TaxTMI 
TaxTMI 
2020 (11) TMI 915
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....he Respondents had not passed on the benefit 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 "S....
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....amount of refund which the was getting in the industrially 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 th....
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.... 18% or in other words, the profiteered amount came 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 ....
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....ring scheduled on 29.04.2019 vide its letter dated 23.04.2019, it was decided to grant next hearing on 15.05.2019. On the request of the Group, hearing was adjourned two more times on 24.05.2019 and 31.05.2019. Finally, the hearing was held on 04.06.2019 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 da....
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....4.10.2019, the had issued a letter to the Respondents on 21.10.2019 to provide the copies of agreements entered with the CSD/CPC partners. In response to the letter dated 21.10.2019, the Respondents had replied vide e-mails dated 24.10.2019, 22.11.2019, 05.12.2019 and 09.01.2020 and submitted the following documents:- 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 ....
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.... on certain SKUs : The DGAP has stated that as the profiteered amount had to be passed 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. b) Extra quantity (grammage): The DGAP has also stated that Section 171(1) of the CGST Act, 2017 reads as "Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices." 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 Par....
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....details furnished by the Respondents. However, where ever any product was not supplied by the Respondents during the period from 01.11.2017 to 14.11.2017 the base prices submitted by the Respondents themselves were taken as the pre-rate reduction base prices. c) Profiteering also alleged on certain imported SKUs with increase in Basic Customs Duty (BCD) during period of investigation: The DGAP has further intimated that 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....
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....ad not been explained: The DGAP has further claimed that 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, where ever any product was not supplied by the Respondents during the period w.e.f. 01.11.2017 to 14.11.2017 the base prices as submitted by the Respondents were taken as the pre-rate reduction 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 o....
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....ls, the recomputed profiteered amount of Rs. 2,41,51,14,485/- with place (State or Union Territory) of supply-wise break-up was as has been given in the Table below:- State Name Total Profiteering Andaman Nicobar Islands 26,70,205 Andhra Pradesh 11,84,56,433 Arunachal Pradesh 6,52,319 Assam 3,86,91,768 Bihar 7,13,42,240 Chandigarh 24,72,685 Chhattisgarh 2,48,50,574 Delhi 13,17,62,298 Goa 1,39,93,388 Gujarat 14,84,91,508 Haryana 10,32,22,549 Himachal 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 th....
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....ade combined oral submissions and also given power point presentation. During the course of the hearing the Applicant was represented by Ms. Neeharika, Deputy Commissioner and the Respondents were represented by Sh. Prashant Bhatnagar, Sh. Gagan Sawhney, Sh. Ghanashyam Thegde, Sh. Sachin Wani, Company Employees, P&G Group, Sh. V. Lakshmikumaran, Sh. K. Srikanth, Advocates and Sh. D. Machchhar, Consultant. The Respondents have filed their consolidated written submissions dated 20.07.2020 which were received on 21.07.2020. The contentions raised by the Respondents vide their above submissions 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 c....
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.... 22.10.2018, 26.10.2018, 29.10.2018, 06.11.2018, 26.11.2018, 21.12.2018, 04.01.2019, 18.01.2019, 26.03.2019, 29.03.2019 and 03.04.2019. Pursuant to the investigation of the data submitted by the Respondents and other facts the DGAP had submitted his report to this Authority. The DGAP in his report dated 05.04.2019 had, inter alia concluded that the Respondents had contravened Section 171 of CGST Act and profiteered Rs. 2,43,93,90,580/- including GST @ 28% or 18% (as applicable) during the period from 15.11.2017 to 30.9.2018. Pursuant to the report of the DGAP, this Authority had issued notice dated 15.4.2019 to 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 DG....
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....ty vide its e-mail dated 01.04.2020 had rescheduled the hearing to 29.04.2020 in the wake of Corona outbreak and subsequent lockdown in Delhi. This Authority vide its e-mail dated 17.04.2020 had further rescheduled the date of hearing to 26.05.2020 due to Corona pandemic outbreak and further extension of the lockdown. Subsequently, the Respondents vide their e-mail dated 22.05.2020 had requested for a further extension of 3 weeks from 26.05.2020, considering the lock down position due to Covid-19 in Mumbai and requested for the personal hearing by Mid-June 2020 by which the situation would improve. Accordingly, 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 ....
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....reschedule the date of personal hearing to May 15, 2019. 07.05.2019 Respondent vide e-mail dated 07,05.2019 requested for change in date of personal hearing to May 21, 2019 instead of May 15, 2019. 13.05.2019 Fresh date of personal hearing granted by the Hon'ble Authority vide its Notice for personal hearing fixing the date as May 24, 2019. 17.05.2019 In response to request from Respondent vide e-mail dated 16.05.2019, the office of NAA has shared three excel sheets separately containing the base price data used for calculating the alleged profiteering. 24.05.2019 Fresh date of personal hearing granted by the Hon'ble Authority based on Respondent'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 subm....
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....0th June 2020 and fixed the next hearing on 13.07.2020. 30.06.2020 DGAP submitted its reply dated 30.06.2020 u/r 133(2A) which was received by the Respondents on 07.07.2020. 10.07.2020 In the meantime, Respondent filed writ petition inter alia challenging the validity of para 10 of guidelines dated 04.10.2019 issued by this Authority which treats DGAP's report u/r 133(4) as a fresh report, as well as the validity of all consequential notices and proceedings initiated pursuant thereto. After some arguments, the Respondents withdrew the writ petition with liberty to raise all pleas and defenses raised in the writ petition before the National Anti-Profiteering Authority. 13.07.2020 Respondent 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 c....
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....h investigation or enquiry was that a fresh time limit of 6 months (with further extension of 3 months if granted by this Authority) became available to the DGAP to furnish his report under Rule 129(6) of the CGST Rules and accordingly, this Authority has a time of 6 months from the date of receipt of the report from the DGAP to decide the matter in terms of Rule 133(1) of the CGST Rules. The Respondents have further stated that unlike Rule 133(5)(b) of the CGST Rules which deemed the investigation/enquiry as a new investigation/enquiry, no such provision existed in Rule 133(4) of the CGST Rules. The rule making authority has consciously distinguished a further investigation under Rule 133(4) from a new investigation under Rule 133(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....
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....date of hearing to 13.07.2020 directing the DGAP to file his reply under Rule 133(2A), the Respondents had approached the Hon'ble Delhi High Court by way of Writ Petition inter alia challenging the validity of para 10 of the Guidelines dated 04.10.2019 issued by this Authority which treated DGAP's report under Rule 133(4) as a fresh report, as well as the validity of all consequential notices and proceedings initiated pursuant thereto. The matter was heard on 10.07.2020 and the Hon'ble Court had asked the Respondents to raise all their pleas and defenses raised in the writ petition before this Authority and dismissed the Writ Petition as withdrawn with the liberty to the Respondents to raise the issues before this Authority. 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) 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 submis....
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....tion. However, from the points referred for further investigation, it could be seen that these were nothing but the Respondents's objections on which clarifications under Rule 133(2A) were sought earlier. The Respondents have argued that a further investigation under Rule 133(4) stood in distinction from a clarification under Rule 133(2A). If the DGAP had not provided the clarifications sought by this Authority under Rule 133(2A) it did not grant power to this Authority to direct the DGAP to carry out further investigation under Rule 133(4) with respect to the very same objections raised by the Respondents. Therefore, the order dated 04.10.2019 was nothing but a direction seeking clarifications from the DGAP under Rule 133(2A). The time limit for passing of the order by this Authority 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 ....
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....has stated that the time limit to complete the investigation was extended up to 06.04.2019 by this Authority vide letter dated 31.12.2018. However, Rule 129(6) clearly specified that a further period not beyond 3 months could be made available to the DGAP. Therefore, in the present case, this Authority could have granted extension to the DGAP only up to 28.02.2019, beyond which neither the DGAP could carry out any investigation nor was this Authority empowered to provide any extension. Therefore, the 1st DGAP report itself was beyond the time limit specified in Rule 129(6) and no further proceedings could be carried out in respect of the present case. In this regard, the Respondents have placed reliance on the judgments of the Hon'ble Supreme Court in the cases of Oil and Natural Gas Corporation Limited 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 Ta....
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....to different customers during the pre-rate reduction period have been furnished by the Respondents as has been tabulated below:- Customer Code Invoice Date Product Description Quantity Base price before discount Customer type 2002707020 02-11-2017 ARIEL LAUPWD 2KG X 6 MAT FL D+C PC 6 360.97 MR 2002853252 02-11-2017 ARIEL LAUPWD 2KG X 6 MAT FL D+C PC 6 356.49 MR 2002677369 03-11-2017 ARIEL LAUPWD 2KG X 6 MAT FL D+C PC 30 347.22 MR The Respondents have also submitted that the DGAP, based on total sale of this product to customer type MR during the period from 01.11.2017 to 14.11.2017 has determined an average base price of INR 360.58. This average base price was then compared with the actual sale price for the individual sales made from 15.11.2017 onwards and wherever 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 when compared for the specific customer, th....
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....comparing average price pre-rate reduction with the actual individual price post rate reduction and computing profiteering for each individual sale where the actual price charged was higher than the average price pre-rate reduction (and ignoring sales where excess amount was passed on) was incorrect, inequitable, arbitrary and the same required reconsideration. In support of the above submissions, reliance has been placed on the recent decision of the Hon'ble Delhi High Court in W.P.(C) 1780/2020 in the case of M/s. Johnson & Johnson Pvt. Ltd. v. Union of India & Ors. wherein the order passed by this Authority was challenged. The Hon'ble High Court in that case vide order dated 18.02.2020 had taken a prima facie view that the methodology adopted by this Authority to consider average of prices pre-rate change and comparing it with specific instances of prices post the change of rates appeared to be incorrect and 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 th....
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.... 12 101 0 6 The Respondents have claimed that based on the above mentioned illustration the DGAP has highlighted the following issues in the adoption of the Average vs. Average methodology: (a) A consumer who had paid Rs. 97/- or Rs. 101/- post rate reduction (against invoice 11 and 12) would not get any benefit of rate reduction even though he may or may not have purchased goods prior to rate reduction at a rate less than Rs. 95/-. (b) That the method of computation of profiteering on Actual to Actual or Average to Average price failed to serve the purpose of extending the benefit to each consumer. The Respondents have further claimed that when comparing the prices charged by the Respondents to their recipients before and after the rate reduction, the DGAP was simply required to compare prices before the rate reduction with the prices charged after the rate reduction to the same recipient. Adopting a convoluted methodology of comparing the average prices (which are not the actual prices charged to the recipient) with the actual prices post reduction with an intent to pass the benefit to a recipient who may not have purchased the produc....
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....ing weighted average prices with actual prices incorrect Adoption of average prices: (Customer code 2002641416) Actual instances where DGAP has computed profiteering in respect of line items where the price after rate reduction has reduced. This shows flaw of adopting average vs actuals for comparison Customer code Invoice date Product description Actual vs Actual DGAP methodology (Average vs Actual) 2002641416 03-11-2017 TIDE LAUPWD 500GX48 JR NS+C NAT PC 36.89 36.87 (Pre-rate reduction average) 2002641416 29-12-2017 TIDE LAUPWD 500GX48 JR NS+C NAT PC 36.88 36.88 Profiteering computation -0.01 0.01 The Respondents have further submitted that the methodology adopted by the DGAP was incorrect. The comparison of average with actuals while ignoring negatives was an incorrect approach not in accordance with the provisions of section 171 as has been explained below:- Methodology of comparing weighted average prices with actual prices incorrect • Computation by DGAP itself shows the error in methodology Sl.No. Pre-rate reduction price of Post-rate reduction ....
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....', the word 'equal' or 'equivalent' would have been used in this Section. 'Commensurate' connoted proportionality and adequacy. The law did not prescribe how to determine whether a particular amount was commensurate as the legislature was conscious of the fact that pricing of goods was a complex exercise involving numerous factors. The price was based on contract and terms as agreed between the seller and the buyer. The price could be tentative and might get finalized at a later date which could be post supply. The price determinable at the time of supply might not be final and it could vary based on a future event. There could be multiple prices for the same supply at different points of time viz. one before the supply and one after the supply then the price was finalized based on terms of sale like discounts or price reductions based on schemes, turnover, etc. To cover such situations, the word 'prices' has been used in Section 171. The law has also used the word 'any' before supply of goods to denote singular as against the plural for price. Therefore, for the same supply, existence of tentative and final prices has been recognized and consequently, all post-supply price reducti....
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....'supply', they denoted that Section 171 was applicable to the persons registered under the CGST Act. The Respondents have not obtained registration SKU wise. Form GST REG-01 was the form specified under CGST Rules as application form for obtaining registration under the CGST Act. S. No. 18 of this form sought details of goods supplied and the words used were 'Please specify top 5 goods' and the table thereunder sought description of goods along with HSN Code. When registration was obtained based on goods supplied which were classifiable under particular tariff headings, applying Section 171 SKU wise was neither legally sanctioned nor correct. It was also submitted that in place of SKU wise calculation of profiteering, HSN Code could be considered in the light of above submissions for the purpose of calculating alleged profiteering without prejudice to the argument that profiteering (if any) has to be considered at the legal entity level. Submissions of the Respondents on the Marginal notes to be used an internal aid of interpretation: The Respondents have also contended that they have not undertaken any activity which tantamounted to 'profiteering'. The interpreta....
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....nt case have not made exorbitant profits in an unlawful manner as was evident from the submissions made in the subsequent paragraphs. Accordingly, it could not be said that the Respondents have profiteered. The Respondents have passed on the benefit of reduction in rate of tax by various methods and have complied with the provisions of Section 171 Submissions of the Respondents on DGAP's 2^nd report dated 31.01.2020: i. The DGAP has stated that as per the website "Lexico", word "equivalent" was also a synonym of the word "commensurate" and the intention of the law was clear that the price of the goods/services has to be reduced by the amount of reduction in the tax. The Respondents have averred that if it had been the intention of legislature to provide for an equivalent reduction in price, the same would have been stated in clear terms in the Act itself by using the term 'equivalent' instead of 'commensurate'. The fact that the term equivalent has not been used itself showed that the intention of the legislature was to provide for adjustment of various other factors affecting the pricing of products, like increase in costs, post-supply discounts, etc. The DGAP ha....
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....after offsetting the higher benefit passed on to the very same recipient. This was without prejudice to the Respondents's submission that the benefit should be seen from the entity perspective and as long as the benefit has not been retained by the Respondents but has been passed on to the recipient (as a class), there should not be any allegation of profiteering. iv. The DGAP has also submitted that since the definition of expression "profiteered" has been inserted by way of an explanation, the same will apply retrospectively even though sub-section 3A was inserted by Finance Act, 2019. Further, the DGAP has also contended that his report was in consonance with the "marginal note" attached to Section 171 and heading of Chapter XV of the CGST Rules, 2017. In this regard the Respondents have claimed that the DGAP's understanding that merely because a definition was given by way of an explanation, it would apply retrospectively was completely incorrect. As per the definition, "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax. This amount would be based on determination by this Authority and the report su....
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....re of benefit accrued on account of tax reduction or benefit of ITC. Section 171 mentions "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 is to be taken at the level of an entity/group/company for the entire supplies made by it. Therefore, the benefit of tax reduction has to be passed on at the level of each supply of Stock Keeping Unit (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 is untenable. Further, the above Section mentions "any supply" i.e. each taxable supply made to each recipient thereby clearly indicating that netting off of the benefit of tax reduction by any supplier could not be allowed. A supplier cannot claim that the has passed on more benefits under one tariff heading/HSN Code, than the commensurate benefit which would actually accrue. Each consumer is entitled to receive the benefit of tax reduction on each product purchased by them." On the above submissions of the DGAP the Respondents have sub....
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....ual sale price charged post-rate reduction was higher than the average price while at the same time zeroing (ignoring) cases where the actual sale price charged post-rate reduction was lower. Further, the methodology computed profiteering for SKUs where the amount charged was higher while ignoring the benefit passed on by the Respondents on other SKUs. It did not take into consideration the increased post-supply discounts offered by the Respondents. It also did not take into consideration the increased costs including Customs Duty increase and reduction in refund under the budgetary support scheme. This interpretation of DGAP, presupposed that reduction in the rate of GST should be passed on proportionately at each SKU level even if it meant that the Respondents would suffer loss due to various other factors which might have led to increase in the cost of supply of such products up to, during and after the time of such GST rate reduction. An interpretation and methodology which did not take into consideration all these factors was an erroneous interpretation and was liable to be disregarded. The Respondents have further submitted that the rate of GST on certain products supplied by....
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....uld have been charged by the Respondents for SKUs on which promotion was extended and computing the revised profiteering, including higher benefit passed on: * Computing the benefit passed on by way of higher price reduction on certain SKUs; * Computing the benefit passed on by way of higher price reduction on certain transactions where the actual price charged was lesser than the average price computed by DGAP; * Mapping the normal prices which could have been charged by the Respondents for products with extra quantity (higher Grammage at the same or lower price) in packs and new promotions introduced after reduction in rate of tax, and computing the revised profiteering, including higher benefit passed on; * Price reduction post supply. The Respondents have contended that after adjusting all the above factors in the DGAP's working, the revised profiteered amount came to be negative. In fact, the Respondents have passed on additional benefit of INR 139.99 Crore (PGHP) + INR 7.12 Crore (GIL) (incl. GST) which was more than the benefit which the Respondents were required to pass on. The above amount was excluding the submissions of the Re....
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.... "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." It is mentioned that the word "any" is used before the word "supply" to indicate the benefit of reduction in rate of tax has to be passed on for each and every supply. Further, it is the position of DGAP that word "registered person" has been used under the CGST Act, and it is clear from the word "recipient" (in singular) that the benefit has to be passed on to each and every recipient, who may buy a single SKU also. Thus, the profiteering has to be determined at the SKU-level." In this regard, the Respondents have submitted that Section 171 did not state that the benefit needed to be passed on each and every supply and it was only an interpretation of the DGAP. Further, the argument that the benefit needed to be passed on to a recipient who would buy single SKU also did not support the DGAP's contention that the benefit needed to be determined at the SKU level. The Respondents have further submitted that in the absence of methodology provided to the Respondents, they had adop....
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....nt with the post-rate reduction base prices pre-discount, in certain category of SKUs, the DGAP had inadvertently compared the pre-rate reduction post-discount prices with the post-rate reduction pre-discount prices. The illustration for the same is as follows:- The Respondents have further submitted that to compute profiteering, a comparison could have been made either between A and B (prices pre and post rate reduction, both before discount) as had been done by the DGAP for most SKUs, or between C and D (prices pre and post rate reduction, both after post supply discount), as submitted by the Respondents. However, in respect of certain SKUs, a comparison was made between C and B (i.e. pre-rate reduction post supply discount price and post rate reduction base invoice price which was prior to discount) which was patently incorrect and was an inequitable comparison. It was submitted that if the DGAP's methodology of comparing prices A and B was adopted, it would require correcting the error for these SKUs highlighted by the Respondents, which itself would result in reduction in allegation of profiteering by INR 28.52 crores (PGHP). In this regard, the Respondents have also ....
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....MR after reducing post-supply discount 9,660.96 48 201.27 From the above illustration, the Respondents have submitted that there were 2 prices pre-rate reduction for distributors, viz.: INR 194.31, i.e. the average price pre-rate reduction before deducting post-supply discount, and INR 183.48, i.e. the average price pre-rate reduction after deducting post-supply discount When the DGAP had called for the price of these SKUs, the Respondents had submitted price of INR 183.48 in their submissions dated 29.03.2019, since the Respondents were under the impression that the computation of profiteering for all SKUs would be based on prices after post-supply discount and not prices before post-supply discount. However, on verifying the computation done by the DGAP in his 1^st report dated 05.04.2019, it was observed by the Respondents that the computational methodology followed by the DGAP was to compare prices charged before deducting post-supply discounts. Accordingly, the Respondents had submitted the revised prices (based on prices charged before deducting post supply discount) for these SKUs (INR 194.31 in the above SKU). The Respondents hav....
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....nefit on these SKUs at the earliest. The other alternative way of passing the benefit would have required stopping the existing promotion, discard the existing packing material, printing of new packing material to correspond to a change in price of 8% (to give effect to reduction in rate of tax of 10%) and packing in new packing material. This whole process would have taken a minimum of 3-4 months for launch in the market and also would have led to consumers enjoying a lower benefit (7.8%) as against the continuation of existing higher than 7.8% promotion benefit. Since the schemes were already in existence the Respondents had decided to continue such schemes to pass on the benefit in the best interest of the consumers. The argument that Section 171 contemplated reduction in prices as the only legally permissible method ignored the fact that price reduction by way of extra sales promotion, extra discount, higher grammage, higher combination package etc., was among the various ways of reaching the customers to ultimately pass on the benefit. In fact, higher grammage would result in reduction in prices per Gram. The purpose was to give choice to consumers to calculate the price per G....
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.... extend the consumer promotion schemes was a conscious call taken by the Respondents so that they could pass on the benefit of reduction in rate of GST on a war footing. Despite the measures undertaken by the Respondents, they were being accused of having profiteered. The DGAP has completely ignored the practical business considerations that the Respondents had to take into account while implementing such an unprecedented change in rate of GST for a vast majority of products supplied by the Respondents. The Respondents's decision to pass on the benefit of reduction in GST rate by way of extension of promotion schemes should be considered as one of the methods of passing on the benefit. Even if the higher benefit passed on was not adjusted against other products, no profiteering could be alleged on these products since the promotions were extended to pass on the benefit of GST rate reduction. XI. Submissions on post supply price reductions: Submissions filed by the Respondents on 19.06.2019: The Respondents had submitted before the DGAP that they were offering discounts in the form of post-supply price reduction to various customers as a routine business p....
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.... against Sales Turnover in the Books of P&G. • P&G increased the discounts given to the recipients in the post Nov 15th period vis-å-vis the pre Nov 15th period. The Respondents have also contended that it was their policy that while the price reduction scheme was made known in advance to the recipients, the same was allowed only when the Respondents were assured of the fact that the benefit of such price reduction was passed on further to the trade partners below in the supply chain, after carrying out in house and third-party verification. The Respondents had allocated such amount passed on by way of price reduction against individual line-items of sale in the details of outward taxable supplies furnished by them to the DGAP. The DGAP ought to have considered the value after discount, as it was this amount which the Respondents had actually realized for the sale transaction and the base price on which tax was charged in the invoice was merely a tentative price subject to subsequent adjustments on account of such schemes. This has been illustrated by the Respondents as is given below:- The Respondents have submitted from the above illustration ....
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....iteering by the assessee consequent to reduction in tax rate or grant of excess credit. Discounts, incentives, cash backs, pre or post sales may or may not be allowed under Section 15 to arrive at the assessable value / taxable value but such considerations would not, and should not, apply to calculation of profiteering under Section 171. Any benefit passed on by the assessee in whatever form to the recipients must be taken into consideration regardless of the fact whether such deduction was permissible or not under Section 15 of the CGST Act. The Respondents have further submitted that the price reduction has been given in the monetary form to the recipients on the basis of documents received from the recipients. It was nowhere prescribed that benefit of GST rate reduction should be given on the invoice itself. The benefit could be given subsequent to the supply by way of adjustments in the books of accounts of the recipient and the supplier. In the present case admittedly, the benefit of price reduction had been given subsequent to supply on the basis of invoices/ debit notes issued by the recipients by way of adjustment in the books of account. It also satisfied the condition pu....
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....nt 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 was either invoices issued by their recipients, mentioning the description as "Promotion Services" with HSD Code 998361 or 998366 (Advertising Service) or Debit Notes issued by the recipients. * However, the profiteering has been quantified at the SKU level invoice-wise and documentary evidence establishing the correlation between the taxable value reported in the GST returns and post supply discount given on any particular invoice / SKU has not been established by the Respondents. * The issue was addressed in para-16 of the Report dated 05.04.2019. In this regard, the Respondents have submitted that the value reported in the GSTR-3B Returns was the value determined at the time of issuance of invoice for supply. It did not take into account the post-supply discount provided to customers as the same was provided subsequently through a separate document. The only requirement in terms of Section 171 was to ensure that the benefit was passed on by reducing p....
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.... 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 Service) or Debit Notes issued by the recipients. However, the profiteering has been quantified at the SKU-level invoice-wise and documentary evidence establishing the correlation between the taxable value reported in the GST Returns and post-supply discount given on any particular invoice/SKU has not been established by the Respondents. The issue is already covered in detail in Para-16 of the Report dated 05.04.2019." The Respondents have submitted that the value in Form GSTR1/3B was the value as per Section 15. The post-supply discount may or may not be deductible from the value for the purpose of payment of GST under Section 15, however that did not alter the fact that the benefit has been passed on by the Respondents. Section 171 was independent of Section 15 and non-deductibility of post-supply discount from the value of supply under Section 15 did not mean that the same was not deductible for determining the price charged for the purpose of Section 171....
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.... were sold as such by the Respondents. Being non-creditable in nature, such increased BCD has resulted in increase in cost of such imported products for the Respondents and hence, the Respondents were well within their right to revise prices to pass on such increased Customs Duty to their customers. However, the Respondents did not revise prices and the additional duty burden was absorbed by the Respondents thereby passing on the benefit to the recipients. Therefore, the Respondents had requested the DGAP not to consider these 6 SKUs for determination of alleged profiteering. The Respondents have submitted that additional costs were being incurred by the Respondents due to increased payout of non-creditable BCD on import of such SKUs and hence, the allegation of profiteering on these SKUs was not sustainable. Submissions of the Respondents on DGAP's 2nd report dated 31.01.2020 The DGAP has in his 2nd report dated 31.01.2020 stated that the contention of the Respondents that the base price was increased with increase in the BCD could not be accepted. The increased cost of raw materials/input services has no relevance in the context of GST rate reduction w.e.f. 15.1....
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....P for an Ariel 12 Gm. pack being supplied earlier. The same was done primarily on small sachet packs on which straight price reductions were not possible due to coinage issues. However, there were also some large packs on which benefit has been passed on using such means. The quantum of benefit passed on by such means aggregated to Rs. 105,79,46,321/- (PGHP) and Rs. 36,91,85,863/- excluding the GST. The DGAP has not given any finding on this submission of the Respondents and in effect has not considered this submission of the Respondents. The Respondents have further submitted that the aggregate value of benefit passed on using this method was earlier computed and submitted to DGAP vide letter dated 03.04.2019 based on net price basis under the belief that the DGAP would make comparisons between the net prices of a product (i.e. after considering the effect of post-supply discounts). As the DGAP had rejected the respective discount values, the Respondents had re-submitted their computations for the benefit passed on by way of extension of promotions based on gross price basis which came to Rs. 100,71,57,005/- (PGHP) and Rs. 35,12,63,262 (GIL) excluding the GST. The benefit passed o....
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.... in the line item-wise details of supplies as per columns AN and AO of the computation sheet provided as Annexure-3 to their submissions dated 09.06.2020 and have given effect to the said price in computing the profiteering as well as excess benefit passed on in columns AU and AV respectively. On a perusal of the base price details mapped by the Respondents, it could be seen that the actual selling price of the product was much lower than the base price which the Respondents could have charged. The Respondents have passed on a higher benefit than what was required to be passed on, which should be adjusted against the profiteering. Submissions of the Respondents on DGAP's reply under Rule 133(2A) dated 30.06.2020: The Respondents have also contended that the DGAP in his reply dated 30.06.2020 has stated as follows:- "As mentioned at 'A' above, the profiteered amount has to be passed on each and every supply and to each and every recipient individually, excess benefits passed on certain SKUs by way of increased quantity and new promotions cannot be adjusted against the profiteered amount in respect of other SKUs." The Respondents have submitted tha....
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....arbitrarily selecting period of investigation and alleging profiteering has the effect of restricting the right of the Respondents to do business, a cherished fundamental right guaranteed by the Constitution of India. The Respondents had requested the DGAP to confine the period of investigation to a maximum of three months as during such period the cost of doing business would have changed and the Respondents would have revised the prices based on such cost. It was pertinent to mention that a supplier considered various factors like direct and indirect costs, demand and supply, customer perception, competition, product positioning, legal compliances, profit etc. while determining the price of his goods. It was further submitted that the Respondents were not able to pass on the increased cost to the recipients by way of increase in prices due to adoption of longer period of investigation. It was also submitted that if the period of investigation was beyond 3 months, the effect of increased costs should be taken into account while calculating the alleged profiteering. Pricing of a product was primarily based on expenses incurred and therefore, increase in costs had to be considered. ....
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....re, the Respondents have submitted that the investigation undertaken by the DGAP covering the period from November, 2017 to September, 2018, had the effect of placing unlawful restraint on the fundamental right of the Respondents to carry on their business and was therefore violative of Article 19(1)(g) of the Constitution of India. The Respondents have requested for restricting the period of investigation to 3 months and if the investigation period was to the held beyond 3 months the cost increase should be factored-in for determination of alleged profiteering. Submissions of the Respondents on DGAP's 2nd report dated 31.01.2020: The Respondents have also averred that this Authority vide its order dated 04.10.2019 had directed the DGAP to file his submissions on the issue of considering 10 months period for calculation of the profiteered amount. Accordingly, the DGAP in his report dated 31.01.2020 has specified that the period of investigation has not been prescribed in the CGST Act, 2017 or the corresponding Rules / Notifications or by this Authority. As the rate reduction has happened w.e.f. 15.11.2017 and the complete reference from the Standing Committee to i....
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....y empowered to determine this issue and provide for either a specific time period for which investigation was to be conducted on reasonable basis or provide a set of guidelines to be followed by the DGAP while determining the period of investigation. As provided in Rule 126, this Authority was empowered to determine the methodology and procedure and the DGAP was under the superintendence, direction and control of this Authority, as provided vide the Guidelines dated 04.10.2019 issued by this Authority and hence, sufficient powers should be considered to be available to this Authority to provide for a set of guidelines for determining the period of investigation. This Authority has been interacting with various entities in various sectors and was aware of the way businesses operated, frequent price changes took place and the need for balancing between customer needs and production/development of products, etc. Substantial sectoral information was available from various governmental statistical bodies to analyse a particular sector. The Respondents have also submitted that this Authority has both sufficient information as well as authority to determine the period of investigation tha....
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.... or principle which was to guide it in exercise of the power, it would be affected by the vice of discrimination since it would leave it open to the authority to discriminate between persons and things similarly situated, as was observed by the Hon'ble Supreme Court in the case of Maneka Gandhi v. Union Of India 1978 AIR 597. It was further submitted that the present investigation was initiated pursuant to the interactive sessions which the Respondents had with this Authority in which various information was provided by the Respondents. Based on the said information, this Authority had presumed that a case was made out against the Respondents and it had forwarded the information to the Standing Committee for examination. This act of this Authority suffered from the vice of discrimination, as while the Respondents were called and asked to submit various information, the same was not the case of similarly placed companies. Further, from the information made available in public domain, it was clear that this Authority has neither initiated similar type of investigation nor called for information from similar type of business competitors of the Respondents till date. This disc....
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....nvestigation. The Respondents have requested this Authority to issue guidelines to the DGAP to determine the period of investigation and in the case of the Respondents such period should be restricted to 3 months. XVI. Submissions on issue of "zeroing": Respondent submissions filed on 19.06.2019: The Respondents have submitted that the rate of GST on certain products supplied by them was reduced from 28% to 18% from 15.11.2017. Accordingly, the Respondents had also reduced the rate of GST charged from their customers from 28% to 18%. The provisions of Section 171 were silent on whether such benefit was to be passed on at an entity level or at a taxable person ('GSTIN') level or at SKU level. While the report of DGAP alleged profiteering at SKU level, the Respondents had ensured passing of benefit using various means. The Respondents have also passed on the above said benefit by allowing greater price reductions i.e. more than commensurate to the GST rate reduction on various impacted SKUs. However, while determining alleged profiteering on other impacted SKUs, the DGAP has ignored such excess benefit passed on by the Respondents. Where the Respondents hav....
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....dumping margins and the negative dumping margins was not correct. Thus, the Government of India succeeded before the WTO Appellate Body which held that the positive and negative dumping margins must be taken together and therefore got lower dumping margins for Indian exporters. European Commission accepted the decision and revised dumping margins not only for Bed Linen cases but also for all other cases against India. Accordingly, the Respondents have submitted that the negative price variations (in case of those SKUs where the reduction in prices has been more than what was considered necessary by the DGAP) should also be considered for determining alleged profiteering. XVII. Submissions on the Loss occurred due to reduced fiscal incentive to the Respondents: Submissions of the Respondents filed on 19.06.2019: The Respondents have also submitted that they were having a unit in Baddi, Himachal Pradesh where they were availing the benefit of area-based exemption under the erstwhile Central Excise regime. Under the exemption, the Respondents were not required to pay Central Excise Duty on the goods manufactured in such unit and were also not entitled to ava....
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.... reduced refund aggregating to Rs. 1,53,08,647/-(PGHP) and Rs. 2,29,94,202 (GIL) should be reduced from the alleged profiteering to determine the net impact of the GST rate reduction on the Respondents. Relevant computations for such reduced refund have been provided by the Respondents. Submissions of the Respondents on DGAP's 2nd report dated 31.01.2020: The Respondents have also submitted that the DGAP has further stated that if one went by the logic adopted by the Respondents, 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). In this regard, the Respondents have submitted that the loss in absolute terms alone needed to be considered. Even in relative terms, there was loss to the Respondents which could be explained from the below mentioned illustration which established that reduction in rate of tax has resulted in reduction in the refund in relative terms to the Respondents, as rate of tax on supply of goods was one of the relevant factors for determining the budgetary support to the Respondents:- Particulars Refund pre-rate reduction Refund post-rate reduction Loss in r....
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....t be required to the full extent of 5% and might be only 4.5% (after adjusting for additional budgetary support). In the facts of the present case, there was no increase in the rate of tax and in such a case the provisions of Section 171 were not applicable and thus, the reliance placed by DGAP on an instance of increase in rate of tax to disallow Respondent's submission for adjustment of reduced budgetary support was wholly incorrect. Accordingly, the Respondents have requested to reduce the value of reduced refund aggregating to INR 1,53,08,647/- (PGHP) and INR 2,29,94,202/- (GIL) from the alleged profiteering. XVIII. Submissions on adding GST to the profiteered amount: Assuming, without admitting, that the Respondents have profiteered and GST has been collected thereon and the said GST was to be paid in Consumer Welfare Fund then instead of the Respondents, the Government could transfer the amount equivalent to GST on the profiteered amount to the Consumer Welfare Fund. In this regard, reliance has been placed on the case of R. S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited (1977) 4 SCC 98, wherein the Hon'ble Supreme Court has analysed what the ter....
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.... credit under the Modvat scheme did not form part of the cost of raw material:- "24. We think it is appropriate that the cost of the excisable product for the purposes of assessment of excise duty under Section 4(1)(b) of the Act read with Rule 6 of the Valuation Rules should be reckoned as it would be reckoned by a man of commerce. We think that such realism must inform the meaning that the Courts give to words of a commercial nature, like cost, which are not defined in the statutes which use them. A man of commerce would in our view look at the matter thus : "l paid Rs. 100/- to the seller of the raw material as the price thereof. The seller of the raw material had paid Rs. 10/- as the excise duty thereon. Consequent upon purchasing the raw material and by virtue of the Modvat scheme, I have become entitled to the credit of Rs. 10/- with the excise authorities and can utilise this credit when I pay excise duty on mv finished product. The real cost of the raw material (exclusive of freight, insurance and the like) to me is therefore Rs. 90/-. In reckoning the cost of the final product I would include Rs. 90/- on this account." This. in real terms. is the cost of the raw m....
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....o the recipient an amount equivalent to the amount not passed on. It further provided for deposit of such amount in the Consumer Welfare Fund constituted under Section 57 of CGST Act where the eligible person did not claim return of the amount or where such person was not identifiable. According to the Hon'ble Supreme Court, it was the cardinal rule of interpretation that where a statute provided that a particular thing should be done, it should be done in the manner prescribed and not in any other way as per the law settled in the case of State of Jharkhand v. Ambay Cements 2004 (178) ELT 55 (SC). Similarly, in the case of Tata Chemicals Ltd. v. Commissioner of Customs 2015 (320) ELT 45 (SC) the Hon'ble Supreme Court has held that if the law required that something be done in a particular manner, it must be done in that manner and if not done in that manner has no existence in the eyes of law at all. Rule 133 mandated that any amount held as profiteered should be returned to the recipient wherever such person was identifiable. This Authority could not direct that the profiteered amount should be deposited in the Consumer Welfare Fund if the recipient was identifiable. The recipien....
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....said powers, the Legal Metrology Division of Department of Consumer Affairs has issued a circular dated 04.07.2017 permitting the manufacturers or packers or importers to change the MRP on unsold stock manufactured / packed / imported prior to 1st July, 2017 after inclusion of the increased amount of tax due to GST if any, in addition to the existing MRP for a period of three months w.e.f. from 1st July, 2017 to 30th September, 2017. The Respondents have submitted that Rule 6(3) dealt with affixation of sticker with revised lower MRP without reference to a person who was empowered in this regard. The only condition was that such sticker should not cover the MRP declaration already made by the manufacturer packer. Therefore, it could be said that such sticker could be affixed also by the distributors, dealers or retailers. The law recognized that the product could be anywhere in the distribution channel and all such persons like dealers and retailers could affix sticker to show the reduced MRP. As submitted above, in case of increase in MRP, relaxation was granted to manufacturers, importers and packers by the above said circular dated 04.07.2017 to affix stickers to declare the cha....
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....his regard, the Respondents have submitted that since the DGAP has stated that this issue did not have any bearing on the profiteering determined, the Respondents did not wish to make any further submissions. It has also been submitted that neither the DGAP nor this Authority have been empowered under the Legal Metrology Act or the rules made thereunder 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. XX. Submissions on procedure and methodology: Submissions of the Respondents filed on 19.06.2019: The Respondents have submitted that the CGST Act or the Rules or the 'National Anti-Profiteering Authority Methodology and Procedure, 2018' did not prescribe any procedure and mechanism for determination and calculation of profiteering which amounted to violation of principles of natural justice. The 'Procedure and Methodology' issued on 19.7.2018 by this Authority only provided the procedure pertaining to the investigation and hearing. The most vital element under Section 171 was to determine whether benefit of reduction in t....
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....he Respondents on DGAP's reply under Rule 133(2A) dated 30.06.2020: As regards the clarification of the DGAP that his Report was in line with the legal principles and this methodology of the DGAP has been consistent throughout in all his reports the Respondents have submitted that the methodology of the DGAP of comparing average price pre-rate reduction with the actual prices post rate reduction and computing profiteering for only those line items where the actual price charged was higher (and putting "0" against negative) itself has been a matter of challenge before the High Courts in various matters. The Hon'ble Delhi High Court in W.P.(C) 1780/2020 in the case of M/s. Johnson & Johnson Pvt. Ltd v. Union of India & Ors. has passed an interim order dated 18.02.2020 wherein it has taken a prima facie view that the methodology adopted to consider average of prices pre-rate change and comparing it with specific instances of prices post the change of rates appeared to be incorrect. It has also been submitted that the DGAP has not adduced any evidence to show that the methodology adopted by him in the Respondents's case was recommended by this Authority. In fact, it was only a....
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....that if this Authority determined that a registered person has not passed on the benefit of reduction in rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, it may order the following:- (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. Thus, this Authority could give any/all the above directions to the person who has been held as having violated Section 171. It is also submitted that the order required to be passed by this Authority under Section 171 would determine rights and liabilities of the said registered person with civil and/ penal consequences. However, Rule 133 did not provide for issuance of a show cause notice to the person alleged to have contravened Section 171, before p....
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....st 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 of natural justice which must be read into sub-rule (5) of Rule 9B, wherever called for." In another case of Vasta Bio-Tech Pvt. Ltd. v. Assistant Commr. 2018 (360) ELT 234, the Hon'ble Madras High has Court has held that if a statute was silent about opportunity being granted to the assessee to put forth his case, then principles of natural justice have to be read in the statute. The Court has held as under:- "5. and if the statute is silent, then, principles of natural justice has to be read into the statute, so that the assessee has reasonable opportunity to put forth their case." The Respondents have further relied on the case of Dharampal Satyapal Ltd. v. Dy. Commissioner of C. Ex. 2015 (320) ELT 3 (SC), where the Hon'ble Supreme Court observed that applicability of principles of natural justice was not dependent on any statutory provision and that the principle has to be mandatorily applied irrespective of the fact whether there was any such statutory provision or....
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....uisite 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 the Respondents. The Respondents could not presume the report of the DGAP to be a show cause notice and defend themselves when the same has been prepared based on the directions of this Authority. In view of the above, the Respondents have submitted that even if the CGST Act and the CGST Rules did not provide for issuance of a show cause notice before initiating proceedings under Section 171, this Authority should have issued a show cause notice to the Respondents in terms of the principles of natural justice as held by the courts in the decisions/judgments referred supra. In view of the foregoing, the present proceedings without issuance of a show cause notice were not sustainable. Submissions of the Respondents on DGAP's reply under Rule 133(2A): The Respondents have also claimed that the aforesaid submissions were not dealt with by the DGAP in his 2nd report dated 31.01.2020. Accordingly, the Respondents have r....
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....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 by the Respondents and the Respondents continued to charge a cum-tax price of INR 190.09, it was the Respondents's understanding that they could be charged for profiteering to the extent of INR 14.85 (the difference between actual price of INR 190.09 and ideal price of INR 175.24). However, in no case the allegation of profiteering could exceed INR 14.85, as the same was beyond the scope of Section 171 of the CGST Act. In this regard, the Respondents have submitted that in cases where the cum-tax prices have been increased beyond INR 190.09, the DGAP has considered the amount charged in excess of INR 190.09 also as profiteering under Section 171 which was wholly incorrect and without jurisdiction. An illustration of the same has been provided below:- Period Base price (excl. GST) GST Base Price (incl. GST) Pre-reduction pri....
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....tution 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 case, Respondents have increased the prices of the SKUs supplied by them, due to loss of the input tax credit and other commercial reasons. It has also been contended that this Authority could not examine the increase in prices due to loss of input tax credit and other commercial reasons as the same was not covered under the ambit of Section 171. Wherever this Authority or the DGAP examined the increase in prices undertaken by a supplier, due to reasons other than mentioned in Section 171 and disputed the said increase, they assumed the role of de facto price regulating body which was not the intent of the CGST Act. Further, it was the contention of the DGAP that on perusal of the invoices issued by the distributors/retailers to the ultimate consumers, it was observed that the base pr....
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.... 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 comparing the average of the base prices of the impugned 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 to 30.09 2018. The DGAP has taken the average base prices of the products on the basis of details submitted by the Respondents themselves. The period of only 14 days was taken to compute the average base prices so that it was almost equal to the actual prices. The average base prices have been computed as the Respondents were not selling their products on a single base price and were charging different prices from different buyers. It was also necessary to compare the pre rate reduction prices with the actual post rate reduction prices as the benefit was required to ....
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....ction 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 observed that the method of computation of profiteering on Actual to Actual or Average to Average price would fail to serve the purpose of extending the benefit to each customer on each transaction as enshrined under Section 171 of the CGST Act, 2017. Thus, by taking Average to Actual method, it could be ensured that: i. All transactions were covered for the purpose of calculation/computation of profiteering. ii. Anyone who actually has to incur higher cost got the benefit of rate reductio iii. The Intent and purpose of the Legislature for including Section 171 in the CGST Act, 2017 and subsequently decision to reduce GST rates by sacrificin....
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....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 clearly indicating that netting off of the benefit of tax reduction by any supplier could not be allowed. A supplier could not claim that he has passed on more benefit under one tariff heading/HSN Code and therefore the would pass on less or no benefit across other tariff heading/HSN Code than the commensurate benefit which would actually accrue. Each customer is entitled to receive the benefit of tax reduction on each product purchased by him. It has also been mentioned that the word "any" has been used before the word "Supply" to indicate that the benefit of reduction in rate of tax has been passed on for each and every supply. Further, i....
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....ns 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 correlation between the taxable value reported in the GST Returns and post-supply discount given on any particular invoice/SKU has not been established by the Respondents. Clarifications on profiteering related to CSD/CPC supply: The DGAP has clarified that the Respondents have provided the copies of the agreements executed with the CSD/CPC partners vide e-mails dated 24.10.2019 and also provided the copies of sample invoices for the pre and post reduction period vide their reply dated 09.01.2020. After comparing the invoices provided by the Respondents, it was found that the base prices had remained same for the pre and the ....
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....(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. Accordingly, prior to 15.11.2017, the Respondents were entitled to proportionate refund of CGST or IGST paid through cash ledger. W.e.f. 15.11.2017, the liability of the Respondents to make payment in cash might have got reduced due to reduction in the rate of GST, resulting in reduced refund in absolute terms. However, there was no loss to the Respondents in relative terms as they were still eligible to get the same proportionate refund of the CGST/IGST paid in cash as was available prior to the reduction in the rate of GST. Moreover, such refund of CGST or IGST paid in cash was also a function of and dependent on ....
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....hematical 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 Authority. Clarifications on Profiteered Amount cannot exceed GST Rate Reduction: The DGAP has mentioned that the amount of profiteering has been computed by them as per the provisions of Section 171(1) of CGST Act, 2017. 19. We have carefully considered all the Reports and clarifications filed by the DGAP, the detailed oral and written submissions and the power point presentations of the Respondents and all the other material placed on record and it is revealed that the present investigation has been conducted by the DGAP for violation of the provisions of Section 171 (1) of the CGST Act, 2017 a....
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....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 reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both." 20. Based on the above provisions of Section 171 the following issues are required to be determined in the present proceedings:- (i) Whether the Respondents have passed on the benefit of tax reduction in terms of Section 171 (1) or not? (ii) If not then what is the profiteered amount as per the provisions of Section 171 (2)? (iii) What p....
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....s 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, payment terms applicable to the transaction and the point in time when the sale took place. Therefore, the average pre rate reduction prices of the SKUs were computed by the DGAP, which were being sold by the Respondents, as is evident from Annexure-17 attached with his Report dated 05.04.2019 and Annexure-6 of his Report dated 31.01.2020, on the basis of which commensurate prices post rate reduction were calculated in respect of the same SKUs and compared with the invoice wise post rate reduction actual prices of these SKUs. The average ....
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....on 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 establish that they have been increasing their prices once in six months. They have also submitted that 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 but keeping in view the market stability they did not increase their prices in July, 2017 but they had increased them when rate reduction was implemented w.e.f. 15.11.2017. In this connection it would be relevant to mention that increase in prices is to be decided b....
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....r 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 ordered under Rule 133(4) has to be conducted by the DGAP as per the provisions of Rule 129 as it is the only Rule which prescribes the procedure for conducting investigation by the DGAP and hence the DGAP can submit his Report only as per the provisions of Rule 129(6). Therefore, there is no doubt that the Report submitted by the DGAP falls within the ambit of Rule 133(1) including the Report submitted under Rule 133(4) on which this Authority can pass order within a period of six months. Further, this Authority under Section....
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....ore, 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 law for which they have been constituted. Accordingly, 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 of 6 months from the date of report furnished by the DGAP under Rule 129(6). In this connection it would be relevant to refer to the findings recorded in para supra which amply prove that Para 10 of the Guidelines only c....
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....y 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 clarify the objections raised by the Respondents, this Authority had directed the DGAP to carry out further investigation vide its order dated 04.10.2019. However, the points referred for further investigation were nothing but the Respondents's objections. Since, further investigation under Rule 133(4) stood in distinction from a clarification under Rule 133(2A) and if the DGAP had not provided the clarifications it did not grant power to this Authority to direct further investigation with respect to the same objections. ....
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....ts 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 without the supporting documents/evidence on the basis of which investigation was to be carried out. The DGAP vide his letter dated 12.09.2019 had requested the Standing Committee to supply the supporting documents which were received by him on 08.10.2018 and therefore, it is quite apparent that the DGAP could have entered in to investigation only after 08.10.2018, from which the period of 3 months would have expired on 07.01.2019 under Rule 129(6). However, the DGAP had sought extension of three months from this Autho....
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....iberal 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 principle of law that where a statutory functionary is asked to perform a statutory duty within the time prescribed therefore, the same would be directory and not mandatory. (See Shiveshwar Prasad Sinha v. The District Magistrate of Mongher & Anr. AIR (1966) Patna 144, Nomita Chowdhury v. The State of West Bengal & Ors. (1999) CLJ 21 and Garbari Union Co-operative Agricultural Credit Society Limited & Anr. V. Swapan Kumar Jana & ors. (1997) 1 CHN 189). 49. Furthermore, a provision in a....
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....o 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 average base prices by the Respondents. Accordingly, the SKUs which have been sold below the pre rate reduction average base price cannot be considered as no profiteering has been done in respect of these SKUs. Since the average pre rate-reduction base price is almost equal to the actual pre rate reduction base price as has been explained above the profiteered amount has been correctly computed by the DGAP and the methodology employed to compute it is appropriate, logical, re....
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....mpute 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 observations made in the above case cannot be applied in the present case of the petitioner as no such order has been passed in his case. 40. The Respondents have also contended that a buyer would not be entitled to the benefit of tax reduction in the post rate reduction period if he had not bought that product in the pre rate reduction period as no reference price would be available for the pre rate reduction period in his case. They have further contended that it would als....
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....espect 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 reduction era. Therefore, the above contentions of the Respondents are untenable and the average to actual comparison of base prices is correct and logical. 42. The Respondents have also claimed that comparison of the invoice Nos. 04 & 11 and 05 & 12 mentioned at Sr. No. 4 and 5 of the illustration given by the DGAP in his reply dated 30.06.2020 showed that inspite of there being reduction of Rs. 1/- in the price in the post rate reduction period there was profiteering ....
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....s 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 spite of there being no mention of the other factors in the above provision the registered persons including the present Respondents are leaving no stone unturned to obstruct passing on the benefit of tax reduction on the basis of other factors which find no mention in Section 171 (1) There is no herculean task involved in computing the commensurate price. It only requires that the Respondents should maintain the pre rate reduction base price (price excluding GST) ....
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.... 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 denote that the benefit is to be passed on all prices charged down the entire supply chain and it does not connote tentative or final prices as there is only one definite price which is being charged by the Respondents. The word "any" used in the above section means that the benefit has to be passed on each supply and it does not mean plural supplies. Therefore, all the above interpretations of the Respondents are far-fetched and wrong and hence they cannot be....
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....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 benefit of tax reduction at each SKU level and in case he is denied the benefit on the ground that it is to be passed at the HSN Code or entity level then it would amount to infringement of Section 171 (1) as well as Article 14 of the Constitution. 48. The Respondents have also contended that the interpretation given to Section 171 by the DGAP without considering the 'marginal notes' attached to it and the heading of Chapter XV of CGST Rules was untenable a....
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....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. The Respondents have no discretion to pass on higher benefit on one SKU and not pass on the benefit on another SKU and claim offset on this ground. The above claim of the Respondents is not only against the provisions of Section 171(1) but it is also against Article 14 of the Constitution. 51. The Respondents have further submitted that the DGAP's understanding that merely because a definition of profiteering was given by way of an ....
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....ere 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 Respondents should have themselves fixed and charged after the rate of tax was reduced from 28% to 18%. Such a commensurate price is based on mathematical computations and hence the same cannot be disputed. Further, if there was any increase in the costs the Respondents should have increased their prices before 15.11.2017. The present investigation has been conducted by the DGAP from 15.11.2017 to 30.09.2018 during which the Respondent....
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....tional 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 running before 15.11.2017 is concerned, in this regard it would be relevant to mention that as per the provisions of Section 171(1) the benefit can be passed on only by commensurate reduction in the price and it cannot be passed through promotion schemes. The Respondents usually float such promotion schemes in the ordinary course of their business the main aim of w....
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....nt 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 Basic Customs Duty (BCD) during the period under investigation. However, the Respondents have themselves admitted in their submissions that they had absorbed the impact of increase in the BCD and had not increased their prices on this ground. Since the Respondents have not increased their prices on the increase in BCD, profiteering has....
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....pondents 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 tax would also not have any impact on the margins of the Respondents. Accordingly, an amount of Rs. 1,53,08,647/- (PGHP) and Rs. 2,29,94,202/- Total: Rs. 3,83,02,849/- claimed to have been reduced as per Annexure-15 of the submissions dated 19.06.2019 on the above ground cannot be deducted from the profiteered amount. Hence, the above ....
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....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 was lesser than the average price computed by the DGAP (v) Mapping the normal prices which could have been charged by the Respondents for products with extra quantity (higher grammage at the same or lower price) and new promotions introduced after reduction in rate of tax and computing the revised profiteering, including higher ....
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....eered 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 and hence the amount so computed cannot be allowed to be deducted from the profiteered amount. As mentioned above no benefit can be passed by introducing new promotion schemes, therefore, the mapping of the benefit as per the annexure attached with the submissions dated 19.06.2019 is wrong and hence, no reduction can be permitte....
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....f 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 on, the quantum of denial of these benefits or the profiteered amount has to be computed for which investigation has to be conducted in respect of all such SKUs/units/services by the DGAP as per Rule 129. What would be the 'profiteered amount' has been clearly defined in the explanation attached to Section 171 quoted above. Th....
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....n 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 would not be similar to the other project. Therefore, no set procedure or mathematical methodology can be framed for determining the benefit of additional ITC which has to be passed on to the buyers of the units. Moreover, this Authority under Rule 126 has been empowered to 'determine' Methodology & Procedure and not to 'pre....
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....al, 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 Respondents is not tenable. 64. The Respondents have also submitted a pictorial diagram to claim that to compute profiteering a comparison could have been made either between A and B where prices pre and post rate reduction both before discount were given as Rs. 194.31 and 203.28 or between C and D where prices pre and post rat....
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....ould 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 promotion schemes like higher grammage/extra quantity and price reductions, 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 had issued newspaper advertisements to ensure mass awareness about such schemes to pass on the GST b....
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....ere 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 required to stamp or re-sticker or reprint the MRPs on all the impacted SKUs as per the letter issued by the Ministryof Consumer Affairs, Food and Public Distribution, Govt. of India, dated 16.11.201 which states as under:- "WM-10(31)/2017 Government of India Ministry of Consumer Affairs, Food and Public Di....
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....NR (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 discount scheme was intimated in advance to the distributors who were further passing the discount to the retailers and were raising the amount of discount through invoices to the Respondents based on the sales made by them to the retailers. The Respondent....
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....iven 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 International 1984 (17) ELT 329 (SC) and M/S Moped India Ltd. v. Asst. Collector 1986 (23) ELT 8 (SC) in which it was held that the discounts amounted to reduction in the price. The law settled in the above cases is not applicable in the facts of the present ....
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....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 submitted by the Respondents in their support was either the invoices issued by their distributors which mentioned the description as "Promotion Services" with HSN Code 998361 or "Advertising Services" with HSN Code 998366 or the Debit Notes issued by the....
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....or 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 has resulted in increase in the cost of these products and the Respondents were entitled to revise their prices. However, they had not revised the prices and the additional duty burden was absorbed by them and therefore, these 6 SKUs should n....
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....s 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 of quantity cannot be reduced from the profiteered amount. 76. The Respondents have also pleaded that this Authority in Case No. 20/2018 (Order dated 24.12.2018) in respect of M/s. Hindustan Unilever Limited (HUL) has already held that the....
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.... 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 has been passed on. Hence, the methodology of 'netting off' cannot be applied in the case of tax reduction and the methodology of Zeroing' has to be applied as the customers have to be considered as individual beneficiaries and they can....
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....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. 2018-VlL-02-NAA. Also, in the cases of M/s Hardcastle Restaurants Pvt. Ltd. 2018-VIL-II-NAA and M/s NP Foods 2018-VlL-08-NAA, loss of input tax credit has been factored-in for determination of net profiteering. By allowing reducti....
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.... 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 of cases in which this Authority has passed orders in which period of investigation was from 2 to 5 months. In this regard it may be observed that these cases were reported immediately after the rate reduction was notified on 1....
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....solutely 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 had admitted that the benefit of tax reduction had not been passed w.e.f. 15.11.2017 and therefore, the Standing Committee on Anti-Profiteering vide letter dated 12.07.2018 was asked to take necessary action under Rule 128(....
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.... 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. This would have been more conveniently done in respect of the stock available with the distributors as on 15.11.2017 who would have claimed the excess GST of 28% paid by them as ITC and passed on the benefit down the supply....
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.... 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 Price (MRP) as per the provisions of Rule 2(m). Therefore, unless they had revised their MRPs after the reduction in the rate of tax their distributors would not have been able to fix stickers of revised MRPs. Instead ....
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....les 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. 01.07.2017 and (ii) for passing on the benefit of tax reduction notified w.e.f. 15.11.2017 to implement the anti-profiteering measures prescribed under Section 171(1) and hence this Authority as well as the DGAP ha....
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....ssued 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. Similar show cause notice was again given to the Respondents on 06.02.2019 on the receipt of the second Report from the DGAP after further investigation under Rule 133(4). Both the notices were duly received by th....
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.... 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 show cause notices after receipt of the investigation Reports. The Notice dated 15.04.2019 clearly stated that it was proposed to take action against the Respondents unde....
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....thing 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 their favour through a large number of oral and written submissions. The Respondents have also been heard at length by this Authority. Hence, the above contention of t....
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....ing 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 computation sheets as per column BF of Annexure-3 attached to their submission filed on 09.06.2020, as INR 24.51 Crore, which cannot be reduced from the profite....
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.... 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 State Governments vide Notification No. 41/2017-Central tax (Rate) dated 14.11.2017 w.e.f. 15.11.2017. It is also established that the Respondents have not....
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.... 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 above amount was realized by the Respondents f....
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.... 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 provisions of Section 171 (1) of the ....