the 1st Report dated 05.04.2019. Further, the Guidelines issued by this Authority vide File No. Admn.(NAA)/P&M/81/2019/ dated 04.10.2019 specified in para 10 that the Reports submitted by the DGAP under Rule 133(4) would be....
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....y had already lapsed and any order passed in the present case would be completely barred by time. In the proceedings between the Respondents and the DGAP as adversary, if the DGAP has not provided reasons or clarifications, this Authority should draw adverse inference against the DGAP. Instead, in the present case, the DGAP has been granted additional time to provide clarifications on the subject which was not in accordance with the law. The Respondents have also argued that the anti- profiteering measure was by very essence transitionary in nature as per the stated position of the Government at the time of introduction of GST. In this regard, a statement from the then Finance and Revenue Secretary of Government India at the time of introduction of the GST, issued in response to a question in respect of the implementation of the anti- profiteering measure had clarified as under:- "It is only a transitory provision. It will happen only during the first year or second year of implementation. in all likelihood, in only the first year of implementation of GST" It has further been argued that prolonging the investigation to such an extent that the order was not passed for more than....
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....imited v. Gujarat Energy Transmission Corporation Limited and Others (2017) 5 Supreme Court Cases 42, Singh Enterprises v. CCE, Jamshedpur 2008 (221) ELT 163 (SC), Commissioner of Customs & Central Excise v. Hongo India (P) Ltd. 2009 (236) ELT 417 (SC), Commissioner of Income Tax v. Gitsons Engineering Co. [2015] 53 taxmann.com 108 (Madras), Krishna Kumar Saraf v. Commissioner of Income Tax [2017] 83 taxmann.com 331 (Delhi - Trib.), and Gujarat Paraffins Pvt. Ltd. v. Union of India 2012 (282) ELT 33. The Respondents have also submitted that the DGAP has furnished the reports beyond the time limit provided in Rule 129(6) and therefore, the reports dated 05.04.2019 and 31.01.2020 submitted by the DGAP be quashed. VI. Submissions on the Methodology adopted by DGAP: Respondent's submissions dated 09.06.2020: The Respondents have also averred that the DGAP in para 20 of his 1st report dated 05.04.2019 has stated that the profiteered amount has been arrived at by comparing the average of the base prices of the impacted products sold during the period from 01.11.2017 to 14.11.2017, with the actual base prices on the invoices of such products sold during the period from 15.11.2017....
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....ice charged post rate reduction was higher than the average base price pre-rate reduction, the DGAP has computed the difference as profiteering, whereas in those cases where the actual base price charged post-rate reduction was lower than the average base price pre-rate reduction when compared for the specific customer, the DGAP has ignored the same (i.e. profiteering was marked as "0"). Thus, the DGAP has not only applied an inequitable and incorrect methodology to compare but even applied the same methodology selectively to only choose those instances where the actual price was more than average price to allege profiteering and conveniently ignored those instances where the actual price was lower than the average price by not taking it into account at all in determination of statement of net benefit that remained to be passed on before adjustment of cost escalations, if any. In the above illustration, the DGAP by comparing the average pre-rate reduction prices with the actual prices post rate-reduction expected that the individual base sale price post rate reduction should be INR 360.58 (i.e. the average price). If the price charged post rate reduction was INR 360.58 or below, th....
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....nd that the impugned order of this Authority needed reconsideration. Based on this prima facie case, stay of operation of the impugned order of this Authority has been granted in the above case. Therefore, the Respondents have requested to consider the methodology adopted by the DGAP as erroneous and not accept the profiteering amount as alleged by the DGAP in his 2nd report dated 31.01.2020. The Respondents have further submitted that the methodology adopted by them in computing the profiteering (if any), should be accepted and since the Respondents have already passed on excess benefit at entity level, the allegation of profiteering should be withdrawn. Submissions of the Respondents on DGAP's reply under Rule 133(2A) dated 30.06.2020: The Respondents have also submitted that the understanding of the DGAP that if an actual to actual price comparison was made then a buyer who has not purchased a product from the Respondent in the pre rate reduction period would not get the benefit of tax reduction if he has purchased the same product in the post reduction period, was incorrect. Without prejudice to the same, the assumption that a new buyer would purchase only at an average pri....
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....ient) with the actual prices post reduction with an intent to pass the benefit to a recipient who may not have purchased the product in question was not only arbitrary, without any logic but was also beyond the intent of Section 171 of the Act which nowhere called for passing of the benefit to even those who did not purchase the product from the Respondents before rate reduction. In this regard, the comments given by the DGAP favouring the methodology of Average vs. Actual itself showed that the said methodology was not the correct approach to compute profiteering, if any. The Respondents have further submitted the comparison of the invoice Nos. 4 & 11 and 5 & 12 mentioned at Sr. No. 4 and 5 in the illustration given above. Sr. No. 4 of illustration table in DGAP's reply dated 30.06.2020: a. Pre-rate reduction base price: INR 98 b. Post rate reduction base Price: INR 97 c. Whether price increased in post rate reduction regime: No, (there is reduction in price) d. Whether profiteering established or not as per DGAP method? Yes e. Profiteering as per DGAP's method: INR 2 (INR 97 - INR 95) Sr. No. 5 of illustration table in DGAP reply dated 30.06.2020: a. Pre-rate red....
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....teering in case of Average to Average Profiteering in case of Average to Actual Notice submission (profiteering should be 0 in this illustration) Inv. No. Base price declared in invoice Average base price of the product Inv. No. Base price declared in invoice Average base price of the product 1 01 90 95 08 88 95 0 0 -2 2 02 92 09 94 0 2 3 03 95 10 95 0 0 4 04 98 11 97 2 -1 5 05 100 12 101 6 1 Total 8 0 Further, the Respondents have submitted that although no final order has been passed by the Hon'ble Delhi High Court in the case of M/s. Johnson & Johnson v. UOI & ors. mentioned supra, the fact that the operation of the order has been stayed and it has been observed by the Court that the methodology needed consideration itself showed that there was a prima facie defect in the methodology so adopted. It has also been submitted that stay of operation of an order should result in the order (whose operation is stayed) not being available as a binding precedent. Hence, the methodology should be determined keeping in mind the above submissions of the Respondents and the methodology o....
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....ax rate reduction in monetary terms which was normally the price. Section 171 did not use the words 'pass on the benefit by reduction in price'. The effect of commensurate reduction in prices increased benefit to the recipient due to tax rate reduction. It should be seen whether the objective of Section 171 was being achieved or not. If the recipient has got the benefit in monetary or non-monetary form proportionate to tax rate reduction, Section 171 was complied with. The price in this regard was the consideration paid or payable for the supply. As per the Indian Contract Act, 1872, consideration included any act or abstinence. While consideration for supply was generally measured in monetary terms, the same could also include non-monetary elements. Thus, price was not only what was reflected in the invoice. The monetary component could already be factored in the invoice price. However, the parties could also choose to settle the consideration partly in non-monetary terms. In the present case, the Respondents have reduced the price by way of reduction in the price itself post-supply and also by way of extension of promotion schemes and additional quantity. By these methods, the Re....
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....text of Section 171 did not use the term 'profiteering'. It was mentioned in the marginal notes to Section 171 and in the heading of Chapter XV of CGST Rules. In order to understand the scope of Section 171, it was pertinent to understand the meaning of the term 'profiteering' which has been used in the marginal notes. It was a settled principle of law that marginal notes were to be used as an internal aid of interpretation to address any ambiguity in the provision. In this regard, reliance has been placed on the case of Indian Aluminum Company v. Kerala State Electricity Board (1975) 2 SCC 414, wherein the Hon'ble Supreme Court has held that the marginal notes could be relied upon to show what the section was dealing with. In UOI v. Harbhajan Singh Dhillon (1971) 2 SCC 779, it was observed by the Hon'ble Supreme Court that marginal notes could serve as guidance when there was ambiguity or doubt about the true meaning of the provisions. Similar observations were made by the Hon'ble Supreme Court in the case of SP Gupta v. UOI AIR 1982 SC 149. The Respondents have further contended that the term 'profiteering' was not defined in the CGST Act or rules made thereunder. Therefore, refe....
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....rofiteered amount. In this regard, the Respondents have submitted that the interpretation adopted by the DGAP was incorrect as the same was oblivious of the practical realities of the commercial transactions where price of a product sold could vary from customer to customer depending on various commercial considerations such as the type of customer, quantity of the product bought, discount applied, payment terms applicable to the transaction and the point in time when the sale took place. Considering that the term 'prices' was used in plural form, any interpretation of the same to mean only one selling price for a particular product would defeat the very purpose of usage of the term in plurality. Accordingly, the submission of the Respondents that prices after reducing post-supply discount should be considered was correct. iii. The DGAP has also stated that the word "any" was used before the word "supply" to indicate the benefit of reduction in rate of tax has to be passed on each and every supply. Further, it was position of the DGAP that the word "registered person" used in Section 171 of the CGST Act, 2017 could not be applied to suppliers who were not registered under the CG....
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....dents have further claimed that the interpretation of Section 171 adopted by the DGAP was incorrect and should not be accepted, and the interpretation provided by the Respondents alone should be accepted. Submissions of the Respondents on DGAP's reply under Rule 133(2A) dated 30.06.2020: The Respondents have claimed that the DGAP in his reply under Rule 133(2A) has stated as follows: "In this regard it is submitted by the Respondents that the term "Commensurate reduction" in the Section 171 of the CGST act denotes reduction in the price after taking into account all factors which impact the pricing of the goods and that by the use of the word 'commensurate', cost of raw materials, packing materials, overheads and other such elements involving increase in cost are required to be factored in while examining whether Section 171 is applicable or not. Hence, the Respondents made submission that the increases in cost of business operations should be taken into account while determining profiteering, if any. In this connection it would be pertinent to mention that the provisions of Section 171 of the CGST Act, 2017 requires the Respondents to pass on the benefit of tax reducti....
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....ere not making supplies to the consumers, but rather making B2B sales. Even if it was admitted that the benefit of tax reduction has to be passed on to consumers, proceeding against the Respondents on the presumption that such benefit might not have been passed on by the recipients of the Respondents and / or recipient' recipients in forward supply chain to the consumers, was without any legal basis and was out rightly arbitrary. Further, while DGAP has stated that Section 171 has no mandate to look into the fixing of prices of the products which the Respondents were free to do, by alleging profiteering, the DGAP was effectively fixing certain limit on the prices beyond which any sale would be violative of Section 171. Further, the DGAP has stated that if there was any increase in the costs it could have been done prior to the period of rate reduction itself i.e. before 15.11.2017 and accordingly these costs would have been included in the base prices of the products sold prior to the rate reduction period. However, the adjustment was required after considering that the period of investigation spanned across more than 10 months. By ignoring cost increase subsequent to reduction in ....
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...., during the relevant period they have passed on the benefit to their customers by the following means: 1) Benefit passed on by way of higher price reduction on certain SKUs; 2) Extra quantity (higher Grammage at the same or lower price) in packs and new promotions; 3) Extension of promotion schemes running before Nov 15th 2017, which passed on higher value to the customers/consumers; 4) Price reduction post supply. The Respondents have also claimed that there were discrepancies in the calculation of alleged profiteering by the DGAP which are mentioned below:- 1) Net price of SKU (Gross price net of discounts) prior to reduction of tax was compared with the gross price of SKU post reduction of tax in respect of certain SKUs; 2) Profiteering has been alleged on certain imported SKUs where there was an increase in the Basic Customs Duty (BCD) during the period under investigation; 3) Profiteering has been alleged on supply of promotional SKUs; 4) Reduction in area based fiscal incentives as a result of reduction in rate of GST, which has resulted in reduced margins on the products, not considered The Respondents have further claimed that the DGAP has cal....
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....ss: Reduction in profiteering on account of correction of base price on account of errors as per para C, extension of promotions and new promotions (61.59) Less: Zeroing (including on account of extension & new promotions) (190.36) Less: Additional benefit passed on by way of increase in post supply discounts (69.55) Net profiteering (as per column BE of computation sheet) (139.99) GIL Particulars Total (in INR crores) Profiteering as per DGAP computation 57.99 Less: Reduction in profiteering on account of correction of base price for extension of promotions and new promotions (3.17) Less: Zeroing (including on account of extension & new promotions) (61.95) Net profiteering (as per column AX of computation sheet) (7.12) In view of the above, the Respondents have submitted that they as an entity have passed on much more benefit pursuant to reduction in rate of tax and hence the finding of the DGAP that the Respondents have profiteered was incorrect. Further, Rule 126 empowered this Authority to determine the methodology and procedure for determination as to whether benefit of reduced rate of tax or input tax credit has been passed on by a registered pe....
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....-discount, in certain category of SKUs, the DGAP has inadvertently compared the pre-rate reduction post-discount prices with the post-rate reduction pre-discount prices. Accordingly, this Authority vide its interim order dated 04.10.2019 had directed the DGAP to explain the basis of the prices used for comparison for calculation of the profiteered amount. The DGAP vide his report dated 31.01.2020 has clarified as follows: * In general, the base prices of the products were calculated on the basis of average prices during the period from 01.11.2017 to 14.11.2017 based on the outward supply details furnished by the Respondents. * However, wherever any product was not supplied by the Respondents during the period from 01.11.2017 to 14.11.2017, the base prices as submitted by the Respondents were taken as the pre-rate reduction base prices. * However, the DGAP in his report did not offer any comments on the errors highlighted by the Respondents. Submissions of the Respondents on DGAP's reply under Rule 133(2A) dated 30.06.2020: The DGAP in his reply under Rule 133(2A) has clarified the issue and the relevant portion is extracted below: "The Respondents have alleged tha....
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....duct Code. For illustrative purposes, the Respondents have submitted calculations in respect of one of the SKUs as follows:- Product description (for which pre-rate reduction price was not available with DGAP) Comparable product Code (i.e. product Code comparable to the one for which DGAP asked the pre-reduction price) Comparable product description (i.e. product description comparable to the one for which DGAP asked the pre-rate reduction price) Distributor price between Nov 1-14 (average, after deducting post sale discount) MR price between Nov 1-14 (average, after deducting post sale discount) H&S SHM 360MLX12 SB GST IN 82269429 H&S SHM 360MLX12 SB GST saver IN 183.48 201.27 In the above illustration, the DGAP did not have any base price for product description SHM 360MLX12 SB GST IN. Therefore, the DGAP had asked the Respondents to submit the price of the product pre-rate reduction. The Respondents submitted that the product comparable to this product sold in the pre-GST regime was product Code 82269429 having product description H&S SHM 360mlx12 SB saver IN. If the details of sales made by the Respondents of this comparable product in the pre-rate reduction period....
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.... Respondents have requested this Authority to direct the DGAP to revise the computation on the basis of the above submissions which would result in reduction in allegation of profiteering by INR 28.52 crores (PGHP) (excl. CST). X. Submissions on consideration of Consumer Promotions: Submissions filed by the Respondents on 19.06.2019: The Respondents had mentioned in their submissions dated 18.01.2019 and 03.04.2019 that certain consumer promotion schemes which were existing before GST rate reduction were continued after 15.11.2017 so as to pass on the benefit of GST rate reduction. The Respondents have submitted that such schemes were in the nature of higher grammage/extra quantity and price reduction on the pack itself. The Respondents had issued newspaper advertisements in leading dailies such as Times of India and Hindustan Times and also in various regional newspapers to ensure mass awareness about such continuation of promotions to pass on the GST benefit. The above submission of the Respondents were, however, summarily rejected by the DGAP in his Report by terming the same as a business decision of the Respondents. The DGAP has failed to appreciate that these promoti....
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....NR 19,71,93,934/- (PGHP) and INR 3,30,14,424/- (GIL) computed on supplies of these SKUs needed to be excluded from the alleged profiteering. Submissions of the Respondents on DGAP's 2nd report dated 31.01.2020: The Respondents have submitted that in reply to their submissions filed on 19.06.2019, the DGAP in his report dated 31.01.2020 has stated that the provisions contained in Section 171 of the CGST Act, 2017 did not provide for any means of passing on the benefit of reduction in rate of tax or input tax credit other than by way of commensurate reduction in prices. The DGAP has further asserted that it was the Respondents's own business decision to extend the period of consumer promotion schemes, the cost of which could not be set off against the benefit that the Respondents ought to have passed on to their recipients on account of GST rate reduction w.e.f. 15.11.2017. It was further stated that the said issue was covered in detail in para-17 of DGAP's Report dated 05.04.2019. In this regard, the Respondents have submitted that any change in price and alteration in MRP on the product pack required a significant number of steps to be undertaken, which was a time-consuming p....
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....or to and after reduction in the rate of GST, however, the price reductions provided after reduction in rate of GST had been significantly increased to ensure that the benefit of such rate reduction was passed on by the Respondents to their recipients. The Respondents, as a part of their regular trade practice were running various schemes for their recipients, wherein the recipients sold the goods at a reduced price to their customers and such price reduction was reimbursed to the recipients by the Respondents. This resulted in reduction in net realization by the Respondents from their recipients. Since it was towards reduction in the price of goods supplied earlier, the Respondents were adjusting such price reductions from their sales turnover and reported only the net turnover in their books of account as well as the Financial Statements (viz. Profit and Loss Account). The methodology adopted by the Respondents for giving price reductions has been explained by them as is given below:- Methodology adopted for implementing Price Reduction scheme * Scheme for Price Reduction (Discount) to be run in month say July are shared with recipients in the last week of previous month "J....
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.... were given post GST rate reduction as per the established practice. In this regard, the Respondents have relied on the decision of the Hon'ble Supreme Court in the case of Union of India v. Bombay Tyres International 1984 (17) ELT 329 (SC) wherein it was held that discounts allowed in the trade by whatever name such discount were described should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under the agreements or under the terms of sale or by an established practice. The Respondents have also placed reliance on the judgment of the Hon'ble Supreme Court in the case of Moped India Ltd. v. Asst. Collector 1986 (23) ELT 8 (SC). The Respondents have further submitted that they have passed on the benefit of tax rate reduction by way of reducing the price subsequent to supply which the DGAP has rejected. In common parlance discount was nothing but reduction in price. It was settled law that the discounts known in advance to the customers were deductible from the value, irrespective of their form or nomenclature. Further, the observation of the DGAP seemed to be on the basis that since the discount had not been claimed by the R....
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....d on such incentives. In order to avoid dispute regarding future tax liability and interest thereon, if any, the Respondents had taken position to accept the claim for price reductions from the recipients with tax as it was revenue neutral, being creditable in the hands of the Respondents. Accordingly, even though the price reductions were routed by way of service invoices received from the recipients, it remained a fact that the same were raised in lieu of schemes announced by the Respondents and were nothing but a reduction in sale prices of the Respondents and not towards any services provided by the Respondents's customers to the Respondents. Accordingly, the Respondents have submitted that the computation of alleged profiteering ought to have been made on the basis of net prices only, which were the prices charged by the Respondents after allowing for price reduction based on the schemes announced from time to time, as the net price alone reflected the actual consideration towards the supply, realized by the Respondents. Submissions of the Respondents on DGAP's 2nd report dated 31.01.2020: The Respondents have submitted that this Authority vide its Order dated 04.10.2019....
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....e nature of such payments which were nothing but sale discounts given to recipients. Accordingly, the Respondents have submitted that the DGAP's assertion that the prices shown in GSTR-1/GSTR-3B Returns alone could be compared was incorrect. Comparison should be made between the prices charged after reducing the post-supply discount offered to the customers. Further, as regards DGAP's observation that the evidence submitted by the Respondents was either invoices issued by their recipients, mentioning the description as "Promotion Services" with HSD Code 998361 or 998366 (Advertising Services) or Debit Notes issued by the recipients, the Respondents, vide their submissions filed on 19.06.2019 have already submitted that discount allowed in trade by whatever name should be deducted from the sale price. They have also placed reliance on the decision of the Hon'ble Supreme Court in the case of Union of India v. Bombay Tyres International 1984 (17) ELT 329 (SC) and Moped India Ltd. v. Asst. Collector 1986 (23) ELT 8 (SC). However, the DGAP has not dealt with the said cases relied upon by the Respondents. Submissions of the Respondents on DGAP's reply under Rule 133(2A) dated 30.06.20....
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.... The Respondents have submitted the said information vide Annexure-4 attached to their submissions dated 09.06.2020 along with documentary evidence. XII. Submissions on profiteering in respect of the supply made to CSD/CPC: The Respondents have submitted that the allegation of profiteering in respect of supplies made through CSD/CPC channel was not sustainable, as the price for supplies made to CSD/CPC channel was contractual and the same was negotiated excluding the taxes. Since the DGAP has already excluded the said transactions from the ambit of profiteering, the Respondents did not wish to make any further submissions on the same. XIII. Submissions on Impact of Custom Duty Increase: Submissions of the Respondents dated 19.06.2020: The Respondents have stated that they had submitted before the DGAP that certain hair and skin care products (4 products - 6 SKUs) covered under Chapter 33 of the Customs Tariff Act, 1985 namely Pantene IL (Product Codes 82269523 and 82269524), Head and Shoulders IL (Product Codes 82269525 and 82269526), Olay Regenerist Cream (Product Code 82259693) and Olay White Radiance Lotion (Product Code 82261222) were imported by the Respondents o....
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....nt to changes in the tax structure made by the Government only. Accordingly, the said increase in Customs Duty must be considered as a factor for determining profiteering on these SKUs. In any case, there was no legal backing to the assertion that the Respondents were required to keep passing on the benefit of reduced GST rate for an indefinite period irrespective of the change in the business environment (such as increased Customs Duty) which has resulted in an increase in costs. The Respondents have placed reliance on the Case No. 3/2018 of Kumar Gandharv v. KRBL Limited 2018-VlL-02-NAA. Accordingly, the Respondents have reiterated that an amount of INR 3,15,09,080/- computed as profiteering in respect of the above 4 products (6 SKUs) should be reduced from the total alleged profiteering. XIV. Submissions on the increased quantity and new promotions: Respondent submissions filed on 19.06.2019: The Respondents have further submitted that in the absence of any prescribed methodology for passing on benefit of GST rate reduction, the Respondents have passed on the benefit by various methods. The same also included providing increased quantity of the same product at the same/....
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....d order, the DGAP has stated that higher grammage was not an acceptable form of passing on the benefit of reduction in the rate of GST. The Respondents have submitted that the DGAP being an investigating authority was bound to accept the order previously passed by this Authority to the effect that increasing the grammage of products was one of the modes of passing on the benefit. The prices charged for the increased grammage products and new promotions were significantly lower than the prices which the Respondents could have charged based on the prices of normal products sold by them pre-rate reduction. It was done to pass on the benefit of GST rate reduction to the customers, as the Respondents had chosen to increase the grammage and new promotions / combo packs in order to provide additional benefit to the customers at a much lesser price. However, at the time of computing alleged profiteering the DGAP has ignored the said SKUs and did not map any base price pre-rate reduction against the line items of sales for these SKUs. The Respondents have further stated that while they had earlier submitted a standalone computation of the benefit passed on by way of increased grammage/new p....
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....15.11.2017, there was no reason adduced by the DGAP as to the date of 30.9.2018 being reckoned for conducting the investigation in his 1st report dated 05.04.2019. The Report was silent on the grounds or reasons based on which such period was selected by the DGAP for investigation. The period covered under investigation did not have any statutory basis. Based on the period taken as above, the alleged profiteering was calculated up to the period of September, 2018. However, the report was silent about the period till when the Respondents would be investigated for alleged profiteering. This could lead to an inference that in the absence of any specified time period, increase in the prices, if any, undertaken by the Respondents would be considered as profiteering till the time Respondents were in business. It could even imply that in case if, in future, the Respondents decided to increase price of their goods (due to any commercial reason) it would attract anti-profiteering provisions. The Respondents have submitted that such exercise 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 ....
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....s to inter alia pass on the benefit of GST rate reduction to the recipients. Further, such costs were very relevant for determination of prices of various products sold by the Respondents. Such cost increases compelled a business to revise its prices and hence were inextricably linked to pricing decisions. The DGAP had also observed that cost increases were irrelevant for the purpose of determination of profiteering. However, such position adopted by the DGAP was not in consonance with the various orders passed by this Authority. Inflation as a factor has been accepted as a reason for price increase by this authority in the case of Kumar Gandharv v. KRBL Ltd. 2018-VlL-02-NAA. Also, in the cases of Hardcastle Restaurants Pvt. Ltd. 2018-VIL-II-NAA and NP Foods 2018-VlL-08-NAA, loss of input tax credit has been factored-in for determination of net profiteering. According to the provisions of Section 171 this Authority was mandated to check if the benefit of reduction in GST rates or availability of input tax credit alone have been passed on. Therefore, the provision merely allowed evaluation of passing on benefits during increase in ITC and not reduction of ITC. Loss of input tax cred....
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....e 14. If one were to go by this logic of the DGAP and assuming that a person filed complaint and reference from Standing Committee was received in July, 2018, the DGAP would adopt period of investigation up to June, 2018. Similarly, if a complaint was filed and reference was received from the Standing Committee for investigation in December, 2019, the DGAP would adopt period of investigation up to November, 2019. This showed complete lack of application of mind by the DGAP as to what should be the period for which investigation was to be carried out. Applying the anti-profiteering provisions in any manner other than as a transitionary provision would indirectly result in the Respondents being indirectly brought into a price control regime which was not the intent of Section 171. In the absence of any statutory provision on the period for which the Respondents needed to pass on the reduced tax rate, the same would need to be construed in a reasonable manner keeping in mind the factors specific to the Respondents. Even if there was a rule of law which provided that the period of investigation was to be considered from the date of rate reduction till the month previous to receipt of r....
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....d. In a system governed by the rule of law, discretion, when conferred upon executive authorities, must be confined within clearly defined limits. The rule of law from this point of view means that decisions should be made by the application of known principles and rules and, in general, such decisions should be predictable and the citizen should know where he is. If a decision is taken without any principle or without any rule it is unpredictable and such a decision is the antithesis of a decision taken in accordance with the rule of law (see Dicey--Law of the Constitution--Tenth edition, Introduction cx). " Law has reached its finest moments, " stated Douglas J. in United States v. Wunderuck, " when it has freed man from the unlimited discretion of some ruler ... Where discretion is absolute, man has always suffered ". It is in this sense that the rule of law may be said to be the sworn enemy of caprice. Discretion, as Lord Mansfield stated it in classic terms in the case of John Wilkes, " means sound discretion guided by law. It must be governed by rule, not by humour : it must not be arbitrary, vague, and fanciful." (emphasis supplied) The Respondents have also pleaded that....
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....ation was neither envisaged in the CGST Act nor the CGST Rules. The DGAP followed the practice of taking period of investigation from the date of rate reduction till the previous month of the day in which reference was received from the Standing Committee which showed the arbitrariness in determining the period of investigation. Further, the DGAP has stated that the principle behind this practice was to cover the entire period where profiteering has been alleged to have been done. It is submitted that the DGAP has not adduced any evidence to show that profiteering was alleged against the Respondents up to September, 2018. The period of investigation was determined by the DGAP in October, 2018, when the notice for initiation of investigation was first issued vide letter dated 15.10.2018. In the said notice for initiation of investigation, there was no allegation of profiteering up to September, 2018 against the Respondents. Further, the present investigation was initiated pursuant to interactive sessions which the Respondents had with this Authority. The DGAP has not shown that the allegation of profiteering against the Respondents was up to September, 2018, either in the letter wri....
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....TO 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, attention was invited to the Report No. WT/DS141/AB/R dated 01.03.2001 of the Appellate Body of WTO regarding Anti-Dumping Duties on imports of Cotton-Type Bed Linen from India. In the subject case, Indian exporters faced an anti-dumping action by the EU as the exporter was exporting different varieties of Bed Linen to EU. In some cases, the exporter was exporting at positive dumping margin, wherein in many cases there was negative dumping margin i.e. the export price was more than the normal value at which goods were sold in India. The European Commission applied their usual practice of not netting off the positive and negative dumping margins. In fact, they applied 'zero' (0) for negative dumping margins and cumulated only positive dumping margins and thereby arrived at higher dumping margins for Indian exporters. Government of India objected to this approach of the European Commission and the matter was taken to the Dispute Settlement Body of the WTO which held in favour of Government of India. In an appeal fi....
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....oportion of 58% of CGST component paid in cash as earlier and hence, the amount of refund has not reduced in relative terms. Accordingly, the Respondents have reworked the quantum of reduced refund solely on account of reduction in the rate of tax from 28% to 18% without considering loss on account of refund restricted to 58% of CGST/29% of IGST instead of Respondent's expectation of 100% refund of CGST/50% refund of IGST. The refund reduced solely on account of reduction in rate of tax from 28% to 18% worked out to INR 1,53,08,647/-(PGHP) and INR 2,29,94,202/-(GIL) respectively which should be adjusted while arriving at profiteering. The DGAP has also stated that reduction in refund could also be possible due to increased utilization of ITC without any factual finding on the same. It was incorrect on the part of the DGAP to assume reduction in cash payout and consequently reduced refund due to increased utilization of ITC. With the reduction in GST rate w.e.f. 15.11.2017, the tax payout has directly reduced, resulting in reduced refund in absolute terms. Hence, the absolute reduction in refund allowable (even though refund was still allowed at the same proportion of 58% of CGST pa....
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....rejected the submissions of the Respondents without verifying the computation made by the Respondents. Had the DGAP verified the computation made by them, it would have been clear that the Respondents's claim was solely on account of changing the factor of output tax rate getting reduced from 28% to 18% and the Respondents did not make any claim on account of input tax credit change as the input tax credit has been kept constant. The loss in budgetary support has been computed on account of reduction in rate of tax on outward supplies alone. Further, as regards DGAP's assertion that if the Respondents's submission was considered, the price of the goods has to be reduced in case there was an increase in the tax rate (because of availability of more refund), it was submitted that the said understanding of Respondent's submission was plainly incorrect. The Respondents have submitted that hypothetically assuming that there was an increase in the rate of tax by 5% which has resulted in increase in budgetary support by say 0.5%, the Respondents should be entitled to a price increase of 4.5% net (5% - 0.5%). In a case of increase in rate of tax, there was no question of reduction in price....
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....ts on the alleged profiteering amount has already been deposited with Government and there was no factual dispute on this aspect, addition of 18% GST to calculate the alleged profiteering amount was incorrect. The Respondents have also contended that their recipients were registered suppliers and hence excess GST charged, if any, did not form a part of the cost to the recipients. The amount charged from the recipients as GST which was available as input tax credit to them was only an advance tax paid by the Respondents on behalf of the recipients and did not represent the price for supply of goods. Once the GST so paid on the amount alleged to have been profiteered was deposited with the Government and was also availed as credit by the recipients, it did not form part of recipient's cost. Accordingly, the real cost of goods was only the cost paid exclusive of taxes, since taxes were creditable. In this regard, the Respondents have quoted the judgment of the Hon'ble Supreme Court passed in the case of Dai Ichi Karkaria 1999 (112) ELT 0353 SC, wherein the Hon'ble Supreme Court had observed that cost must be reckoned from the perspective of a man of commerce, and held that duty which ....
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....e profiteered, the extra GST charged from the recipients was available as input tax credit to these recipients and did not form part of their cost. Excess GST so charged could not be said to have been borne by the recipients, as they were entitled to input tax credit. Accordingly, an amount of INR 27.69 Crore (INR 153.82 Crore * 18% / 118%) (PGHP), INR 8.85 Crore (INR 57.99 Crore * 18% / 118%) (GIL) and INR 0.31 Crore (INR 2.02 Crore * 18% / 118%) (PGHH) representing the GST collected and deposited with the Government should be reduced from the alleged profiteering amount. XIX. Submissions on to whom Profiteered amount should be refunded: The Respondents have argued that in the unlikely event of this Authority holding that some amount has been profiteered by the Respondents, then the same would be refunded by the Respondents to their recipients. This would be without prejudice to the right of the Respondents to challenge the proceedings before the higher forums. Rule 133 of the CGST Rules provided that where this Authority determined that a registered person has not passed on the benefit of the reduction in the rate of tax, it might order return to the recipient an amount equ....
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....ces was provided under the Legal Metrology Act, 2009 and Legal Metrology (Packaged Commodities) Rules, 2011 (LM Rules). Rule 6(3) of the above Rules reads as: "Rule 6 (3) It shall not be permissible to affix individual stickers on the package for altering or making declaration required under these rules: Provided that for reducing the Maximum Retail Price (MRP), a sticker with the revised lower MRP (inclusive of all taxes) may be affixed and the same shall not cover the MRP declaration made by the manufacturer or the packer, as the case may be, on the label of the package." As per the above provision, in respect of reduction in MRP, it was permissible to affix sticker with revised lower MRP and ensure that the revised MRP did not cover the MRP declared earlier. The said rule provided discretion to the supplier regarding affixation of sticker as the words used were 'may be affixed'. Therefore, in case of reduction in MRP there was no compulsion to affix sticker with revised price. In terms of Rule 33(1) of the aforesaid rules, the Central Government could relax any of the conditions in the rules. In exercise of the said powers, the Legal Metrology Division of Department of C....
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....ly not possible for the Respondents to reduce the MRP on such SKUs by only the proportionate amount. In such a scenario, the only options available was to not undertake price reduction on such SKUs and compensate by a higher price reduction on other SKUs, or to pass higher price reduction / free grammage on selected SKUs and correspondingly lower price reduction on other SKUs. Therefore, the Respondents have complied with Legal Metrology Act and rules made thereunder even while ensuring that benefit of GST rate reduction was passed on to the recipients. Submissions of the Respondents on DGAP's report dated 31.01.2020: The DGAP in his report dated 31.01.2020 has stated that the profiteering has been quantified only on the goods supplied by the Respondents after 15.11.2017 and not on the goods lying in the distribution chain on 15.11.2017. However, the DGAP has gone on to state that the sticker of new MRP has to be fixed along with the old MRP on the stock in hand as provided vide letter No. WM-10(31)/2017 dated 16.11.2017, issued by the Ministry of Consumer Affairs, Food and Public Distribution. In this regard, the Respondents have submitted that since the DGAP has stated that....
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....n the benefit to their customers according to such methodology or guidelines and the present proceedings would have been avoided. Submissions of the Respondents on DGAP's 2nd report dated 31.01.2020: The Respondents have also pleaded that a reference could be made to anti-profiteering mechanism that was adopted in Malaysia and Australia. While the law in these countries had provisions for anti-profiteering, there were detailed rules, guidelines and computational mechanism given to arrive at what constituted profiteering. Given that there were no such guidelines and computational mechanism provided in the Indian law, the proceedings were liable to be dropped. In the case of Commissioner of Income Tax Bangalore v. B. C. Srinivasa Shetty (1981) 2 SCC 460, the Honourable Supreme Court has held that charging section of capital gains was not attracted where corresponding computation provisions was inapplicable. Thus, in the absence of prescribed method / guidelines / mechanism for computing profiteering, the report of DGAP was liable to be rejected. Submissions of the Respondents on DGAP's reply under Rule 133(2A) dated 30.06.2020: As regards the clarification of the DGAP tha....
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.... Respondents filed on 19.06.2019: The Respondents have also submitted that present proceedings have been conducted in violation of the principles of natural justice as show cause notice had not been issued to the Respondents proposing the action to be taken by this Authority. Moreover, the investigation was initiated on the basis of the reference of the Secretary of this Authority to the Standing Committee who, unilaterally misinterpreted submissions made by the Respondents in their communications, to erroneously conclude admission of profiteering by the Respondents. The Respondents were not given any chance to clarify or explain their communication. Moreover, none of the recipients of the Respondents have complained of non-receipt of benefit of reduced rate. Rule 133 of the CGST Rules, inter alia, provided that this Authority shall pass an order within a period of six (6) months [amended from three (3) months by Notification No. 31/2019-Central Tax dated 28.06.2019] from the date of the receipt of the report from the DGAP. The said rule further provided that if this Authority determined that a registered person has not passed on the benefit of reduction in rate of tax on the sup....
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....stice. 16. Principles of natural justice are those rules which have been laid down by the courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial, quasi-judicial and administrative authority while making an order affecting those rights. These rules are intended to prevent such authority from doing injustice." [Emphasis supplied] Similar observation was made by the Hon'ble Supreme Court in the case of Uma Nath Pandey and Others v. State of UP (2009) 12 SCC 40. Further reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of Collector of Central Excise v. ITC Ltd. 1994 (71) ELT 324 (SC), wherein the Hon'ble Court has observed that where an assessee was made responsible for higher duty, he must be given an opportunity of meeting the grounds. Relevant portion of the judgment has been extracted below:- "4. Before the first respondent is made liable for higher or enhanced duty, it must be told on what grounds it is sought to be made liable for additional duty and it must be given an opportunity of meeting those grounds. This is the minimum requirement of the principle o....
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....and services in respect of which the proceedings have been initiated; ii. Grounds / reasons on the basis which profiteering has been alleged; iii. Issues proposed to be examined by the NAA; and iv. Action proposed to be taken by NAA against the Respondents invoking applicable statutory provisions. Further, the Respondents have submitted that the DGAP has made his computations for alleged profiteering by using the base price data which has not been provided by the Respondents. Consequently, no opportunity has been given to the Respondents to review, challenge or rebut the accuracy of the base price data used, methodology adopted by the DGAP and hence the Respondents could not identify the discrepancy, if any, in arriving at the alleged profiteering amount. The Respondents have further submitted that unless the aforementioned information was made available to the Respondents, they could not defend their case and make requisite submissions before this Authority. In the present case except for providing a copy of the report of the DGAP, the Respondents have not been served any notice/communication regarding the issues to be examined and action proposed to be taken against t....
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.... XXIII. Additional Submissions of the Respondents dated 09.06.2020: a. The Respondents have stated that there were instances where the DGAP has computed profiteering which was in excess of the reduction in the GST rates. b. The Respondents have also stated that the allegation of profiteering could only be to the extent of reduction in price required as a result of reduction in GST rates. c. In the instant case, there has been a reduction in tax rates by 10% which as per the DGAP's computation methodology could be given effect by keeping the base prices constant and then charging 18%. The same could be illustrated as follows:- Period Base price (excl. GST) GST Base price (incl. GST) Pre-reduction 148.51 28% (41.58) 190.99 Post-reduction 148.51 18% (26.73) 175.24 Commensurate reduction as per DGAP INR 14.85 (10% of INR 148.51) In the above example, if the Respondents had reduced the cum-tax price to INR 185/- post-rate reduction, allegation of profiteering on such product could have been to the extent of INR 9.76 (difference between INR 185 and ideal price of INR 175.24). Further, in case the price of the product was not at all reduced b....
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....utation sheets as per column BF of Annexure-3 attached to their submissions filed on 09.06.2020, as INR 24.51 Crore (PGHP) which was required to be reduced from the profiteered amount. In case their submissions relating to the incorrect prices used for comparison by the DGAP for certain SKUs and benefits passed on by way of post supply price reductions / discounts (as per Para E of submissions) were also considered, then the quantum of profiteering in excess of rate reduction would also undergo revision as per column BG (Profiteering in excess of rate reduction (based on DGAP calculation, after revising Cat 0 and Cat 4 base prices) and column BH (Profiteering in excess of rate reduction (based on post discount prices) respectively. XXIV. Submissions on violation of Article of the Constitution of India: The Respondents have also submitted that the anti-profiteering provisions as provided in the CGST Act, 2017 and the Rules, were invokable only when a registered person did not reduce the prices commensurately pursuant to the rate reduction or benefit of ITC mentioned in Section 171. The Respondents have duly performed their obligation under both the conditions. In the present c....
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....llows:- Clarifications on Methodology: The DGAP has stated that the Respondents have questioned the methodology adopted by him for calculation of profiteering. In reply he has submitted that the "Methodology and Procedure" has been notified by this Authority on 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, one formula which fits all could not be set while determining such a "Methodology and Procedure" as the facts of every sector were different. By reducing the GST rate, which was the case in hand, the Central as well as the State Governments have sacrificed their tax revenue in the public interest and hence the suppliers were required to pass on the commensurate benefits as per the provisions of Section 171 (1) of the Act. The DGAP has further clarified that the extent of profiteering was 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 the goods or services supplied. There could not be any fixed methodology for determination of the quantum of benefit to be passed on under Section 171(1) of the CGST Act, 2017. In the present case profiteered amount has been arrived at by com....
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.... era if thesame product was sold at Rs. 88/94/95/97/- and Rs. 101 /- to different or same buyer, then the following picture (TABLE) shall emerge:- TABLE Pre-Rate Reduction Post- Rate Reduction Profiteering Sr.No. Invoice No. Base price declared in the invoice Average base price of the product Inv. No. Base price declared in the invoice Average base price of the product Avg. to avg. comparison Avg. to a Actual comparison (A) (B) ('C) (D) (E) (F) (G)=(F)-('C) (H)=(E)-('C) 1. 1 90 95 8 88 95 0 0 2. 2 92 9 94 0 0 3. 3 95 10 95 0 0 4 4 98 11 97 0 2 5. 5 100 12 101 0 6 Thus, comparison of pre-rate reduction average price with post rate reduction average price for computation of profiteering would lead to a situation where a person/consumer who had paid Rs. 97/- or Rs. 101/- post rate reduction will not get any benefit of rate reduction even though these recipients might or might not have purchased goods in the period prior to rate reduction at a rate less than Rs. 95. Even a new purchaser who would purchase goods at Rs. 97/-, post rate reduction would not get any benefit of profiteering. From the above, it could be obser....
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....ued led to increase in prices concurrently with the rate reduction did not hold any merit and was just an eyewash. Cost escalations did not fall within the ambit of Section 171 and so they could not be considered as a valid reason for not passing on the benefit of tax reduction. The word "commensurate" could be interpreted only to mean that the benefit passed on to the recipient has to be in equal measure of benefit accrued on account of tax reduction or benefit of ITC. The DGAP has further added that Section 171 mentioned "reduction in the rate of tax on any supply of goods or services" which did not mean that the reduction in the rate of tax was to be taken at the level of an entity/group/company for the entire supplies made by a registered person. Therefore, the benefit of tax reduction has to be passed on at the level of each supply of SKU to each buyer of such SKU and in case it is not passed on, the profiteered amount has to be calculated on each SKU. Therefore, the contention that the profiteered amount should be computed at the tariff heading/HSN Code was untenable. Further, the above Section mentioned "any supply" i.e. each taxable supply made to each recipient thereby cle....
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.... that the provisions contained in Section 171 did not provide for any means of passing on the benefit of reduction in the rate of tax or benefit of input tax credit other than by way of commensurate reduction in price. It was the Respondents's own business decision to extend the period of consumer promotion schemes, the cost of which could not be set off against the benefit that the Respondents ought to have passed on to their recipients on account of GST rate reduction w.e.f. 15.11.2017. Clarifications on post-supply price reduction non-consideration: The DGAP has stated that the taxable value as shown in the GSTR1/3B Returns filed by the Respondents have been taken into account for determining the base price both before and after rate reduction w.e.f. 15.11.2017. The evidence submitted by the Respondents in support of their claim to have given post-supply discounts were either invoices issued by their recipients, mentioning the description as "Promotion Services" with HSN Code 998361 or 998366 (Advertising Services) or Debit Notes issued by the recipients. However, the profiteering has been quantified at the SKU level invoice-wise and documentary evidence establishing the corr....
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....assed on each and every supply and to each and every recipient individually, higher price reduction on certain SKUs could not be adjusted against the profiteered amount in respect of other SKUs. As per the provisions of Section 171(1) the benefit accrued due to reduction in the rate of tax was required to be passed on each purchase made by a customer by commensurate reduction in the price. Clarifications on Loss due to reduced fiscal incentives under budgetary support scheme to be considered: The DGAP has also stated that with regard to the contention of the Respondents that as the reduced amount of refund (area based fiscal incentive) has resulted in increase in cost, which was directly attributable to the reduced GST rate, the same should be considered for the purpose of the on-going investigation into the alleged profiteering by the Respondents. The DGAP has claimed that as per the Notification No. 10(1) /2017-DBA-11/NER dated 05.10.2017, the eligible units were entitled to a refund of 58% of CGST or 29% of IGST paid through debit in the cash ledger account, in terms of Section 49(1) the CGST Act, 2017, after utilization of the input tax credit of the CGST or the IGST. Accord....
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....dopted by him in his Report was in line with the legal principles and this methodology has been consistent throughout in all his reports involving allegation of profiteering in similar cases and has been settled before this Authority. As regards methodology prescribed by this Authority, the Procedure and Methodology for determination of profiteering and intent thereof has been determined by it on case to case basis by adopting the most appropriate and accurate method based on facts and circumstances of each case as well as the nature of the goods and services supplied. There could not be any fixed mathematical formulations/methodology for determination of quantum of benefit to be passed on which would cover different sectors of the economy and each case has to be decided based on its specific facts. Clarifications on issuance of Show Cause Notice: In this regard the DGAP has mentioned that he was not required to give opportunity of hearing to the Respondents as there was no such provision in the CSGT Act or the Rules and the DGAP was merely an investigative authority. The opportunity to present the facts and merits of the case has been accorded to the Respondents by this Authori....
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.... 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 them. (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 person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered: PROVIDED that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. Explanation:- For the purpose of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of red....
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....ndents during the pre rate reduction period w.e.f. 01.11.2017 to 14.11.2017 with the actual post rate reduction channel wise base prices of these products supplied during the period from 15.11.2017 to 30.09.2017. It was not possible to compare the actual base prices prevalent during the pre and the post GST rate reduction periods due to the reasons that (i) exact comparison of millions of pre and post reduction invoices cannot be done (ii) a customer may not have purchased the same SKU during the pre rate reduction period which he has purchased in the post rate reduction period and (iii) the Respondents were selling their SKUs at different prices to different customers of their distribution channels and even within the same channel based on the various business considerations and hence a particular actual price cannot be taken in to consideration. The Respondents have themselves admitted in their submissions dated 21.07.2020 that they were selling the SKUs at different prices to different customers of their distribution channels and even within the same channel based on the various business considerations such as type of customer, quantity of the SKU bought, discount applied, payme....
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....2,41,51,14,485/- as per Annexure-6 of the investigation Report dated 31.01.2020. The excess GST charged from the recipients has also been included in the profiteered amount. The place of supply-wise break-up of the total profiteered amount has been furnished vide Table mentioned in the Report dated 31.01.2020 in respect of the 33 States/UTs. The above methodology employed by the DGAP for computing the profiteered amount appears to be appropriate, correct, logical, reasonable, justifiable and in consonance with the provisions of Section 171 of the CGST Act, 2017. The above mathematical methodology has also been approved by this Authority in respect of all such cases of reduction in the rate of tax. Therefore, the above mathematical methodology can be safely relied upon. 23. The Respondents through their elaborate oral and written submissions have submitted that thy have the practice of revising prices of their products once in about six months based on multiple factors of cost increase and tax rate changes. However, the Respondents have not produced data even for a period of 2 previous years mentioning the names of the products and the percentage of increase in prices, which could ....
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....time limit of six months was not available under Rule 133(4) otherwise the proceedings would never come to an end. In this regard it would be pertinent to note that the I.O. No. 11/2019 dated 04.10.2019 under Rule 133(4) directing the DGAP to conduct further investigation in the present case was passed by this Authority due to the reason that the DGAP had not submitted findings on the issues raised by the Respondents vide their submissions dated 19.06.2019 including wrong computation of the profiteered amount. Therefore, further investigation was required to be done as a consequence of which the profiteered amount has been reduced to Rs. 2,41,51,14,485/- from Rs. 2,43,93,90,580/-. The Respondents cannot contend that the entire investigation including the further investigation ordered under Rule 133(4) should be completed within a period of 6 months when it involved fresh appreciation of the evidence and recalculation of the profiteered amount. Moreover, there is no stipulation under rule 133(1) that the entire investigation including the investigation ordered under Rule133 (4) shall be completed within a period of 6 months. It can also not be disputed that any further investigation....
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....at the Report from the DGAP was received on 08.04.2019 and the Respondents were directed to appear on 29.04.2019 however, they had sought repeated adjournments and had finally appeared on 04.06.2019 after a lapse of a period of 36 days and then filed their written submissions on 19.06.2019 after a period of 14 days. The Respondents have not explained why the above period of 50 days should be counted in the period of 6 months prescribed under Rule 133(1) while passing order after receipt of the Report under Rule 133(4). Therefore, the above contention of the Respondents is illogical, unreasonable and contrary to the provisions of Rule 133(1) and hence the same cannot be accepted. 27. The Respondents have also claimed that they had challenged the validity of Para 10 of the above Guidelines before the Hon'ble High Court of Delhi which had asked them to raise all their pleas before this Authority and dismissed the Writ Petition. The Hon'ble Delhi High Court had also referred to the judgment of the Hon'ble Supreme Court in L. Chandra Kumar v. Union of India (1997) SCC 261, wherein it had been held that the Tribunals shall act as the only courts of first instance in respect of areas of ....
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.... which this Authority could not do as the power to amend rules was available only with the Central Government. In this regard it would be pertinent to mention that as discussed in para supra this Authority has only clarified the position which already exists in Rule 133(1) and hence such a clarification cannot amount to amendment of Rule 133 (4). Moreover, as per the power conferred on this Authority under Rule 126, which has been framed under Section 171 (3) and 164 of the above Act, this Authority is competent to clarify vide Para 10 of the above Guidelines that the Report furnished by the DGAP after further investigation ordered under Rule 133(4) shall be treated as a fresh Report under Rule 133 (1) and accordingly order on such Report can be passed within a period of 6 months. Therefore, there is no requirement of modifying the above Para and hold that the present proceedings are time barred as it does not amount to amendment in Rule 133(4) in line with Rule 133(5). 29. The Respondents have also contended that this Authority vide its order dated 03.07.2019 had asked the DGAP to file clarifications under Rule 133(2A) but since the DGAP vide his reply dated 16.09.2019 did not cl....
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....sted in passing on both the benefits of tax reduction and ITC and are advancing lame excuses to misappropriate the amount sacrificed from the public exchequer even when they are not required to pay even a single penny from their own pocket. Therefore, the anti-profiteering provisions are bound to remain on the statute book till the registered persons cultivate the habit of voluntarily passing on the above benefits as a matter of routine. Hence, the above contention of the Respondents is incorrect. 31. The Respondents have further argued that as per Rule 129(6) the DGAP was required to complete the investigation within a period of 3 months which could be extended by another 3 months by this Authority, from the date of receipt of the recommendation from the Standing Committee on Anti-Profiteering. Since, the recommendation of the above Committee was received on 30.08.2018 the Report was required to be submitted on or before 28.02.2019, however, it was submitted on 05.04.2019 and therefore, the present proceedings were not maintainable. In this context perusal of the record shows that the DGAP had received recommendation for investigation from the Standing Committee on 30.08.2018 wit....
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....e Hon'ble Supreme Court in the case of Mahadev Govind Gharge v. Special Land Acquisition Officer (2011) 6 SCC 321 wherein it was held that:- "37. Procedural laws, like the Code, are intended to control and regulate the procedure of judicial proceedings to achieve the objects of justice and expeditious disposal of cases. The provisions of procedural law which do not provide for penal consequences in default of their compliance should normally be construed as directory in nature and should receive liberal construction. The Court should always keep in mind the object of the statute and adopt an interpretation which would further such cause in light of attendant circumstances. To put it simply, the procedural law must act as a linchpin to keep the wheel of expeditious and effective determination of dispute moving in its place. The procedural checks must achieve its end object of just, fair and expeditious justice to patties without seriously prejudicing the rights of any of them." 34. Reliance in this regard is further placed on the following judgement of the Hon'ble Supreme Court in the case of P. T. Rajan v. T. P. M. Sahir and ors. (2003) 8 SCC 498:- "48. It is well-settled prin....
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.... to the findings recorded in para supra vide which it has been explained in detail why the computation of the profiteered amount has been done by comparing the above prices. Therefore, the above claim of the Respondents cannot be accepted. 37. The Respondents have also furnished Tables and claimed that they were selling product ARIEL LAUPWD 2KG X 6 MAT FL D+C PC to a customer 'MR' at various base prices ranging from INR 347.22 to INR 360.97 during the period from 01.11.2017 to 14.11.2017, the average base price of which has been determined as INR 360.58 by the DGAP, which was compared with the actual sale prices from 15.11.2017 onwards and where ever the actual base price charged post rate reduction was higher than the average base price pre-rate reduction, the DGAP has computed the difference as profiteering, whereas in those cases where the actual base price charged post-rate reduction was lower than the average base price pre-rate reduction the DGAP has ignored the same which was inequitable and incorrect methodology. The above claim of the Respondents is completely wrong as profiteering has to be computed only on those products which have been sold above the pre rate reduction....
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....ed by the DGAP to compute the profiteered amount is correct in terms of Section 171(1). 39. In support of their above submissions, the Respondents have placed reliance on the observation of the Hon'ble High Court of Delhi given in W. P. (C) 1780/2020 in the case of M/S Johnson & Johnson Pvt. Ltd. v. Union of India & Ors., vide its order dated 18.02.2020, whereby the order passed by this Authority has been stayed on the ground that the methodology adopted by the DGAP to compute profiteering was erroneous. In this regard it is respectfully submitted that the above order nowhere states that the methodology adopted by the DGAP was wrong. The Hon'ble Court has specifically stated that "Our attention has been drawn to the tabulation filed by the petitioner before the DGAP, which shows that in respect of several items sold by the petitioner, after the reduction of GST to nil, the price actually fell, however, while computing the profiteered amount such cases have been excluded from consideration." Therefore, it is clear that the above claim of the Respondents is not correct. Moreover, the above case is still pending for final adjudication before the Hon'ble High Court and hence the obser....
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....ever, it is quite apparent from the Table submitted by the DGAP that where a person has paid price of Rs. 97/- or 101/- he would not be able to get the benefit if average to average price is compared as the price would be Rs. 95/- during the post rate reduction period. Even a new purchaser who has paid Rs. 97/- would also not get the benefit if the above comparison is made. Moreover, it would simply not be possible to compare the pre and post reduction base prices in respect of each customer as there is a large number of customers and transactions, the same customer may not have purchased the same product during both the periods and some buyers may have bought a product during the pre rate reduction period which they may not have bought in the post reduction period or vice versa. By comparing average to actual prices it is ensured that (i) all transactions are covered while computing the profiteered amount (ii) the benefit is ensured to that buyer who has paid higher price (iii) the objective of passing on the benefit of tax reduction is fully achieved and (iv) benefit of rate reduction is not denied to the consumer who did not make purchase of the same product in the pre-rate redu....
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....36.89 + GST Total=Rs. 47.21 and post reduction cum-tax price would be Rs. 36.88 + GST @18%=6.63 Total Rs. 43.51 and hence there would be profiteering of Rs. 3.70 (Rs. 47.21- 43.51) and not (-) 0.01 as has been claimed by the Respondents. 44. The Respondents have also pleaded that the word "commensurate reduction" used in Section 171 (1) denoted reduction in price after taking into account all the factors such as cost of raw materials, packing materials, overheads and other such elements which impacted pricing of goods and also connoted proportionality and adequacy. In this connection it would be pertinent to mention that Section 171 (1) only requires passing on the benefit of tax reduction and ITC and it has no connection with the other factors which influence the prices of the products. Had it been the intention of the legislature to consider the other factors it would have been specifically mentioned in the above provision. The legislature appears to have intentionally not mentioned the other factors so that the registered persons cannot deny the above benefits on the ground that the other factors have increased their costs and hence they cannot pass on the above benefits. In sp....
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....gnized and consequently, all post-supply price reductions passed on should be factored in while examining whether commensurate reduction in prices has taken place or not. In this regard it is mentioned that the passing of the benefit under Section 171(1) is not subject to the agreement executed by the Respondents with their distributors as it is an independent statement of public policy made in favour of ordinary customers by sacrificing precious tax revenue of the Government which is legally enforceable. It is also on record that the Respondents are selling their products at the prices which are fixed by them in advance as is evident from the agreements executed by them with the CSD and CPC and the same are neither tentative nor they are being finalized at a future date based on future events. The Respondents are also not charging different prices before and after supply as they are always charging them pre supply at fixed rates. Any discounts or price reductions unless they form part of the transaction value in terms of Section 15 of the Act are not required to be taken into consideration while computing the profiteered amount. The word "prices" has been used in Section 171(1) to....
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.... particular tariff heading / HSN Code. Section 171 has used the words 'registered person' however, the Respondents have not obtained registration SKU wise and it has been obtained based on the goods supplied which were classifiable under a particular tariff headings and hence Section 171 could not be applied SKU wise and calculation of profiteering should be considered at the level of HSN Code without prejudice that profiteering has to be considered at the legal entity level. In this regard it would be appropriate to note that as per the provisions of the CGST/SGST Acts the rate of CGST and SGST has to be fixed as percentage of the transaction value and it cannot be ad valorem or combination of specific value and ad valorem. "Any supply" mentioned in Section 171 (1) would mean each supply made to each customer. Since the Respondents are making supplies at the SKU level they have to pass on the benefit on each such supply at the SKU level. The Respondents are not making supplies and charging base prices and tax at the HSN Code or entity level hence they cannot pass the benefit at such Code or entity level. As per the provisions of Section 171(1) each recipient is entitled to the ben....
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....een provided in Section 171(1) and 171(3A) and the explanation attached to it hence, there is no need for using the definition given in the above dictionaries. Accordingly, the above contention of the Respondents is not tenable. 50. The Respondents have also submitted that the DGAP's interpretation of the term 'any' supply as 'each and every' supply was wholly misplaced and therefore, if a recipient has been supplied 2 SKUs and if any additional price charged on 1st SKU has been offset by passing on higher benefit on the 2nd SKU, then the profiteering should be determined after offsetting the higher benefit passed on to the very same recipient. The above claim of the Respondents is highly misplaced as the benefit has to be passed on each SKU to each recipient and it cannot be offset against the other SKU as every recipient may not buy the SKU on which more benefit has been passed on. Such an approach is illogical, inequitable and illegal as a recipient who has been denied benefit of tax reduction on a SKU in respect of which price has not been reduced commensurately cannot be compelled to get his benefit from the other recipient who has got the benefit on the SKU purchased by him.....
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.... on by their distributors and retailers down the line. Through the present proceeding it is the Respondents whose liability is proposed to be fixed in terms of Section171 (1) which they cannot avoid on the ground that they are not supplying the goods to the ultimate customers directly. Further, the DGAP has also correctly stated that Section 171 has no mandate to look into the fixing of prices of the products which the Respondents were free to fix. If there was any increase in the costs of the Respondents it could not be considered to have arisen exactly at the time of reduction in the rate of tax, which had forced them to raise their base prices exactly equal to the rate reduction or more. By no stretch of imagination such a coincidence is justifiable and the only conclusion which can be safely arrived at is that the Respondents have deliberately increased their prices to misappropriate the benefit given out of the public exchequer and deny the same to the ordinary customer to enrich themselves at his expense. The DGAP has not fixed any limit on the prices beyond which any sale would be violative of Section 171. He has only computed the commensurate price of each SKU which the Res....
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.... copy of the invoice showing the base price, rate and amount of tax and cum-tax price of SKU. (iii) Pre rate reduction Grammage/quantity supplied on the SKU. (iv) Amount of benefit of tax reduction. (v) Commensurate Grammage/quantity to be supplied in lieu of amount of rate reduction. (vi) Grammage/quantity actually supplied post rate reduction. (vii) Date from which additional Grammage/quantity was supplied. (viii) Copy of Production Log of manufacture vide which Grammage/quantity was increased. (ix) Post rate reduction copy of invoice showing base price, amount and rate of tax and cum-tax price of SKU. (x) Copy of public notice/advertisement informing the customers that the benefit of tax reduction is being passed by increasing the Grammage/quantity. (xi) Certificate to the effect that increase in Grammage/quantity was not continuation of their ongoing business promotion scheme. However, the Respondents have not submitted any of the above documents which could establish their above contention. Therefore, the above claim of the Respondents cannot be accepted. 55. As far as the issue of passing on the benefit by way extension of promotion schemes runnin....
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....any discount which is given - (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply;" Therefore, as per Section 15 (3) (a) of the above Act the value of the supply does not include any discount which was given before or at the time of the supply if such discount had been duly recorded in the in invoice issued in respect of such supply and thus, the GST was chargeable on the actual transaction value after excluding any discount (conditional as well as unconditional) and therefore, actual transaction value has been considered for computation of profiteering. Since, the DGAP has compared the transaction values of a SKU mentioned by the Respondents in their pre and post rate reduction invoices excluding the discounts there is no question of comparing the net price of SKU (Gross price net of discounts) prior to reduction of tax with the gross price of SKU post reduction of tax in respect of certain SKUs and hence the above allegation of the Respondents are not sustainable. 57. The Respondents have further alleged that profiteering has been computed on certain imported SKUs where there was an increase in the ....
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....he amount of input tax credit utilized by the Respondents for discharge of their output GST liability which was further based on the output GST rate. In case the input tax credit utilization by the Respondents has reduced, their refund amount might increase in case the Respondents were paying GST in cash. By their above logic the Respondents certainly do not intend to claim that if there was increase in the rate of tax the Respondents would have to reduce prices of their goods as there would be increase in the refund due to increase in the rate of tax. The Respondents have also furnished two illustrations to establish their claim which show that there has been loss in the refund from 5.22 in the pre rate reduction period to 2.9 in the post reduction period. The above reduction is normal as there has been reduction in the rate of tax from 28% to 18% and hence the refund would be proportionately less. The illustration given by the Respondents that if there was an increase in the rate of tax then they would not be required to reduce their prices is also irrelevant as it does not support their claim that reduction in the rate of tax has reduced their refund. Reduction in the rate of ta....
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.... (PGHP), Rs. 8.85 Crore (GIL) and Rs. 0.31 Crore (PGHH) Total= Rs. 36.85 Crore representing the additional GST illegally charged from the buyers cannot be reduced from the profiteered amount. The above Respondents have also referred to the cases of R.S. Joshi Sales Tax Officer and Dai Ichi Karkaria supra in their support, however, in view of the fact that the GST collected by the above Respondent amounts to denial of benefit of tax reduction to the customers both the above cases cannot be relied upon. 60. The Respondents have also prepared consolidated working of the profiteered amount vide their submissions dated 19.06.2019 by (i) comparing the net price of a SKU (Gross price net of discounts) prior to reduction in rate of tax with the gross price of SKU post reduction of tax (ii) Mapping the normal prices which could have been charged by the Respondents for the SKUs on which promotion was extended and computing the revised profiteering, including higher benefit passed on (iii) Computing the benefit passed on by way of higher price reduction on certain SKUs (iv) Computing the benefit passed on by way of higher price reduction on certain transactions where the actual price charged....
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....icle 14 they are required to pass on the benefit on each SKU to each buyer and therefore, computation of the benefit passed on by way of higher price reduction on certain SKUs as per the annexure attached with the submissions dated 19.06.2019 is incorrect and hence an amount of Rs. 190.36 Crore cannot be reduced from the profiteered amount. (iv) No profiteering has been computed on the SKUs where the Respondents have charged less prices as compared to the average prices. In addition any benefit passed on by claiming higher price reduction on certain SKUs where the actual price charged was less than the average price cannot be set off against the profiteered amount as has been computed by the Respondents vide their above submissions as the benefit has to be passed on each SKU (v) As discussed in para supra the Respondents have not supplied the details to prove that they have passed on the benefit by way of supplying extra quantity, hence, mapping of the normal prices which could have been charged by the Respondents for the products with extra quantity or the higher grammage at the same or lower prices as per the annexure attached with their above submissions is wrong and incorrect a....
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....he benefits of reduction in the rate of tax and ITC or for computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that "any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." and therefore, no methodology or guidelines are required to be provided separately for passing on the above benefits or for computation of the profiteered amount. It is clear from the plain reading of the above provision that it mentions "reduction in the rate of tax or benefit of ITC" which means that if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails benefit of additional ITC post GST implementation, the same have to be passed on by them to their recipients since both the benefits are being given by the above Governments out of their scarce and precious tax revenue. It also provides that the above benefits are to be passed on any supply i.e. on each Stock Keeping Unit (SKU) or unit of construction or service to every buyer and in case they are not passed o....
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....t is also a mathematical exercise which can be done by any person who has elementary knowledge of accounts and mathematics. However, to further explain the legislative intent behind the above provision, this Authority has been authorised to determine the 'Methodology & Procedure' which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017 and not on 19.07.2018 as has been claimed by the Respondents. However, no fixed mathematical formula, in respect of all the Sectors or the SKUs or the services, can be set for passing on the above benefits or for computation of the profiteered amount, as the facts of each case are different. In the case of one real estate project, date of start and completion of the project, price of the flat/shop, mode of payment of price or instalments, stage of completion of the project, rates of taxes pre and post GST implementation, amount of CENVAT credit and ITC available, total saleable area, area sold and the taxable turnover received before and after the GST implementation would always be different from the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project....
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....t of tax reduction to their customers on the above ground and enrich themselves at the expense of their buyers as Section 171 provides clear cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount. Therefore, the computation of profiteering made by the Respondents is incorrect, illogical, arbitrary and against the provisions of Section 171 and Article 14 and hence, it cannot be accepted. 63. The Respondents have also contended that in respect of certain category of SKUs, the DGAP has inadvertently compared the pre-rate reduction post-discount prices with the post-rate reduction pre-discount prices which have not been corrected by him. In this context perusal of Annexure-6 furnished by the DGAP with his Report dated 31.01.2019 shows that the DGAP has compared the pre discount prices in respect of both the pre and post reduction periods as per the provisions of Section 15. The DGAP has not compared the pre-rate reduction post-discount prices with the post-rate reduction pre-discount prices. The Respondents have themselves admitted that the DGAP has compared the pre discount prices in both the periods. Therefore, the above claim of the Respond....
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.... post supply discount for this SKU as INR 194.31. The Respondents have further submitted that for computation of profiteering for SKIJ H&S SHM 360mlx12 SB saver IN, the DGAP has taken base price of INR 194.31. Thus, for computing profiteering in respect of SKU SHM 360MLX12 SB CST IN the base price adopted by the DGAP should be INR 194.31 and not INR 183.48, which was the price charged after deducting post supply discount. In case this error was corrected it would result in reduction in profiteering by INR 28.52 Crore (PGHP) excluding GST. In this connection perusal of Annexure-6 attached with the Report of the DGAP dated 31.01.2019 shows that the DGAP has taken the pre rate reduction average base price of INR 194.31 only in respect of the SKU SHM 360mlx12 SB saver IN and not INR 183.48 as has been wrongly claimed by the Respondents. Therefore, an amount of Rs. 28.52 Crore in respect of Respondent No. 1 (PGHP) excluding GST cannot be reduced from the profiteered amount. Hence, the above claim of the Respondents is frivolous which cannot be accepted 66. The Respondents have also mentioned that vide their submissions dated 18.01.2019 and 3004.2019 they had submitted that certain prom....
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....cking material which would have taken a minimum of 3-4 months. The above contention of the Respondents is incorrect as there was no requirement to continue the existing promotion schemes or discarding the existing packing material and packing in the new material. As has been explained in para supra the Respondents were simply required to maintain the base prices of the SKUs which they were charging before the rate reduction and charge GST @18% instead of 28% and no method was required to be prescribed by the Government to pass on the benefit of tax reduction. They were to replace only one entry of GST in their billing software from 28% to 18% w.e.f. 15.11.2017. If the Respondents could change several entries in their software to increase the base prices w.e.f. 15.11.2017 they could have very easily replaced one entry of rate reduction. The Respondents could also have affixed stickers of revised prices on the existing packing material because as a manufacture they were legally responsible for fixing the revised MRPs as per the provisions of Rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011. However, they have not re-fixed the MRPs after rate reduction. They were also ....
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....legally permissible method for passing on the benefit of tax reduction and it cannot be done by way of extra sale promotion schemes, extra discount, higher grammage and higher combination packages etc. Accordingly, an amount of INR 19,71,93,934 (PGHP) and INR (GIL) Total= INR 23,02,08,358/- computed on the supplies of the SKUs on the basis of promotion schemes cannot be excluded from the profiteering. 68. The Respondents have also stated that profiteering should be based on the comparison between the net price of a product i.e. after considering the price reductions and not on the gross prices. The price reductions were provided both prior to and after reduction in the rate of GST, however, the price reductions provided after reduction had been significantly increased to ensure that the benefit of such rate reduction was passed on. The Respondents were adjusting such price reductions from their sales turnover and had reported only the net turnover in their books of account as well as Financial Statements. The methodology adopted by the Respondents for giving price reductions has been explained by them through an illustration which shows that the Respondents have claimed that the d....
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....st supply reduction as Rs. 7.5 and net price ex-GST as Rs. 94.5 and the profiteering has been calculated as Rs. 2/- for the pre rate reduction period, Rs. (-) 2.5 for the post supply and Rs. (-) 0.5 for the post rate reduction period. The illustration given by the Respondents is completely hypothetical and is based on the prices and reductions invented by the Respondents which are illogical, arbitrary and illegal as no benefit of tax reduction has been passed by the Respondents by post rate reduction in prices by way of discounts rather they have increased these prices as is evident from the perusal of Annexure-6 attached with the Report of the DGAP. Moreover, the Respondent were required to maintain the pre rate reduction base price of Rs. 100/- which they have admitted to have increased to Rs. 102/-. The Respondents cannot increase the base price and then claim to have increased the discount to pass on the benefit of tax reduction in the post rate reduction period. Accordingly, the above claim of the Respondents cannot be accepted. 70. In this regard, the Respondents have relied on the decisions of the Hon'ble Supreme Court in the cases of Union of India v. Bombay Tyres Internat....
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....ern retailers had treated the discounts as service in view of the fact that the incentive received by the dealers was considered by the Department as consideration for the service and Service Tax was demanded on such incentives. In order to avoid litigation the Respondents had accepted the claim for price reductions from the recipients with tax as it was revenue neutral, being creditable in the hands of the Respondents. Accordingly, even though the price reductions were routed by way of service invoices received from the recipients, it remained a fact that the same were raised in lieu of schemes announced by the Respondents and were nothing but a reduction in sale prices of the Respondents, and not towards any services provided by Respondent's customers to the Respondents. Accordingly, the computation of profiteering ought to have been made on the basis of net prices only, which were the prices charged by the Respondents after allowing for price reduction based on the schemes announced from time to time, as the net price alone reflected the actual consideration towards the supply, realized by the Respondents. In this regard it would be worthwhile to state that the evidence submitte....
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....e Respondents on the above grounds is wrong and misleading and therefore, the same cannot be accepted. The Respondents have also placed reliance on the cases of Union of India v. Bombay Tyres International and M/S Moped India Ltd. v. Asst. Collector supra both of which do not apply in the facts of the present case. 73. The Respondents had repeatedly claimed that the allegation of profiteering in respect of supplies made through CSD/CPC channels was not sustainable, as the price of supplies made to CSD/CPC channels was contractual and the same was negotiated excluding the taxes. Since the DGAP has already excluded the transactions made by the Respondents with the CSD and CPC from the ambit of profiteering, the Respondents have not made any further submissions on the same. 74. The Respondents have also claimed that they had submitted before the DGAP that certain hair and skin care products i.e. 4 products comprising of 6 SKUs covered under Chapter 33 of the Customs Tariff Act, 1985 were imported by the Respondents on which the applicable rate of BCD was increased from 10% to 20% w.e.f. 02.02.2018 vide Clause 101 (a) of the Finance Bill, 2018. Being non-creditable such increased BCD....
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....ction in the price of the Ariel 12 Gm. pack only and they had no option of substituting it with another SKU. They have also not explained how Ariel 14.3 Gm pack could be considered as passing on the benefit on Ariel 12 Gm pack when no details have been submitted. The Respondents have also mentioned the issue of coinage on the payment of prices of small sachet packs and reduction in quantity which only shows that the Respondents were not bothered to pass on the benefit to vulnerable sections who generally buy such sachet packs. Moreover, it was for the buyers to render the coinage and not for the Respondents to surmise on their behalf that they would not be able to pay it. The buyers could have easily done it through electronic platforms. The Respondents could also have reduced the quantity by appropriate adjustments in the manufacturing process however, they had not done it with an intention to deny the benefit. They could also have easily deposited the extra amount charged on such sachets in the CWFs. Therefore, an amount of Rs. 105,79,46,321/- (PGHP) and Rs. 36,91,85,863/- (GIL) Total= Rs. 142,71,32,184/- excluding the CST claimed to have been passed on due to additional supply o....
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....ody of the WTO. In this regard, the Respondents have referred to the Report No. WT/DS141/AB/R dated 01.03.2001 of the Appellate Body of the WTO regarding Anti-Dumping Duties on imports of Cotton-Type Bed Linen from India, vide which it was held that the methodology of 'Zeroing' could not be applied and both the negative and positive margins have to be considered while applying the anti-dumping provisions. The above contention of the Respondents is not correct as no 'netting off' can be applied in the cases of profiteering as the benefit has to be passed on to each customer which has to be computed on each SKU. Netting off implies that the amount of benefit not passed on certain SKUs will be subtracted from the amount of benefit passed on other SKUs and the resultant amount would be determined as the profiteered amount. If this methodology is applied the Respondents would be entitled to subtract the amount of benefit which they have not passed on one product from the amount of benefit which they have claimed to have passed on the other product, which will result in complete denial of benefit to the customer who has purchased a particular project on which no benefit or less benefit h....
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.... as such a person would be ordered to reduce his prices immediately per as the provisions of Rule 133(3)(a) from the date of passing of the order by this Authority and if the does so no further investigation can be conducted against them. In case the Respondents cannot be investigated till the time they prove passing on the benefit and compliance with the provisions of Section 171(1) they can also not be investigated over a period of 3 months as it has no nexus or rationale with the provisions of Section 171 (1). The Respondents are repeatedly harping on increase in their costs but they have not explained how they have suddenly increased their prices on the intervening night of 14/15.11.2017 to exactly coincide with the reduction in the rate of tax by the amount of tax reduction or more. The Respondents have not reduced their prices even once after the rate reduction and have increased them to deny the benefit of tax reduction to the customers and hence the above claim of the Respondents cannot be accepted. 80. The Respondents have further argued that Inflation as a factor has been accepted as a reason for price increase by this Authority in the case of Kumar Gandharv v. KRBL Ltd.....
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....nnot be allowed to misappropriate the amount of benefit granted to him from the public exchequer and enrich himself as the expense of unorganised, voiceless and vulnerable customers. The Respondents are not required to pay even a single penny from their own pocket while passing on the benefit of tax reduction and hence the should have no objection on the period of investigation. They cannot be investigated beyond the date from which they have passed on the benefit. Their plea to restrict the period of investigation only means that they want to appropriate the amount of benefit. Therefore, no provision is required to be made either under Rule 126 or the above Guidelines to fix the period of investigation as different registered persons may or may not have passed on the benefit from the same date and hence they would be required to be investigated till the time they have passed on the benefit which may be different in different cases. There is no question of the Respondents being brought under the price control regime as there is no such provision under Section 171 (1). Therefore, the above contention of the Respondents is not tenable. 82. The Respondents have also submitted a list ....
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.... like M/S Hindustan Lever Ltd., M/S Nestle India Ltd., M/S Patanjali Ayurveda Ltd. and M/S Johnson & Johnson Pvt. Ltd. etc. and they were duly investigated and held liable for profiteering and hence the above contention is absolutely wrong which cannot be accepted. 84. The Respondents have also submitted that the period of investigation was neither envisaged in the CGST Act nor the CGST Rules. The DGAP was following the practice of taking period of investigation from the date of rate reduction till the previous month of the day on which reference was received from the Standing Committee which showed arbitrariness in determining the period of investigation. The DGAP has not adduced any evidence to show that profiteering was alleged against the Respondents up to September 2018. In this connection it would be relevant to mention that from the interactive sessions held by this Authority with the P&G Group, which represented the Respondents, on 16.05.2018 and 11.06.2018 and their subsequent letters dated 23.05.2018 and 04.07.2018 along with which details of the SKUs and the dates from which the benefit was passed on by the Respondents were supplied, it was evident that the Respondents ....
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....is case is limited till 30.09.2018 but can be extended till the passes on the benefit. Therefore, there are clear cut provisions under the above Act and the Rules till what period the investigation is to be conducted and it cannot be restricted to a period of 3 months as contended by the Respondents as there is no such provision in the Act or the Rules or any justifiable ground and hence the above claim of the Respondents is not maintainable. 85. The Respondents have also contended that their recipients viz. distributors and direct retailers were registered suppliers and hence the excess GST charged did not form part of their cost as both were entitled to ITC. In this connection it would be pertinent to mention that since the recipients of the Respondents were entitled to ITC there was no reason for the Respondents to pass on the benefit of tax reduction to them by way of offering discounts. They should have simply maintained their pre rate reduction base prices and charged the reduced rate of tax and their recipients would have claimed ITC and sold the products at the reduced rate of tax and pre rate reduction base prices which would have resulted in passing on of the benefit. Th....
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....rden of tax and hence it cannot be returned to the recipients of the Respondents. The Respondents have also relied upon the cases of State of Jharkhand v. Ambay Cements and Tata Chemicals Ltd. v. Commissioner of Customs supra to support their above contention. However, the above cases do not support the case of the Respondents as the benefit has to be passed to the ordinary customer and not to the recipients of the Respondents. 87. The Respondents have also submitted that Rule 6(3) of the Legal Metrology (Packaged Commodities) Rules 2011 provided discretion to the supplier regarding affixation of sticker as the words used were 'may be affixed'. Therefore, such sticker could be affixed also by the distributors, dealers or retailers. It was not possible for the manufacturers to affix stickers with reduced MRPs on the products which had already been sold and were lying with the dealers and retailers. In this regard it would be correct to mention that as per the provisions of Rule 2(d) of the above Rules and the admission of the Respondents themselves that they were manufacturer of all the SKUs which were being supplied by them and hence they are liable for fixing the Maximum Retail P....
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....16.11.2017, issued by the Ministry of Consumer Affairs, Food and Public Distribution. It has also been submitted that neither the DGAP nor this Authority have been empowered under the Legal Metrology Act or the rules made there under to verify Respondent's compliance with the provisions of legal metrology and hence they should refrain from commenting on compliance with respect to re-stickering of reduced MRP on pack. In this connection it would be pertinent to mention that as per the self admission of the Respondents as well as the Report of the DGAP it is established that they have not been investigated for profiteering in respect of the stock which was lying in their godowns or with their distributors and retailers. The Respondents cannot get away by denying the benefit of tax reduction on the SKUs lying in the supply chain and hence they are required to be investigated on this account. It is also apparent from the bare perusal of the letter dated 16.11.2017, issued by the Ministry of Consumer Affairs, Food and Public Distribution that the direction to affix stickers has been issued only (i) to give effect to the GST rates fixed after implementation of the CGST Act, 2017 w.e.f. 0....
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.... above case is not being followed. 91. The Respondents have also submitted that the present proceedings had been conducted in violation of the principles of natural justice as show cause notice had not been issued to the Respondents. Moreover, the investigation was initiated on the basis of the reference of the Secretary of this Authority to the Standing Committee who, unilaterally, misinterpreted submissions made by the Respondents in their communications to erroneously conclude admission of profiteering by the Respondents. The Respondents were also not given any chance to clarify their communication. Moreover, none of the recipients of the Respondents have complained of non-receipt of benefit of reduced rates. In this regard perusal of the record shows that the Respondents were duly given show cause notice on 15.04.2019 by this Authority on the Report dated 05.04.2019 of the DGAP informing them that they have been alleged to have profiteered under Section 171 of the Act and they should explain why they should not be held liable for profiteering. A copy of the Report was also supplied to them in which detailed allegations and computations of profiteered amount had been made. Simi....
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....ed that:- "We, however, make it clear that this interim order shall not come in the way of the National Anti Profiteering Authority in cases where it has suo moto taken action. " (Emphasis supplied) 92. The Respondents have further submitted that Rule 133 of the CGST Rules provided that this Authority could order the following action against the Respondents if they were held to have profiteered:- a. reduction in prices; b. return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest; c. deposit such amount in Consumer Welfare Fund where the eligible person does not claim return of the amount or is not identifiable; d. imposition of penalty as specified under the CGST Act; and e. cancellation of registration under the CGST Act. However, Rule 133 did not provide for issuance of a show cause notice to the person alleged to have contravened Section 171, before passing an order under Rule 133. Therefore, Rule 133 of the CGST Rules, to that extent was violative of principles of natural justice. In this context it is to be noted that as explained in para supra the Respondents were duly served sh....
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....lso not objected to the present proceedings at the very beginning on the ground of not having been served with a detailed notice and hence the present objection is nothing but an afterthought which cannot be accepted. 94. The Respondents have also submitted that the DGAP has made his computations for profiteering by using the base price data which has not been provided by the Respondents and no opportunity has been given to them to rebut the same. The Respondents have further submitted that unless the aforementioned information was made available to the Respondents, they could not defend their case. In this respect it would be appropriate to take note that the computation of the pre rate reduction base prices, commensurate prices, post rate reduction prices and the profiteered amount has been made by the DGAP on the basis of the data of sale transactions supplied by the Respondents themselves and the GSTR-I and GSTR-3B Returns filed by them and hence the claim of the Respondents that they have not supplied the base data is frivolous. This Authority has supplied all the details of computation of the profiteered amount against which the Respondents have mounted a huge defence in the....
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....ing the benefit by stating that the increase in price was on account of business profits. This ingenious argument advance by the Respondents amounts to not passing on the benefit of tax reduction and hence the amount so claimed to be business profit is required to be added in the profiteered amount. Any price increase made by the Respondents on the eve of rate reduction cannot be distinguished as increase due to denial of benefit of tax reduction and due to addition of profit as such a distinction if allowed would amount to non-passing of the benefit as it nullifies and negates the passing of tax reduction benefit. The Respondents have also placed reliance on the case of Lifestyle Retail Pvt. Ltd.- Case No. 8/2018 dated 25.09.2018, wherein this Authority has observed that it was not functioning as a 'price regulator'. The above clarification of this Authority is correct and hence, the Respondents cannot claim that this Authority was working as a price regulator as the Respondents cannot withdraw the benefit of tax reduction simultaneously while passing it. 97. The Respondents have also computed profiteering in excess of rate reduction, based on DGAP's calculations, in the co....
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....s to the Respondents. The DGAP has recorded in his Reports that the Respondents have not reduced their prices on the basis of the invoices issued by them to their recipients. Therefore, the above contention is also incorrect. It is established from the investigation that the Respondents have not reduced their prices to their recipients and hence they are squarely responsible for not passing on the benefit of tax reduction. 99. It is also apparent from the record that the profiteered amount of Rs. 2,41 ,51,14,485/- is more than 0.89% of the total sales and hence the principle of "de minimis non curat lex" is not applicable in this case. Accordingly, the law settled in the cases of Morarjee Goculdas Spinning & Weaving. Co. Ltd. v. Commissioner Central Excise (1998) 102 ELT 420 (Tribunal), Maruti Udyog Ltd. v. Commissioner Central Excise (2004) 173 ELT 382 and Essar Steel India Ltd. v. Commissioner Central Excise (2015) 317 ELT 713 (Tri-Ahmd.) is not applicable in the facts of the present case. 100. Based on the above findings it is abundantly clear that the Respondents are liable to pass on the benefit of GST rate reduction from 28% to 18% as was notified by the Central and the Sta....
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....,38,01,116 Puducherry 46,11,560 Punjab 7,46,00,558 Rajasthan 7,86,14,977 Tamilnadu 21,19,64,315 Telangana 13,69,84,859 Tripura 46,90,362 Uttar Pradesh 28,74,31,916 Uttarakhand 2,26,21,786 West Bengal 15,20,40,632 Total 2,41,51,14,485 101. Accordingly, the Respondents are directed to reduce prices of all the SKUs commensurately in respect of which profiteering has been computed as per Annexure-6 forthwith in terms of Rule 133 (3) (a) of the above Rules read with Section 171(1) of the above Act. 102. The Respondents are also directed to deposit 50% of the profited amount of Rs. 2,41,51,14,485/- (Rs. 181,51,46,262/- in respect of Respondent No. 1 + Rs. 2,00,30,807/- in respect of Respondent No. 2 + Rs. 57,99,37,416/- in respect of Respondent No. 3) in the Central Consumer Welfare Fund and the balance 50% in the Consumer Welfare Funds of the 33 States/UTs mentioned supra as per the provisions of Rule 133 (3) (c) of the above Rules read with Section 171(1) as per Annexure-6, since the recipients who are millions of ordinary customers are not identifiable. The above amounts shall be deposited along with 18% interest payable from the dates from which the abo....
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....(31)/2017 dated 16.11.2017, issued by the Ministry of Consumer Affairs, Food and Public Distribution, Government of India. Therefore, the DGAP is directed to supply a copy of this order to the concerned authorities responsible for taking cognizance of the violations of the Legal Metrology (Packaged Commodities) Rules, 2011 framed under the Legal Metrology Act, 2009, for taking appropriate action against the Respondents and furnish his report accordingly. 106. This Authority as per Rule 136 of the CGST Rules 2017 directs the concerned Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondents as ordered by this Authority is deposited in the CWFs of the Central and the concerned State/UT Governments as per the details given above. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioners CGST/SGST within a period of 4 months from the date of receipt of this order through the DGAP. 107.1t is also evident from the above narration of the facts that the Respondents have denied benefit of rate reduction to the buyers of their SKUs in contravention of the prov....