TaxTMI 
TaxTMI 
2021 (1) TMI 1009
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.....11.2017, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017. 2. The DGAP has reported that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 02.05.2019, a Notice under Rule 129 of the Rules was issued by the DGAP on 13.05.2019, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in GST rate w.e.f. 15.11.2017 had not been passed on to his recipients by way of a commensurate reduction in prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all documents in support of his reply. Further, the Respondent was afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period 21.05.2019 to 23.05.2019. The Authorized Representative of the Respondent availed of the said opportunity on 22.05.2019. 3. The DGAP had further reported that the period covered in the current investigation was from 15.11.2017 to 30.04.2019 and the time limit to complete the invest....
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....iding the supply price data which highlighted that depending upon food/ beverage items, in question, and keeping in view the factors above, the prices might be dynamic on the same date (for different properties) or for the same property (on different dates). It signified that differentiation in the prices of tickets according to the film, the day and the time of the show as also the location of the property was completely business-driven. Thus in his case, no two supplies were comparable and prices were extremely dynamic and could go up and down depending upon the parameters stated above and any price change, therefore, could not be related to any profiteering by him. d. That the meaning/definition of the term 'profiteering' was given in various scholarly references and that even in terms of Section 171 of the CGST Act, his case did'nt fit the criteria of a case of profiteering. e. That before 15 Nov 2017, the supply of food and beverage by him was liable to GST rate of 18% with full ITC allowance, whereas w.e.f. 15 Nov 2017, his supply of food and beverages had become liable to GST at 5% without ITC, which had a far-reaching impact on his business and profitabili....
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....xes) Tea Georgia Before 11-Nov-17 90.00 18% 76.27 After 18-Nov-17 90.00 5% 85.71 Popcorn Before 11-Nov-17 260.00 18% 220.34 After 18-Nov-17 260.00 5% 247.62 Loss Incurred by the Respondent Table-'C (Amounts in Rs.) Particulars Tea Georgia Popcorn Base Price Before the change in GST rates (A) 76.27 220.34 Loss of ITC 17.21% 17.21% Loss of ITC (Amount) (B) 13.13 37.92 Prices should have been revised to (C = A+B) 89.40 258.26 GST 5% on above (D = 5% of C) 4.47 12.91 The price that should have been charged to the Customer (E = C+D) 93.87 271.17 Actual Price Charged (F) 90.00 260.00 Excess Benefit Passed on the to Customer (E-F) 3.87 11.17 j. That as illustrated above, no incremental profit was made by him, and that the ITC loss parallel to the rate change event - had actually resulted in overall losses to him since he had passed on the benefit to the customers; that that fact that he was making losses was overlooked by the Screening and Standing Committee, thus, the very basis of reference for detailed in....
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....e following documents/information: (a) Copies of GSTR-1 returns for the period July 2017 to April 2019. (b) Copies of GSTR-3B returns for the period July 2017 to April 2019. (c) Copies of sample sale invoices along with sample SKU's at different properties. (d) Copy of the price fluctuation data for different properties. (e) Monthly Summary of Multiplex wise item-wise sales register for the period July 2017 to April 2019 for all the states. (f) Actual ITC loss sheet and excess loss incurred due to benefit passed on. (g) Input Tax Credit register for July 2017 to November 2017. (h) Copy of Sample invoices of ITC availed during November 2017. (i) Copy of Balance Sheets for the FY 2016-17 & 2017-18. (j) Copy of Maharashtra GST Registration. (k) Reconciliation of F&B sales and Non-F&B sales with GST Returns. (I) Details of ITC Reversed on Stock of 14 November 2017 in proportion to expected use in F&B business. 6. The DGAP has further reported that the Respondent has also submitted that he was a listed company and his business data constitutes price sensitive information in ter....
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....the prices of the goods or services as it was to be determined by the supplier and that Section 171 only mandates that any reduction in the rate of the tax or the benefit of ITC which accrues to a supplier must be passed on to the consumers as these were concessions given by the Government and the suppliers were not entitled to appropriate them; that any such benefits must go to the consumers and in case the consumers were not identifiable the amount so collected by the suppliers was required to be deposited in the Consumer Welfare Fund; that he had not examined the cost component included in the base prices but had only factored the denial of ITC to the pre rate reduction base price since Anti-profiteering provisions attempted neither to regulate the prices nor to disregard any business outcomes. 10. It was also stated by the DGAP that the concern over the long period of investigation was frivolous since the period of Investigation has not been prescribed either in the CGST Act. 2017 or in the corresponding Rules/Notifications; that he had received the reference from the Standing Committee on Anti-profiteering recommending a detailed investigation into the instant matter on 02.....
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....consonance with the contents of Rule 129 of the CGST Rules, 2017. 14. The DGAP has also reported that Respondent's contention that no adequate opportunity of representation was given by the State Screening Committee was not found tenable as Rule 133(2) of the CGST Rules, 2017 only bestows the power of granting any interested party the opportunity of being heard only to this Authority and that there was no such power available with the State Screening Committee or Standing Committee; that Rule 133 (2) reads as follows- "An opportunity on hearing shall be granted to the interested parties by the Authority where any request was received in writing from such interested parties". 15. The DGAP has also reported that the Respondent's submissions related to his having opened new units/ properties or supplied new food items and beverages, etc. have been duly considered in the investigation and the profiteering has been computed only for those goods and services which were being supplied in the pre-tax rate reduction period, i.e. during the period 01.07.2017 to 14.11.2017. 16. The DGAP has also reported that the Respondent has argued that he had incurred ITC loss of 17% (appro....
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....er GST rate of 5% had been charged on the increased base prices of the items in the post-tax rate reduction period after 15.11.2017, which established that the tax amount was computed @ 18% before 15.11.2017 and @ 5% w.e.f. 15.11.2017. The charging of the lower tax on a higher (enhanced) base price had resulted in the customers having to pay more than the commensurate price. Thus, while the Respondent's contention during the investigation that the tax amount was computed (c)18% before 15.11.2017 and at a reduced rate of 5% w.e.f. 15.11.2017 was correct, this in no way established that the commensurate benefit of the reduction in the GST rate had been passed on by him to his customers. On the contrary, the fact was that the customers should have paid a lower final price after the GST rate was reduced to 5% but the final item-wise prices remained unchanged for the customers and hence it was clear that the benefit was not passed on to them by the Respondent. DGAP has added that thus the only point for determination was whether the increase in the item-wise base prices was solely on account of denial of the ITC. 20. The DGAP has further reported that the assessment of the impact of ....
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....services. Further. ITC availed on common inputs, input services and capital goods has been taken proportionately, based on the proportion of Respondent's turnover from restaurant service to his total turnover. While determining the net taxable turnover of the Respondent during the period July 2017 to October 2017, the total taxable turnover (only restaurant service) as per SKU wise sales summary duly reconciled with GSTR-1 returns for the period July 2017 to October 2017 had been taken into consideration by the DGAP. Finally, the ratio of ITC to the net taxable turnover had been taken for determining the impact of denial of ITC for the period from July 2017 to October 2017. On this basis, the finding was that ITC amounting to Rs. 8,92,55,966/- was available to the Respondent during the period July 2017 to October 2017 which was approximately 9.70% of the net taxable turnover of restaurant service (Rs. 92,01,72,389/-) supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the said ITC was not available to the Respondent. A summary of the computation of the ratio of ITC to the taxable turnover of the Responden....
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.... ITC in respect of 1434 items (out of a total of 1650 items) sold during the same period. Thus, the conclusion was that in respect of these items, the commensurate benefit of reduction in the rate of tax from 18% to 5% had not been passed on. It was also claimed by the DGAP that there was no profiteering in regard to the remaining items on which there was either no increase in the base prices or the increase in base prices was less or equal to the denial of the input tax credit, or these were new products launched in many states or sold in new Multiplexes which started operation post 15.11.2017. 23. The DGAP has also reported that having established the fact of profiteering, the next step for him, was to quantify the same. In this regard, the methodology adopted could be explained by illustrating the calculation in respect of a specific item i.e., SAMOSA (2PCS.) sold in a particular multiplex i.e. MUMBAI METRO CINEMA, during the period 01.11.2017 to 14.11.2017 (pre-GST rate reduction) was taken by the DGAP and an average base price (after discount) was worked out by dividing the total taxable value by the total quantity of the said item sold by the Respondent during the above pe....
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....e total profiteering, only those items were considered where the increase in base prices was more than what was required to offset the impact of denial of the input tax credit. The DGAP has further reported that based on the aforesaid pre and post-reduction in GST rates, the impact of denial of ITC and the details of item-wise outward supplies for the period 15.11.2017 to 30.04.2019, the amount of net higher sale realization on account of the increase in the base prices of the items supplied by the Respondent, despite the reduction in GST rate from 18% to 5% (with denial of ITC). or in other words, the profiteered amount works out to Rs. 3,85,30,314/-(including GST on the base profiteered amount). 26. The DGAP has also reported the details of the place-wise break up (State or Union Territory) of the total profiteered amount of Rs. 3,85,30,314/- vide Table- 'F' below:- Table- 'F' S.No. Name of State State Code Total Profiteering (Rs.) 1 Andhra Pradesh 37 21,91,020 2 Chhattisgarh 22 2,52,833 3 Delhi 7 16,46,621 4 Goa 30 19,13,126 5 Gujarat 24 21,72,745 6 Haryana 6 11,93,313 7 Jharkhand ....
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....ct Goods only qua the state of Maharashtra; that however, the DGAP has expanded the scope of his investigation to cover all the items sold without the approval of the Standing Committee, a pre-requisite under Rule 129(1) of the CGST Rules that reads as follows:-"Where the Standing Committee is satisfied that there is a prima-facie evidence to show that the supplier has not passed on the benefit of reduction in the 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 shall refer the matter to the Director General of Anti-profiteering or a detailed investigation." c) that in terms of sub-rule (3) of Rule 129 of the Rules, ibid, the notice to be issued by the DGAP before the start of the investigation should inter-alia mention "the description of the goods or services in respect of which the proceedings have been initiated"; that it was a specific requirement under the above Rule to mention, in the notice, the description of the goods or services which is a clear indication that proceedings could be initiated only in respect of those goods which were described in the Notice; that, how....
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.... Lord Roche in the case of Nazir Ahmad v. King Emperor who pronounced as under: "where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all." 32. The Respondent has further submitted that the DGAP in the given scenario was mandated by GST law to follow a pattern of action while carrying out the investigation. In light thereof, without any specific complaint, any evidence, or any description whatsoever in the Notice, the DGAP could not have suo-moto broadened the scope of the investigation to products other than those which had been referred to it either by the Standing Committee or this Authority. It was for this reason that Rule 133 of the CGST Rules had been amended prospectively by insertion of sub-rule (5) vide Notification No. 31/2019 - Central Tax dated 28.06.2019 granting powers to this Authority (and not to the DGAP) which could expand the scope of an investigation. Even in that scenario, this Authority had to give reasons to believe that there was a contravention of the provisions of Section 171 of the CGST Act 2017. The said amendment, which, was prospectively applicable, has been extracted herein below: ....
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....l in nature and,, therefore, the amendment would apply to all cases of infringements whether committed before or after the amendment. In other words, the amendment was retrospective and would apply to even a case where the return was filed before the amendment. The learned counsel, in this connection, also relied on the marginal note saying "procedure"". We are unable to agree with this contention of the learned counsel. The provision relates to the jurisdiction of the Income-tax Officer to deal with penalty proceedings. Before the amendment, the Income-tax Officer could deal with cases falling under section 271(1) (c) only if the minimum penalty imposable did not exceed a sum of Rs. 1,000. Under section 271(1) (c) (iii) the minimum penalty imposable is a sum equal to the amount of income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. In cases where the minimum penalty imposable exceeds the sum of Rs. 1,000, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner. Under the amended provision, the Income-tax Officer is enabled to deal with cases in which the amount of income concealed did not exceed....
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....e done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein." The Respondent had also placed strong reliance on the recent decision of the Hon'ble Delhi Court in the case of Reckitt Benckiser India Private Limited v. UOI wherein the Court directed that no information was required to be submitted to DGAP other than the information pertaining to the goods mentioned in the Application. The relevant extract of the ruling in Reckitt Benckiser (supra) was re-iterated herein below: "The Court is of the view that the Petitioner has made out a prima facie case for grant of limited interim relief. It is directed that, till the next date, it will not be required to furnish information to the DGAP pursuant to the impugned notice other than information pertaining to the Subject Goods. It is, however, clarified that the N....
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....1951 SC 230] "No acquiescence or consent can give a jurisdiction to a court of limited jurisdiction which it does not possess." Kiran Singh v. Chaman Paswan [AIR 1954 SC 340] "A defect of jurisdiction ... strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." Benarsi Silk Palace v. CIT [(1964) 52 ITR 220 (All)] "Jurisdiction could be conferred only by statute and not by consent and acquiescence. Since jurisdiction is conferred upon Income Tax Officer to proceed under Section 34 (1) only if he issues a notice an assessee cannot confer jurisdiction upon him by waiving the requirement of notice because jurisdiction cannot be conferred by consent or acquiescence" 40. The Respondent also submitted that the DGAP had exceeded its jurisdiction and has thus travelled far beyond its power by investigating all products which neither formed a part of the complaint examined by the Standing Committee nor was it mentioned in the Notice issued by the DGAP. The investigation conducted by DGAP was therefore in gross violation of the mandate in terms of Rule 129 of the CGST Rules and went to the very root of the i....
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....ceived the reference from the Standing Committee on Anti-profiteering on 02.05.2019 to investigate the matter, hence the period from 15.11.2017 up to the latest month of receipt of reference was taken up for investigation i.e. from 15.11.2017 to 30.04.2019 which has already been conveyed in para-5 above. 44. The Respondent has further submitted that the forwarding of complaint from the Screening Committee was even beyond the extended period of one month that could have been allowed by this Authority. Further, the use of negative words "not exceeding a further period of one month" under Rule 128 has an inbuilt element of a "mandatory" prescription. It meant that the legislature intended this Authority to condone the delay of only one month and any further condonation would render the phrase "not exceeding a further period of one month" wholly otiose. 45. It has been further argued by the Respondent that where a limitation period was prescribed and the condonation of delay period was also prescribed in law, it was not permissible to further extend or condone the delay. When an extension period was prescribed in law, the delay (beyond the extension) could not be condoned even by....
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....019) 2 SCC 455] 47. The Respondent has averred that the forwarding of application by the Screening Committee was even beyond the extended period of one month that could be allowed only by this Authority. Further, it was apparent that the Screening Committee had exceeded the statutory period of two months (to conclude investigation) by seven times. It was argued by the Respondent that the delay was deliberate because, on account of this unlawful delay, the DGAP was allowed an unfettered free play to expand the period of investigation till April 2019 and arrive at a stratospheric alleged profiteering amount of Rs. 3.85 crores (approx.) A period of limitation prescribed by a Rule could not be diluted, more so when the delay has such grave financial implications & hardships caused to the taxpayer. 48. The Respondent has also submitted that the use of the word "shall" in Rule 128 was indicative of the seriousness which the Screening Committee ought to have attached to the prescribed timeline. The use of the word "shall" in a statute denoted mandatory prescription. The strict requirement of two months was specified to ensure that the taxpayers should not be asked to produce documen....
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....right that has accrued to it in law as a result of his acting vigilantly." 50. The Respondent has also submitted that the Hon'ble Supreme Court, in the case of State of Punjab v. Shreyans Industries Ltd., has held that once the period of limitation expired, the immunity to being subject to assessment sets in and the right of the tax officer to make assessment got extinguished. It was further stated in the case of Shreyans Industries (supra) that once an assessment has already become time-barred, a valuable right accrues in favour of the assessee. The relevant extract from Para 23 of the judgment is quoted below: "If one is to go by the aforesaid dicta, with which we entirely agree, the same shall apply in the instant cases as well. In the context of the Punjab Act, it can be said that extension of time for assessment has the effect of enlarging the period of limitation and, therefore, once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore, there would be no question of extending the time for assessment when the assessment has already become time-barred. A valuable righ....
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.... the present case as unsustainable and liable to be summarily set aside. 54. The Respondent has also submitted that the DGAP had failed to submit the Impugned Report within the time limit as prescribed under the statute. In terms of sub-rule (6) of Rule 129, as it stood on the date of initiation of proceedings by DGAP, required that the investigation report must be submitted within a period of three months from the date of receipt of a reference from the standing committee. The relevant extract is provided below: (6) The Director General of Anti-profiteering shall complete the investigation within a period of three months of the receipt of the reference from the Standing Committee or within such extended period not exceeding a further period of three months for reasons to be recorded in writing as may be allowed by the Authority and, upon completion of the investigation, furnish to the Authority, a report of its findings along with the relevant records. 55. The Respondent has further submitted that the investigation was neither completed by the DGAP nor a corresponding report submitted in the prescribed 3 months period from the date of initiation of proceedings and t....
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....per/ object memorandum, etc. (by whatever name called), laying out the object of the said amendment, which was suggestive of its retrospective application. He further claimed that the enhanced time limit of 6 months could not be made applicable to investigations pending as on the date of such amendment, since the proceedings were initiated under the law before the amendment and hence, would be subjected to conditions/ limitations as existed on that relevant date. 58. The Respondent has contended that notwithstanding the above, and assuming for the mere sake of argument that the 6 months period was available to DGAP in the instant proceedings. it remained a glaring fact that the investigation was completed beyond the stipulated 6 months period too. Hence, the additional period also could not rescue the void character of proceedings as explained above. 59. The Respondent has also submitted that in the given scenario, the only way the Impugned Report would stand the test of law would be when the below conditions were cumulatively satisfied: a. The amended 6 months period was available to the proceedings; and b. The said period was further lawfully extended by a....
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....was invalid and not tenable under the prescribed code. The decision to allow the extension, in the present case, was clearly devoid of legal merits and failed on the principles of natural justice as well and was, therefore, illegal. 62. The Respondent has further contended that the CGST Act and the CGST Rules did not prescribe any procedure or mechanism for calculation of profiteering due to which the DGAP arbitrarily adopted a methodology that best suited its motive. Given the absence of knowledge of the basis on which the DGAP had to act, the Respondent was compelled to accept any procedure adopted by DGAP and the opportunity of full defence to the Respondent was also curtailed. This violateed the principles of natural justice. 63. The Respondent has also submitted that as per Rule 126 of the CGST Rules, it was this Authority that could determine the methodology and the procedure. However, in the present proceedings, the DGAP has used its own methodology and procedure to determine the alleged profiteering amount. This violates the mandate given under Rule 126 since the DGAP did not have the statutory power to determine the methodology and procedure that had to be considered....
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....difficult to implement it because of the difficulty in determining what profit was, what profiteering was, etc." 66. Further, the Respondent has contended that this Authority, in the case of Jubilant Food works Ltd., has itself admitted in Para 47 that no methodology for calculation of profiteered amount could be fixed as parameters required to be taken into account would vary from industry to industry. The stance of this Authority that no methodology guidelines could be prescribed for computing the profiteering amount was untenable and highlighted the lacunae of methodology, which was required to be devised under the law. In this regard, the Respondent has submitted that in the case of anti­dumping levies under the Customs Tariff Act, 1975, there were broad guidelines based on which the extent of dumping and anti­dumping duty was quantified. Even under anti-dumping investigations, the products under consideration were from completely different industries, still, the general principles for the determination of injury and dumping margin were well enshrined under the law and the Rules made thereunder. In this regard, the principles for the determination of injury, evidence....
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.... DGAP was computing the profiteering; that the said denial of hearing by the DGAP was in gross violation of the principles of natural justice; that he places his reliance on the decision of the Hon'ble Supreme Court in the case of Automotive Tyre Manufacturers Association v. Designated Authority, wherein the Directorate General of Anti­dumping and Allied Duties (DGAD) had passed an order without granting personal hearing to the parties and the said order was quashed by the Apex Court on the ground that it was a violation of the principles of natural justice. The relevant extract from the judgment was quoted herein below: "83. The procedure prescribed in the 1995 Rules imposes a duty on the DA to afford to all the parties, who have filed objections and adduced evidence, a personal hearing before taking a final decision in the matter. Even written arguments are no substitute for an oral hearing. A personal hearing enables the authority concerned to watch the demeanour of the witnesses, etc. and also clear up his doubts during the course of the arguments. Moreover, it was also observed in Gullapalli [AIR 1959 SC 308], if one person hears and other decides, then personal h....
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....as been placed on the decision of the Hon'ble Supreme Court in the case of Ajay Hasia and Ors. V. Khalid Mujib Sehravardi and Ors wherein it was inter-alia observed that wherever there was arbitrariness in the State action, whether it was of the legislature or the executive, Article 14 immediately springed into action and struck down such action. The concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and was a golden thread that ran through the whole of the fabric of the Constitution. The Respondent has relied upon the following decisions to submit that the taxing statutes must conform to Article 14 of the Constitution of India: • The State of A.P. and another v. Nalla Raja Reddy and others [AIR 1967 SC 1458] • Kunnathat Thathunni Moopil Nair etc. v. the State of Kerala and another [AIR 1961 SC 552] 74. Based on the above submissions, the Respondent has contended that the absence of any prescribed mechanism to compute "profiteering" coupled with inexplicable prolonged investigation of -18 months when many other investigations were between 2 to 4.5 months clearly manifested arbitrariness and was violative of Article....
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....ort of the DGAP merited to be quashed by this Authority. 77. The Respondent has also submitted that Section 171(1) of the CGST Act, which laid down the framework for anti-profiteering in the context of GST laws, reads as follows- "171. (1) 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.". which implied that no profiteering should be done in the name of GST in an event of (a) reduction in tax rate or (b) benefit of enhanced ITC and that the benefit of the same should be passed on to the recipient of supply by way of commensurate reduction in prices. 78. The Respondent has also submitted that the key aspect to be analyzed was what factual scenario would constitute `profiteering' and has relied on the FAQs published on the CBIC website on the subject matter, which provides as under: "Q1 What is profiteering? Ans. In terms of Section 171 of the CGST Act, 2017, the suppliers of goods and services should pass on the benefit of any reduction in the rate of tax or the benefit of input tax credit to the recipients by way of commensurate r....
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.... price while profiteering is the act of making an unreasonable profit not justified by the corresponding assumption of risk, or by doing so unethically Wiki Diff online 5. Any conduct or practice involving the acquisition of excessive profits Mount vs. Welsh 81. The Respondent has further argued that the above meanings/ definitions/ connotations, read together with the FAQ (supra), suggest that profiteering could be said to have been done only if there has been a willful lack of fairness, i.e. either when any incremental margins or profits were made in comparison to the base scenario with similar facts and circumstances or the incremental profits were not derivatives of action that conformed to the established business practices and/ or pricing trends; that a bare reading of the aforementioned definitions suggested that profiteering could be alleged only when a person made excessive. unreasonable, or exorbitant profits and that the mere act of earning profits has not profiteering; that his case was not one where any exorbitant or unreasonable profits were made unlawfully and hence it could be said that he had profiteered. 82. The Respondent also reitera....
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....ances and uniqueness of his case. 85. The Respondent has also reiterated his submissions made before the DGAP that the supply price data depending upon food/ beverage items, in question, and keeping in view the factors above; the prices could be dynamic on the same date (for different properties) or for the same property (on different dates). It signified differentiation by the film, the day and time of the show, the location of the property etc. 86. The Respondent has also reiterated his submission made before the DGAP that in the present case, no two supplies were comparable and prices were extremely dynamic and could go up and down depending upon the parameters stated above and any price change, therefore, could not lead to any profiteering by the Respondent. 87. Further, the Respondent has reiterated his submission made before the DGAP that it was proven beyond doubt that the dynamic pricing (and frequent price changes) was a natural business outcome of the industry in which the Respondent operated, implying that prices of any given two or more instances were rendered incomparable to the said fact itself. 88. The Respondent has also reiterated his other submissions ....
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....bitrarily. 90. The Respondent has reiterated that the provisions of Section 171 of the CGST Act could restrict the right of the Respondent to increase prices in the normal course of business for such a prolonged period and that the DGAP has assumed that the powers under Chapter XV of the CGST Rules. were akin to price control mechanism and has sought to impinge on his fundamental right to decide the selling price of his items/ goods. 91. The Respondent has also reiterated his submission that there were no guidelines regarding the period for which further prices could or could not be revised, but the DGAP has stretched the investigation to nearly 1.5 years after the reduction of tax rate w.e.f. 15.11.2017, which was inexplicable; that the Impugned Report was silent about till when the increase in prices undertaken by the Respondent would be considered as profiteering. In the absence of any period of limitation, it would imply that any increase in prices by Respondent would be considered as profiteering till the time he is in business. It meant that the Respondent was bound by the Authorities in taking commercial decisions qua the pricing of the product even if it had valid rea....
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....,087,992 Taxes - 5% C 58,004,400 Total (a) D = B + C 1,218,092,392 Erstwhile tax rate E 18% Re-computed base price F = D/(1+E) 1,032,281,688 ITC loss as % of pre-rate change prices A / F 13.88% 94. Referring to the above Chart, the Respondent has contended that the increase in the base prices of the items supplied by him was not enough to offset the loss of ITC, since the loss of ITC was 12.35% whereas the base prices had increased by 11.01% and hence his case was not a case of profiteering. 95. It was also submitted by the Respondent that the actual proportion of ITC to total turnover in his case was significantly different from that adopted by the DGAP; that in Para 27 of his Report, the DGAP has applied an arbitrary amount of ITC in the computation; that he wished to make the following contentions to dispute the DGAP's computation:- a. Adoption of a period of 4 months from July to October 2017 to compute the average base prices in the pre-tax-rate reduction period - The adoption of the said period was arbitrary and without any logic. The impugned Report did not provide any rationale for such an approach. ....
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....he ITC availed by the Respondent from July 2017 to October 2017. This was conceptually illogical and biased action of the DGAP to merely give effect to its motive to determine as high profiteering as may be possible notwithstanding the merits of its approach. The Respondent has submitted that if the DGAP wished to persist with the ITC loss % computed for the July-October 2017 period, it would be relevant to ensure that data so adopted/ considered was free from any sampling errors. The Respondent has also averred that the key aspect in the present case was that there could be a timing difference in the booking of expenses and hence, an automatic timing difference in availing the corresponding ITC too. In Respondent's case, ITC on several invoices pertaining to the months of July-October 2017 was availed in subsequent periods. To make the ITC loss computation comprehensive and free of any sampling errors, it would be prudent to consider the ITC qua actual purchases in a given period irrespective of the month/ period of its availment. The Respondent has submitted the computation of ITC loss thus, updated as is detailed in the Chart below:- Amounts (INR) Particulars Key ITC....
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.... the rate change event. It was further submitted by the Respondent that such an inconsistent approach in data adoption was neither warranted nor tenable. Accordingly, the DGAP should have considered ITC only of October 2017 (i.e. the month immediately preceding the rate change event). From data quoted within the impugned Report itself, it followed that ITC - Turnover percentage for October 2017 was pegged at 10.49%, which should have been considered for the computation since such an approach would not just present consistency in action but would also be a good measure to leave aside the data that has the potential of abnormality. 102. It was also submitted by the Respondent that since the investigation was being done post-facto rather than on a live basis, one should actually look at actual ITC loss suffered by the Respondent, the data of which was available on record & summary has been presented below. The ITC loss percentage based upon actual data post the rate change event could alone be the most authentic basis for the present computation of alleged profiteering since it neither averaged/ nor projectioned/ nor has any inbuilt assumptions. It represented actual financial loss....
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....n lends force to the construction that "collected" means "collected and kept as his" by the trader." 106. Citing the above decision, the Respondent has stated that the amount of GST collected from the customers was a liability of tax (reflected under the head of 'Liabilities' in the Balance Sheet) which was subsequently deposited with the Government. The accounting treatment accorded to account for the applicable GST was as depicted below: Transaction Journal Entry Amount (Rs.) Amount (RS.) Outward Sales - Creation of GST Liability Customer A/c.......................... Dr. 105 To Sales Outward.....................................Cr. 100 To IGST Tax Payable........................Cr. 5 Payment of GST Liability to Government IGST Tax Payable .......................................Dr. 5 To Bank.........................Cr. 5 107. The Respondent has also submitted that if the above relief was upheld, the computation ....
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....supplies made by it in respect of restaurant service (SAC: 9963) and not limited to a particular item provided by it. Thus the DGAP had not exceeded its jurisdiction by investigating whether the benefit of ITC had been passed on all the supplies made by the Respondent. Further, with regard to Respondent's reference of the judgment of the Hon'ble High Court of Delhi in the case of M/s Reckitt Benckiser India Private Limited v. UOI in WP (C) 7743/2019. wherein the Hon'ble High Court of Delhi granted relief that only the inquiry as far as the concerned product would continue till final disposal of the petition, it was noted that there is no such stay/directions issued in the present proceedings. Further, it was an interim relief only and no final judgment has been passed and hence its ratio was not applicable in this case. b) Para- 'B': Examination of over 14 months by the Screening Committee is in clear violation of Rule 128 of the CGST, Rules, 2017. Clarification by DGAP: He had received the reference from the Standing Committee on Anti-profiteering on 02.05.2019 with a remark that the complaint had been forwarded to the DGAP for carrying out the investigation. The....
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....e. It was further submitted that the Methodology and Procedure to be adopted for the determination of profiteering might vary from case to case, depending on the facts and circumstances of the case as well as the nature of goods or services supplied. No fixed Methodology could be prescribed to determine profiteering in all cases. Moreover, the Authority could only determine the Methodology and not prescribe it as per the above R le. Further, regarding the contention of the Respondent that different period of investigation was taken up in different cases the reason has already been explained that since the report was received from Standing Committee in May 2019, the review was done until April 2019. The same has also been mentioned in para-17 of this office report dated 31.01.2020 which is reproduced below: "17. It is also noted that the Respondent raised concern over period of investigation. In this regard, it is submitted that the period of Investigation has been prescribed neither in the Central Goods and Services Tax Act, 2017 nor in the corresponding Rules/Notifications. This office has received the reference from the Standing Committee on Anti-profiteering on 02.05.20....
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....tates or sold in new Multiplex started operation post 15.11.2017." f) Para- 'F': Anti-profiteering provision, if at all, can be triggered only in instances where an unlawful manner of business is established. Clarification by DGAP: - DGAP in its report dated 31.01.2020 has nowhere questioned lawful profits made by the Respondent. Only those transactions have been taken up where the prices post rate cut have been increased more than the impact of ITC loss suffered by it. Further, an explanation has already been given in the reply supra. g) Para- 'G': Adopting 18 months as the period of investigation to determine alleged profiteering acts as a price control mechanism and is clearly violative of the Right to trade. Clarification by DGAP: - The objection raised by the Respondent has been duly redressed in para-16 of this office report dated 31.01.2020 which is reproduced below: "16. Further, the contention of the Respondent that anti-profiteering provisions attempt to regulate the prices and disregard business outcomes & their impact on prices is not correct. Directorate General of Anti-profiteering has not attempted to examine or question t....
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....red to reverse an amount of Rs. 1,35,90,052/- on the closing stock of input and capital goods as on 14.11.2017. However, the correctness and completeness of the computation cannot be ascertained and therefore it cannot be relied upon. 2) The invoice-wise outward taxable turnover in November 2017 was not provided by the Respondent to compute taxable turnover for the period 01.11.2017 to 14.11.2017. 3) On several invoices, the credit was taken between 01.11.2017 to 14.11.2017 but they pertained to services availed during the whole month of November 2017. The details of sample invoices and observations are mentioned in Annex-20." i) Para- 'I': The computation of alleged profiteering hastily overlooks the correct ITC loss & includes other arbitrary additions. Clarification by DGAP:- With regard to Respondent's submission that ITC against invoices of July to October, 2017 period, which were booked in later periods also be taken into consideration, it was submitted that Section 16(2) the Central Goods and Services Tax Act, 2017 prescribes certain conditions for entitlement of ITC which are as follows:- i. Respondent is in possession of a tax i....
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....uction in price. Price includes both, the base price and the tax paid on it. If any supplier has charged more tax from the recipients, the aforesaid statutory provisions would require that such amount be refunded to the eligible recipients or deposited in the Consumer Welfare Fun regardless of whether such extra tax collected from the recipient has been deposited in the Government account or not. Besides, any extra tax returned to the recipients by the supplier by issuing credit notes could be declared in the return filed by such supplier, and his tax liability would stand adjusted to that extent in terms of Section 34 of the CGST Act, 2017. Therefore, the option was always open to the Respondent to return the tax amount to the recipients by issuing credit notes and adjusting his tax liability for the subsequent period to that extent. 111. The DGAP's clarifications dated 23.03.2020 were supplied to the Respondent vide this Authority's Order dated 01.06.2020. In response, the Respondent vide his letter dated 21.07.2020 requested time to file his rejoinder against the clarifications dated 23.03.2020 filed by the DGAP. The above request was allowed by this Authority and the Respond....
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.... not have been required. 112.5 That the legal position as demonstrated by him in relevant context had been duly buttressed and strengthened by the available jurisprudence none of which has been disproved by the DGAP. It was a settled position of law, that case laws quoted by the taxpayer if not properly distinguished then, such action amount to tacit acceptance of the taxpayer's connected arguments. In the present case, the judicial precedents submitted by him had been completely overlooked despite being placed on record, leave alone distinguishing the same. This Authority may, accordingly, consider these legal aspects before passing any final order in the present matter to avoid any futile and long-lasting litigation; that the DGAP had itself submitted that further comments could be sought from the Screening Committee on the matter. This statement itself attested DGAP's acceptance of futile delay in procedure undertaken by the Screening Committee. Given that the statutory prescription had been breached in the said case, the reference by the Standing Committee itself was illegal, and hence, the proceedings ought to be quashed on that basis alone; that the statutory limitation pe....
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....ich was duly adhere to in the initial investigation), there was no such timeline for the examination of the claims as per the directions of this Authority and for the first time, vide Rule 133 (5) of the CGST Rules, 2017, introduced w.e.f 28.06.2019 it has been stated that "any investigation or enquiry carried out on the direction of the NAA shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry". He submitted that since Rule 133 (5) of the Central Goods & Services Tax Rules, 2017 was introduced with prospective effect from 28.06.2019 it had no bearing on the ongoing investigation. 112.10 Further, it was submitted by the Respondent that the approach of the DGAP was a grave miscarriage of justice since it has applied different yardsticks and calculations in different cases as per his convenience. This Authority must take due cognizance of the inconsistencies in DGAP's conduct across different matters that the impugned Report breached the law of limitation and was, therefore, null & void. He also submitted that no opportunity of hearing was granted to him while allowing the DGAP....
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.... submitted that the computation of ITC loss percentage should be based on actual numbers as reported by the Respondent in the periodic GST returns including reversal of ITC on closing stock of goods as of 14.11.2017; rather than on any hypothetical basis, as done by the DGAP. e. It was further submitted by the Respondent that the bifurcation of ITC availed during July 2017 to October 2017 between Food & Beverages and other businesses, had been done on frivolous basis rather than considering the actual data. Due to this error, the eligible ITC percentage was determined to be lower than the authentic figure of 11.25%. 115. Further, the Respondent has submitted that the ITC reversed on closing stock of goods as of 14.11.2017 was reported in the GSTR-3B return filed for the month of May 2019. The Respondent had enclosed a certificate issued by an independent Chartered Accountant certifying the amount of ITC reversed on closing stock of goods as of 14.11.2017 and disclosure thereof in the GST returns. The Respondent had also submitted that the provisions related to payment of GST on the supply of services were governed by Section 13 i.e. time of supply of services. It provid....
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....hence, the results so obtained were just & reasonable. 119. Further, the Respondent has placed reliance on the decision of Hon'ble Chennai Tribunal in the case of Same Duetz-Fahr India Pvt. Ltd., wherein it was upheld that the eligibility to avail ITC was with reference to the date of receipt of inputs in the factory and subsequent exemption granted to the final product shall not impair such right. The Tribunal further said that the denial of ITC on inputs reaching the factory after the prescribed date was possible, however, eligibility to avail ITC on inputs received before the exemption was not hampered and that such credit could be availed at a later date too. The relevant part is extracted as under: Therefore, the right vested on the appellant to get credit on the input came into its factory before 9-7-2004 remain unimpaired. Deniability of Cenvat credit on inputs reaching the factory after 9-7-2004 may be possible. Law isalso well settled in Dai lchi Karkaria Ltd., that there is no provision in the rule to recover Cenvat credit in the event the goods manufactured prior to a cutoff date are cleared at a subsequent date. The Cenvat credit earned being permitted to be....
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.... its business. The Cinema exhibition sector too had borne the brunt of the pandemic. While the sector was among the first businesses to get impacted due to a country-wide lockdown, it was amply clear now that it would be among the last ones to be allowed to reopen for operations. The Respondent has been already under lockdown for the last 5 months now, and despite unlock 3 already announced, he was still shut with no clarity on the resumption of operations. If that was not enough, the apprehensions in the minds of consumers, which started impacting our revenues weeks before the lockdown, would remain prevalent for a longer time, even after he reopened. The list of challenges did not end here. Producers of those movies which would supposedly have helped him garner huge Box Office revenues had started opting for direct release on digital platforms. This trend was potentially causing grave damage to the cinematic value chain and his potential revenue prospects. The Respondent had further contended that the kind of headwinds, which its premier venture, INOX Leisure Ltd. was facing, coupled with a ZERO revenue stretch of more than 160 days now, has already challenged his strong business....
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.... a. Respondent is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; b. Respondent has received the goods or services or both. c. subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and d. Respondent has furnished the return under section 39: Further, with effect from 15.11.2017, Respondent was not allowed to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, Therefore, in terms of provisions of Section 16(2)(a) Respondent was not eligible to take ITC w.e.f. 15.11.2017 on the strength of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from ITC availment. As Respondent has received the taxable invoices post 15.11.2017 when he was ineligible to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore the same cannot be considered for computation of denial of Input Tax Cre....
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....e Turnover as per SKU Wise Sale Register (J) 21,65,99,800 24,03,35,295 21,27,81,452 25,04,55,842 92,01,72,389 Total Turnover other than restaurant service (K)= (I) - (J) 72,07,86,672 84,43,86,507 79,98,60,105 84,57,18,863 3,21,07,52,147 Proportionate ITC availed towards restaurant Service (L)= (H*J/1) 6,02,25,143 Total ITC availed towards Restaurant Service (M) = (C+D+L) 9,40,64,163 Net Outward Taxable Turnover for the period July, 2017 to October, 2017 (N) = (J) 92,01,72,389 Ratio of Input Tax Credit to Net Outward Taxable Turnover (0)= (M/N) 10.22% (III) Further with regards to the total profiteering, only those items where the increase in base price is more than what is required to offset the impact of denial of input tax credit, have been considered. On the basis of the pre and post reduction in GST rates, the impact of denial of input tax credit and the details of outward supplies (other than zero rated, nil rated and exempted supplies) during the period 15.11.2017 to 30.04.2019, as per the item wise sales registers, the amount of net higher sale realization due....
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....on; the investigation being time barred; Lacunae in procedures and arbitrary methodology of computation of profiteering amounts; etc The Respondent further submitted that regarding ITC allowance the DGAP has partially acceded to his submissions/ argument on the manner of computation of ITC loss %. However the DGAP again failed to be set out a legal basis for his new approach. The DGAP has once again erred in its approach by only partially accepting Respondent's claim regarding ITC loss (%). Such approach, of rejecting the balance claim, is devoid of legal merits and ought to be set aside. He also reiterated his earlier submissions regarding ITC loss (%) which are as follow:- a. ITC eligibility on procurement is determined qua the outward supplies for which such procurements has been used. Procurements vide July to October 2017 invoices were used for outward supplies in the same period and not thereafter b. The right to avail ITC arises on the date of receipt of supplies. The limitation period for actual availment (once the right is established) is a statutory prescription. c. For July to October 2017 invoices, the right to avail ITC thereupon aro....
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.... of investigation to determine alleged profiteering acts as a price control mechanism and is clearly violative of the right to trade. 8. The loss on account of its disallowance is higher than the revision in prices. 9. Incorrect addition of 5% GST to the alleged profiteering amount. 10. Proceedings/Notice to be kept in abeyance pending finality of various petitions 127. We have carefully considered all the Reports furnished by the DGAP, the submissions made by the Respondent, and the other material placed on record. On examining the various submission we find that the following issues need to be addressed:- (a)Whether the Respondent has passed on the commensurate benefit of reduction in the rate of tax to his customers? (b)Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent? 128. It is revealed from the record that the Respondent has been operating a total of 133 multiplexes in 18 states and dealing with 1650 items while supplying restaurant services after 15.11.2017. It is also revealed from the plain reading of Section 171 (1) of the CGST Act, 2017 that it deals with two situa....
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.... (c) On several invoices, the credit was taken between 01.11.2017 to 14.11.2017 but it pertained to services availed during the whole month of November 2017. Accordingly, the ratio of ITC to the net taxable turnover has been computed for determining the impact of denial of ITC, by taking in to consideration the ITC and the turnover which was available/obtained by the Respondent till 31.10.2017. As per the case record, ITC amounting to 8,92,55,966/- was available to the Respondent during the period from July 2017 to October 2017 which was approximately 9.70% of the net taxable turnover of the restaurant service amounting to 92,01,72,389/- supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the said ITC was not available to the Respondent. 131. It is further revealed from the analysis of the details of item-wise outward taxable supplies made during the period from 15.11.2017 to 31.03.2018 that the Respondent had increased the base prices of the items supplied as a part of restaurant service to make up for the denial of ITC post GST rate reduction. The pre and post GST rate reduction prices of the....
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....f ITC and failed to consider ITC loss booked between 15.11.2017 to 31.03.2018 and accordingly calculated the loss of ITC as 9.70% which should have been 13.88%. Further the DGAP vide its supplementary Report dated 08.10.2020 has submitted that he had inadvertently not considered the ITC availed during the period 01-14 Nov 2017, pertaining to invoices issued from July 2017 to Oct 2017 and hence accepted the revised ITC loss as 10.22% instead of 9.70%. Further the Respondent's contention of considering actual ITC loss data for the period 15.11.2017 to 31.03.2018 was not tenable as the same could only be computed after the end of period i.e. on or after April, 2018 which could not be factored in on the eve of GST rate reduction i.e. on 15.11.2017. The DGAP has computed the input tax credit as a percentage of the total taxable turnover for the period July, 2017 to October, 2017. Further we agree with the DGAP that ITC against invoices of July to Oct., 2017 period, which were booked in later periods could not be considered as Section 16 (2) the Central Goods and Services Tax Act, 2017 prescribed certain conditions for entitlement of ITC which are: (a) Respondent is in possessio....
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.... November 2017 and also excluding the amount of ITC pertaining to the period before July 2017 which was availed during the period from July 2017 to October 2017 as per GSTR-3B returns. Accordingly, the ratio of Input Tax Credit to Net Outward Taxable Turnover was determined as 10.22% as per Table- 'D (revised)' as is given below: Table-'D (Revised)' Particulars July-2017 August-2017 September- 2017 October-2017 Total ITC Availed as per GSTR-3B (A) 5,10,45,836 8,64,73,023 12,02,04,147 12,48,44,525 38,25,67,531 ITC availed Exclusively on Non Restaurant Services (B) 32,21,451 1,12,90.601 3,40,34,664 4,17,10,519 9,02,57,234 ITC availed Exclusively on Restaurant Services (C) 40,14,836 76.62,990 1,02,80,402 94,28,274 3,13,86,503 Add: ITC Exclusively on Restaurant Services of July, 2017 to October, 2017 availed in the month of November, 2017 GSTR-3B (Annex- 23) (D) 33,227 64,258 1,50,217 22,04,815 24,....
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....ase in the base price of the service, despite the reduction in GST rate from 18% to 5% (with denial of ITC) or in other words, the revised profiteered amount comes to Rs. 3,10,56,939/- (including GST on the base profiteered amount). The details of the computation are given in Annexure-25 (Confidential) of the DGAP Report. The place (State or Union Territory) of the supply-wise break-up of the total profiteered amount of Rs. 3,10,56,939/- is furnished in Table- `F (revised)' below: Table- `F (Revised)' S.No. Name of State State Code Total Profiteering (Rs.) 1 Andhra Pradesh 37 17,66,048 2 Chhattisgarh 22 2,03,793 3 Delhi 7 13,27,241 4 Goa 30 15,42,054 5 Gujarat 24 17,51,318 6 Haryana 6 9,61,857 7 Jharkhand 20 3,99,941 8 Karnataka 29 25,00,847 9 Kerala 32 2,10,867 10 Madhya Pradesh 23 5,77,855 11 Maharashtra 27 79,96,518 12 Orissa 21 7,91,684 13 Punjab 3 4,96,972 14 Rajasthan 8 19,21,980 15 Tamil Nadu 33 16,70,255 16 Telangana ....
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....rliament and all the State Legislatures and of the GST Council which is a constitutional body established under 101st Amendment of the Constitution and also has the approval of the Central Government and the State Governments. There is no provision in the above Act or the Rules which provides that the investigation shall be limited to the products against which complaint has been received. On the contrary, every product on which the rate of tax has been reduced is required to be investigated by the DGAP and report submitted to this Authority to determine whether the above benefits have been passed on as per the provisions of Section 171 of the above Act. Moreover, Section 171 (2) of the above Act empowers this Authority to examine all such cases in which the benefit of tax and ITC is required to be passed on. Since the account of ITC is kept for all the products in one common ledger/Register the same cannot be apportioned product-wise hence, all the products being supplied by the Respondent are required to be investigated to determine whether the benefit of tax reduction after duly considering the denial of ITC has been passed on or not. Rule 133 (5) is a mere clarification of the ....
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....o the DGAP to investigate the case was extended to 'Six months' in place of 'three months' earlier which could be extended by a further period of three months (total nine months) by this Authority. After the expiry of six months, necessary extension of three months was duly granted by this Authority which has been clearly mentioned in para-6 of the DGAP report dated 31.01.2020. Thus, the submission of the Respondent that the report of the DGAP is time-barred is bereft of facts. 138. The Respondent has further submitted that the CGST is a substantive law in nature and substantive law could not be retrospectively amended. He also placed reliance on the cases of Purbanchal Cables and Conductors Pvt. Ltd. v. Assam State Electricity Board and Continental Commercial Corporation v. ITO Supra. However the above mentioned cases are of no assistance to the Respondent as the Notification No. 31/2019- Central Tax dated 28.06.2019 has come into force with immediate effect for the pending proceedings and was not retrospectively implemented. The Respondent submitted that the period of limitation and the condonation period when statutorily prescribed has to be strictly adhered to and cannot be ....
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....s case. 140. It was further contended by the Respondent that no methodology was prescribed to compute profiteering which has led to an arbitrary exercise of powers by the DGAP. The above contention of the Respondent is frivolous as the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and ITC or computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that "Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." 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 the benefit of additional ITC the same have to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their tax revenue. It also provides that the above benefits are to be passed on any supply i.e. on each Stock Keeping Unit (SKU) of ea....
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....ation of the profiteered amount is also a mathematical exercise that can be done by any person who has elementary knowledge of accounts and mathematics. However, to further explain the legislative intent behind the above provision, this Authority has been authorized to determine the 'Procedure and Methodology' which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. 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 installments, stage of completion of the project, rates of taxes pre and post GST implementation, amount of CENVAT and ITC availed/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....
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....rs as Section 171 provides a clear cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount. Therefore, the above plea of the Respondent is wrong, and hence, it cannot be accepted. 141. Further The Respondent has placed reliance on the decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise and Customs Kerala v. Larsen and Toubro Limited supra wherein it has been held that in the absence of machinery provisions for computation of taxable value, the levy of tax would become non-existent. Reliance was also placed on the cases of State of Uttar Pradesh v. Singhara Singh, State of Jharkhand v. Ambay Cements, Petroleum and Natural Gas Regulatory Board v. Indraprastha Gas Limited & Ors and Commissioner of Income Tax, Bangalore v. B. C. Srinivasa Shetty supra. However, the above quoted cases are not being followed as the facts of the present case are different from the above-quoted cases. The Respondent has failed to understand that Section 171 is not a charging section and anti-profiteering provisions do not levy any tax. Section 171 (1) provides for only passing on the benefit of tax reduction or additional ITC by a ....
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....e Respondent. We further observe that had the Respondent passed on the benefit before 31.03.2019, he would have been investigated only till that date. The Respondent has failed to cite any ground due to which the profiteered amount should be computed till March 2018 only. Therefore, the period of investigation from 15.11.2017 to 30.04.2019 has been rightly taken by the DGAP for computation of the profiteered amount. 145. The Respondent has also argued that the right to trade was a fundamental right guaranteed under Article 19 (1) (g) of the Constitution which included the right to determine prices that could not be taken away without any explicit authority under the law. Therefore, this form of price control was a violation of Article 19 (1) (g). In this connection, it would be relevant to mention that the Respondent has full right to fix his prices under Article 19 (1) (g) of the Constitution but he has no right to appropriate the benefit of tax reduction under the garb of the above right. The DGAP has not acted in any way as a price controlling authority as it does not have the mandate to do so. Under Section 171 read with Rule 129 of the above Rules, the DGAP has only been ma....
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.... not sufficient to compensate the loss of denial of ITC which has been rightly computed as 10.22%. The Respondent was to maintain the base price of the product which he was charging as on 14.11.2017 and then add the amount on account of denial of ITC and charge GST @5% w.e.f. 15.11.2017. Instead of doing that he has raised his prices by adding more than denial of ITC as is evident from the above discussion. It is also clear from the above narration that the Respondent has increased the base prices of 1434 items more than the loss on account of ITC disallowance. Further, with effect from 15.11.2017, Respondent was not allowed to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore, in terms of provisions of Section 16(2)(a) Respondent was not eligible to avail ITC w.e.f. 15.11.2017 on the strength of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from ITC availment. As Respondent has received the taxable invoices post 15.11.2017 when he was ineligible to avail ITC in terms of Notification No. 46/2017 Central Tax (Rate) dated 14.11.2017, therefore the same cannot be considered for computation of denia....
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....escribed period. Therefore, the above contention raised by the Respondent is not sustainable. 149. Based on the above facts the profiteered amount is determined as Rs. 3,10,56,9391- as has been revised vide the DGAP's Supplementary Report dated 08.10.2020. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent is directed to deposit an amount of Rs. 3,10,56,939/- in two equal parts of Rs. 1,55,28,470/- each in the Central Consumer Welfare Fund and the State Consumer Welfare Funds as mentioned in the Table 'F' Revised, as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The above amount of Rs. 3,10,56,939/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned CGST/SGST Commissioner. 150. It is evident from the above na....