TaxTMI 
TaxTMI 
2022 (5) TMI 691
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....ng in respect of the supply of 04 goods namely Anutone Serge Astral Lay-in Aluminium Unperforated Aquila 595*595*0.6mm, Anutone Serge Astral Lay-in Aluminium Unperforated Aquila 1200* 1200*0.6mm, Anutone Serge Astral Lay-in Aluminium Perforated Mensa (2.5 mm dia) 595*595*0.6mm and Anutone Serge Astral Lay-in Aluminium Perforated Mensa (2.5 mm dia) mm by the Respondent. 2. The DGAP has submitted that the Applicant No. 1 vide his submissions had mentioned that the Respondent supplied the above 04 goods as per the order placed during February 2017 on the prices agreed as per the offer of the Respondent given during November 2016. At the time of placing order, since it was inter-state transaction, CST of 2% was applicable. Consequent to the introduction of GST, IGST @ 18% was applicable on the inter-state supply of such goods. The Respondent had been charging 2% CST prior to July 2017 and started charging 18% IGST from July 2017 but the basic price of the goods remained unchanged. The Respondent, an importer of the said goods, was not eligible to avail the input tax credit (ITC) of Additional Duty of Customs (referred as CVD) paid on such goods at the time of import till June 2017 a....
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....tate to submit the requisite documents. Another Summon dated 27.07.2020 was issued to the Respondent to submit the complete requisite documents by 07.08.2020. In response to the Summon, the Respondent replied vide e-mail dated 05.08.2020 and submitted certain documents. 7. The DGAP has also reported that in addition to the above, letter dated 27.07.2020 was sent to the jurisdictional office to obtain the desired documents from the Respondent and forward the same to the DGAP. In response to that no reply was received from the jurisdictional office. Further, on scrutiny of the documents submitted it was observed that the Respondent had not submitted the complete documents, hence reminder letters were issued to the Respondent again and the Respondent submitted requisite documents vide e-mails dated 21.09.2020, 22.09.2020, 25.09.2020 and 05.10.2020. 8. The DGAP has further submitted that vide e-mail dated 07.10.2019, the Applicant No. 1 was given an opportunity to inspect the non-confidential evidences/ documents submitted by the Respondent on 09.10.2020 or 12.10.2020. In response, the Applicant No. 1 replied vide e-mail dated 08.10.2020 and stated that he resided in Goa and b....
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....09.2020, 05.10.2020 and 19.10.2020. Vide above letters/ e-mails the Respondent submitted: - (i) That he was engaged in manufacturing and trading of wall and ceiling panels. The manufacturing unit at 95, KIADB Phase-3, Malur, Kolar District had stopped the production activities due to continuous loss in the business and therefore it was used as warehouse for trading. Also, he had a trading warehouse at Bhiwandi, Maharashtra, which had been closed due to loss in the business. Further, the Corporate Office at 231, 7th Cross, Indira Nagar 1st Stage, Bangalore -560038 had also been closed due to financial activities. Only one unit at 3A, Visvesaraya Industrial Area, Mahadevapura, Bangalore-48 was operating on a low-key basis. (ii) That he had submitted the details pertaining to the Applicant No. 1 only, as it was the first time he got the order for the said specified 04 goods and after that he had not imported the said goods for any other buyers. (iii) That he had 2 CST registrations i.e. 29AADCA1269KIZH (Active) and 27AADCA1269KIZL (De-registered). 13. The DGAP has also reported that vide the aforementioned letters/ e-mails, the Respondent submitted the fo....
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....eing allowed in the erstwhile tax regime. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST with effect from 01.07.2017, all these taxes got subsumed in the GST and the ITC of GST was available in respect of all goods and services, unless specifically denied. Thus, the additional benefit of ITC in the GST regime would be limited to those input taxes, the credit of which was not allowed in the pre-GST regime but was allowed in the GST regime. This additional benefit of ITC in the GST regime was required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 171 of CGST Act, 2017. This was a matter of fact which had not been contested by the Respondent. 16. The DGAP has further reported that before enquiring into the allegation of profiteering, it was important to examine Section 171 of the CGST Act, 2017 which governed the anti-profiteering provisions under GST. Section 171(1) of the CGST Act, 2017 reads as "any reduction in rate of tax on any supply of goods or se....
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....uila 595*595*0.6mm 1790123, 1790122-07.10.2017 1790079, 1790080, 1790081-03.08.2017 1790127-13.10.2017 17416.80 533.80 9297088 1673475.81 2. Anutone Serge Astral Lay-in, Aluminium, Perforated Mensa (2.5mm dia) 595*595*0.6mm 1790142-04.11.2017 1790127-13.10.2017 2304.00 873.80 2013235 362382.34 3. Anutone Serge Astral Lay-in, Aluminium, Unperforated, Aquila 1200*600*0.6mm 1790142-04.11.2017 1790135-25.10.2017 2878.56 740.52 2131631 383693.63 4. Anutone Serge Astral Lay-in, Aluminium, Perforated, Mensa (2.5mm dia) 1200*600*0.6mm 1790142 04.11.2017 856.80 1080.52 925790 166642.12 19. The DGAP has further submitted that had the import of the said 04 goods taken place prior to implementation of GST, when the quotation dated 18.02.2017 was provided to the Applicant No. 1, the Respondent would have suffered Countervailing Duty (CVD) @ 12.5% and Special Additional Duty of Customs (referred as CVD) paid by the Respondent would not have been available, and would have formed an embedded part of the cost of the products in the said quotation. However, the actual import of the said 04 goods had taken place vide Bil....
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.... and their amount of profiteering have been summarized by the DGAP in the Table below:- 22. The DGAP has further reported that the benefit of the ITC would be available to the Respondent in those situations where the Respondent had quoted the prices of his supplies in pre-GST regime and supplies of same were made in post-GST regime. Therefore, the profiteering on account of benefit of ITC would be restricted to said 04 goods which were supplied to the Applicant No. 1 only. The Respondent had submitted that during the period 01.07.2017 to 30.09.2019, he had supplied only the aforesaid 04 goods for the first time to the Applicant No. 1, for which quotation was given in the pre-GST era. Further, the Respondent had also submitted that he had not sold the subject goods to any other buyers. Therefore, based on the submission of the Respondent during the period of the current investigation i.e., from 01.07.2017 to 30.09.2019, the amount of profiteering by the Respondent was worked to Rs. 12,79,304/- (Rupees Twelve Lakh Seventy Nine Thousand Three Hundred and Four only) in respect of aforesaid 04 goods. 23. The DGAP has further concluded that as the benefit of ITC had not been passed....
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....determined as profit by the DGAP in the transaction, he prayed that he might be permitted to pay the amounts in instalments and also in view of his precarious financial position and continued losses and in ordinate delay in revival caused by the pandemic situation, further he prayed for waiver of interest and penalty in the interest of justice. 25. The Applicant No. 1 has also filed his written submissions dated 26.11.2020 wherein he has stated:- a) That the non-confidential evidences/ documents submitted by the Respondent on 9/10/2020 and 12/10/2020 to the DGAP had not been sent to him despite DGAP's directions as mentioned in para 10 of the Report. However, the Applicant No. 1 requested to go ahead with the proceedings initiated vide Notice dated 05.11.2020. b) That if the Respondent by mentioning about the financial losses and shutting down of his manufacturing/ trading units was trying to justify his action of not passing on the legitimate tax benefit to him, then the same was not acceptable as the same was irrelevant. c) That by not passing on the tax benefit to him, he was the one who had suffered heavy losses by way of bank interest charged ....
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....by him, had aptly and immediately reduced the prices by almost 14% post GST scenario. Copy of the relevant Office Memorandum of Govt. of Goa dated 06.11.2017 had been already submitted as Exhibit VIII of his Application. g) That an Order on merits to be passed directing the Respondent to return to him, the amount of Rs.12,79,304/- as mentioned in the Report of the DGAP being the amount not passed on by way of commensurate reduction in prices to him along with interest at the rate of eighteen per cent from the date of collection of higher amount till the date of return of such amount at the earliest. h) That he had been requesting the Respondent to pay him the amount commensurate to reduction in prices vide his several e-mails dated 09/04/2019, 15/05/2019, 27/05/2019, 03/06/2019. However, he chose to not only ignore his requests but it was also seen from the DGAPs observations made at paras 5,6,7,8,9 and 10 of his Report, that the Respondent had been showing scant regard to the legal provisions and not respecting this Authority. Hence, it was requested to deal with the matter with an iron hand and do justice to a sincere business organization like his which was an ....
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....27 of the CGST Rules, 2017, the DGAP has clarified that the mandate of DGAP was to conduct investigation based on the recommendation of the Standing Committee on Anti-Profiteering. The DGAP submitted Report of his findings to this Authority under Rule 129 of the Rules and this Authority passed the Order under Rule 133 of the Rules. While the DGAP was the Investigating Agency, the adjudication to establish profiteering or the absence of it, was done by this Authority. Therefore, the DGAP had no authority to direct the Respondent to pay the applicable interest @ 18% on the profiteered amount which was to be determined by this Authority. 27. On the basis of the above clarifications of the DGAP, the Respondent and the Applicant No. 1 were directed to file rejoinder/ reply. The Applicant No. 1 vide his submissions dated 04 01.2021 has filed his rejoinder on the DGAP's clarifications dated 14.12.2020 wherein he has stated:- a) That he reiterates submissions made by him at para 25 (d) & (e) above vide his reply dated 10.11.2020. b) That interest provisions were statutory as could be seen in Rule 127 of the CGST Rules, 2017 which needed to be considered as rightly ....
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....on or ITC benefit had to be passed on to the recipient by way of commensurate reduction in price. g) That the Applicant No. 1 reiterated his entire submissions made vide his reply dated 10.11.2020 which might be considered before passing the final order. h) The Applicant No. 1 further requested to pass an Order directing the Respondent to return to him, the amount of Rs.12,79,304/- as mentioned in the DGAPs Report being the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent from the date of collection of higher amount till the date of return of such amount at the earliest. 28. The Respondent vide his submissions dated 15.02.2021 has filed his consolidated written submissions wherein he has stated:- A) That alleged Notice issued by the DGAP was defective and did not meet the mandate of Rule 129(3) of the CGST Rules, 2017 and the investigation was in violation of principles of natural justice:- a) It was settled law that due and sufficient Notice was a sine qua non to any administrative or quasi-judicial action. In the present case, the Alleged Notice issued by the DGAP was defective, in....
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....marily involved ceiling materials (which it marketed to several of his clients) was hardly put to due and sufficient Notice by the DGAP when the Alleged Notice failed to identify with even a modicum of specificity, the description of the goods involved. e) It was settled that when the law required a certain thing to be done in a certain way, it could be done in that way alone and no other. Resultantly, the alleged Notice failed to comply with Rule 129(3) of the CGST Rules. In such circumstances, the Alleged Notice was no Notice at all and therefore rendered the entire proceedings a non-starter. B) That DGAP had wrongly assumed the following admissions on part of the Respondent:- a) In para 17 of his Report the DGAP recorded a baseless unilateral finding against the Respondent in the context of the way in which the charging provision of Section 171 of the CGST Act, ought to have been complied with. Therein, the DGAP Report wrongfully noted that "this is a fact which has not been contested by the Respondent." The Respondent pleaded that the said assumption on part of the DGAP demonstrated the non-application of mind to the response and defences urged by the Respo....
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....s bound to commensurately change based on the change in the price of variables, including the cost of raw material. In other words, the base price quoted in SO 002 would be the same only if the incidence of sale took place in the month of February 2017. This aspect had been completely ignored by the DGAP's Report. d) Pertinently, the eventual sale of the four distinct aluminium products took place vide invoices dated 3 August 2017, 7 October 2017, 13 October 2017, 25 October 2017 and 4 November 2017. e) It was thus evident that none of the sales was subjected to the same base price as indicated in SO 002. In fact, while the base price quoted in SO 002 was valid only until the end of February 2017, the earliest sale in pursuance thereof took place only in August 2017. Notably, in the interim the raw material price of aluminum in the international market had increased significantly. Yet, the Respondent did not make any commensurate change to the base price of the aluminum goods listed in SO 002 since the natural increase in price had been absorbed by the ITC. f) That the Applicant No. 1 continued to enjoy the benefit of purchasing the concerned goods as....
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....Hon'ble Apex Court Islamic Academy of Education v. State of Karnataka, (2003) 6 SCC 697, relied on the definition of 'Profiteering' as contained in the Black's Law Dictionary, 5th Edn. and held it to mean "taking advantage of unusual or exceptional circumstances to make excessive profits". c) In this context the text of Section 171(1) of the CGST Act and the Explanation therein might also be considered; the same are reproduced below for ease of reference: 171. Anti-profiteering measure.-(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. Explanation.-For the purposes 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 or both]. d) Evidently, it was clear from the scheme of Section 171 of the CGST Act and the definition of profiteering, that implicit th....
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....ct, which provides for imposition of penalty, was inserted in the CGST Act w.e.f. January 1, 2020 vide Section 112 of the Finance Act, 2019. There was no doubt therefore that the said provision was not in force during the period when the Respondent had allegedly profiteered. Therefore, the penalty provisions prescribed under Section 171(3A) of the CGST Act could not be invoked with retrospective effect in the present case. As a result, without prejudice to the Respondent's case that it was not liable for alleged profiteering at all, no penalty could be imposed on the Respondent in the facts of the present case. ii. It was settled law that no person could be subjected to imposition of a penalty higher than what was prescribed in law, which was in force at the time of the commission of the offence. As per Article 20(1) of the Constitution of India, "No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence". Therefore, Section 17....
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....hout prejudice to the Respondent's case that he had not violated Section 171 of the CGST Act or that he was liable for profiteering, no penalty might be imposed on the Respondent. vi. It was pertinent to note that the constitutional validity of Section 171 of the CGST Act and Chapter XV of the CGST Rules (more particularly, Rules 126, 127 & 133 of the CGST Rules) had been challenged as being unconstitutional and violative of Articles 14 & 19(1 of the Constitution of India in Man Realty Ltd. and Another vs. Union of India and Others [W.P. (C) 997/2021], which was pending before the Hon'ble Delhi High Court. vii. The Respondent submitted that the Annexures to the above submissions contained highly confidential and sensitive business information. Necessary instructions may be issued to ensure that none of the documents submitted herein were made available to the Applicant No. 1 or any other third party. Necessary directions might accordingly be issued to the registry as well as the DGAP. g) Further the Respondent submitted that:- i. The alleged Notice issued by the DGAP was defective and did not meet the mandate under Rule 129(3) of the CGST....
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....t Para 10 of the DGAP's Report dated 29.10.2020. It is to mention here that as per the Respondent's consolidated written submissions dated 15.02.2021 Para no. 33 (d) & (e), the Respondent had prayed to ensure that the records supplied by him were to be maintained with utmost confidentiality, during the pendency of the proceedings and thereafter. Therefore, request of the Applicant No. 1 could not be accepted. Therefore, only copy of the Respondent's written submissions dated 15.02.2021 (without the confidential records) was supplied to the Applicant No. 1. 30. The Applicant No. 1 vide his submissions dated 03.03.2021 has submitted:- A. That since a personal hearing had been granted in the matter on 04.03.2021, as a matter of following of principles of natural justice, the Applicant No. 1 had requested to provide him a copy of the consolidated written submissions against the Report of the DGAP filed by the Respondent. B. That the Applicant No. I be provided the copy of the non-confidential evidence/ documents filed by the Respondent as recorded at para 10 of the DGAP's Report issued vide F. No. 22011/ API/153/2019/3384 dated 29.10.2020 which had ....
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.... Moreover from above para, it could be seen that the Respondent himself vide e-mail dated 19.10.2020 had stated that he had submitted all the documents and no action was pending from his side. Hence question of now refusing to show the Applicant No. 1 the said documents did not arise. G. That the Applicant No. 1 reserved his right to call for the non-confidential information furnished by the Respondent for which the Applicant No. 1 was asked to come to Delhi and inspect and subsequent evidence/ documents submitted by the Respondent. H. That the Applicant No. 1 agreed with the DGAP's investigation Report wherein he had worked out an amount of Rs.12,79,304/being the amount profiteered by the Respondent on account of change in the tax structure after introduction of GST. In case there was going to be any reduction in the said quantification the Applicant No. 1 reserved his right to obtain the above documents to fulfil the principles of natural justice. l. Referring to the written submissions filed by the Respondent, the Applicant No. 1 made the following submissions: (i) With regard to the arguments submitted by the Respondent in his submissions....
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....nefit to the Applicant No. 1 in case of reduction in international prices, in any case. (vi) It was noticed from the worksheet provided by the DGAP that the Respondent had earned a substantial profit out of the sales transactions made with the Applicant No. 1 in this case. (vii) The Goa State Govt. had already recovered the differential amount of about 9% from the Applicant No. 1's quoted rates, to adjust the reduction in tax rates after introduction of GST. It was not understood as to why the Respondent considered his case as special? The DGAP and Standing Committee had rightly noticed profiteering and accordingly quantified the said amount. (viii) With regard to the argument of the Respondent that neither the CGST Act nor the rules made thereunder provided for the methodology for calculating profiteering, it was submitted that it could be clearly seen from the chart provided by the DGAP that the profiteering amount had been worked out on the basis of facts and actual figures and there was no scope for dispute whatsoever. (ix) With regard to submissions of the Respondent regarding Sec 171 of the CGST Act, it was submitted that this Authority....
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....s Order dated 17 February 2017 along with the invoices dated 3 August 2017, 7 October 2017, 13 October 2017, 25 October 2017 and 4 November 2017 and the table annexed to the above submissions would show that a 32% trade discount was given to the Applicant No. 1 on the original price of goods, as a result of which, a benefit of approximately Rs. 75,76,925.30/- had accrued to the Applicant No. 1. B. That Section 171 of the CGST Act, 2017 and Rules 122-137 of the CGST Rules, 2017 did not define the term "price" as used in these provisions. However, for the purposes of determining any alleged "profiteering", the price of the goods in question ought to have been calculated and determined as per "market value" of the goods and not the discounted price of the goods. As per Section (73) "market value" should mean the "full amount" which a recipient of a supply was required to pay in order to obtain the goods or services or both of like kind and quality at or about the same time and at the same commercial level where the recipient and the supplier were not related. C. Despite the fact that the price quoted in the Sales Order dated 17.02.2017 was valid only till the end of ....
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....ed." E. That in the light of the written submissions, arguments advanced and the present supplementary submissions, this Authority might be pleased to: (i) Reject the DGAPs report as it had inter alia erroneously considered the discounted price and not the market price; (ii) Dismiss the Applicant No. 1's complaint/ application since the Respondent had not profiteered and had actually suffered losses due to giving a heavy discount of 32% and having also itself borne the increased raw material cost. 33. The Applicant No. 1 vide his email dated 04.03.2021 has also submitted his supplementary written submissions during the personal hearing wherein he has submitted:- A. That the Applicant No. 1 had quoted for the work of "Providing False Ceiling to District Hospital Margao, Goa" tendered by the Goa State Infrastructure Development Corporation Ltd. [GSIDC for short]. A Goa Govt. undertaking which was a Special Purpose Vehicle for speedy implementation of important projects. B. That the Applicant No. 1 was declared as the lowest bidder on 16.09.2016. The approved makes/brands of false ceiling items in the above tender were of the followi....
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....ss. H. That having been enlightened on the issue by way of the above news item, the Applicant No. 1 realized that there was a platform for redressal of such issues provided by the Government of India. The Applicant No. 1 thus requested the Respondent by way of several emails, letters, telephonic requests and personal discussions with their local executive to reduce the rates accordingly. However there was no positive response from the Respondent. Therefore vide his email dated 27.05.2019 the Applicant No. 1 had given the Respondent a 24 hrs notice. The said e-mail is reproduced below: "From: Sunil Deshpande<[email protected]> To: Bharathi<[email protected]>; 'Harshada Trading Company' <[email protected]> Cc: 'Manoj Asho Joshi' <[email protected]> Sent: Monday, 27 May, 2019, pm IST Subject: Re: Regarding reduced rates on account of GST. Dear Bharti Madam, We wish to bring to your kind notice that we are requesting you to refund the amount of taxes, which you are not required to pay on account of GST. These taxes are Central Excise, Countervailing Duties, Spe....
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....ndent because his rates were the lowest after offering 32% overall discounts. Otherwise, the Applicant No. 1 could have purchased the said material from other approved brands. Order was placed at discounted rates. 32% overall discount was not over and above the agreed price but the agreed price was sealed after discount. The profiteered amount had been worked out by the DGAP on the basis of facts and actual figures and there was no scope for dispute whatsoever. The Offer letter dated 20.11.2016 from the Respondent and Purchase Order dated 18.02.2017 of the Applicant No. 1 were self-explanatory wherein the rate of individual item was reduced to the extent of the discount. (ii) The sales order was valid till only end of February 2017:-In this regard the Applicant No. 1 has stated that it was not correct to state that the sales order was valid till only February 2017 as the Respondent went ahead with the complete supply without any issues. The Applicant No. I's purchase order did not speak of any time limit. Also, this issue was not a subject matter before this Authority. It was categorically pointed out that the agreed price between the Applicant No. 1 and the Respondent....
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....hat as per the Respondent's consolidated written submission dated 15.02.2021 para no. 33(d) and (e), the Respondent has prayed to ensure that the records supplied by him are maintained with utmost confidentiality, during the pendency of the proceedings and thereafter. Therefore, request of Applicant No. 1 cannot be accepted. In view of the above, only copy of Respondent's consolidated written submissions dated 15.02.2021 minus annexures be supplied to the Applicant No. 1." 35. Clarifications were sought from the DGAP on the Respondent's submissions dated 15.02.2021 and 08.03.2021. The DGAP vide his Report dated 24.03.2021 has submitted the following clarifications:- Clarifications on the Respondent's written submissions dated 15.02.2021 A. For the Respondent's contention that the alleged Notice issued by DGAP was defective and did not meet the mandate of Rule 129(3) of the CGST Rules, 2017; the investigation was in violation of principles of natural justice, the DGAP has clarified that the State Screening Committee Karnataka vide its letter dated 12.07.2019 to the Standing Committee on Anti-Profiteering had mentioned that Applicant No. 1 had....
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....nor the CGST Rules provided the methodology for calculating profiteering the DGAP has submitted that the "Methodology and Procedure" has been notified by this Authority vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. The main contours of -the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the additional benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself which states that "Any reduction in rate of tax on any supply of goods or services or the benefit input tax credit shall be passed on to the recipient by way of commensurate reduction in prices". The word "commensurate" mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product based on the tax reduction as well as the existing base price (price without GST) of the product. The computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product and hence no fixed mathematical methodology can be prescribed to determine the a....
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....n Para 23 of the DGAP's Report dated 29.10.2020. l. That the cost component had not been taken into cognizance while determining profiteering. As per Section 171 of the CGST Act, 2017 the Respondent was required to pass on the commensurate benefit of additional ITC accrued to him to the Applicant No. 1. J. That had the import taken place prior to implementation of GST, the Respondent would had been liable to pay CVD @ 12.5 % without getting the benefit of ITC. Since the import took place in the post-GST period, the full amount of IGST @ 18% paid at the time of actual import was available to the Respondent as ITC. Hence, there had been additional benefit of ITC to the Respondent. Accordingly, the cited decision was not applicable. 36. The Respondent vide his email dated 05.04.2021 submitted his rejoinder to the above clarifications of the DGAP wherein the Respondent has stated that the DGAP's clarifications were devoid of any merit and application of mind. The DGAP had ignored the Respondent's legal submissions inter alia with respect to: (a) the DGAP's error in considering the discounted price as the base price, instead of the actual pr....
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....Report. It was submitted that the DGAP had again misconstrued the submission since the Respondent had at no point admitted to any allegation of profiteering, or any part thereof. On the contrary, the Applicant No. 1 had benefited from a huge 32% discount on the cost of the goods purchased by him already. In any event, none of his submissions either to this Authority or to the DGAP ought to have been treated as admissions to any of the allegations levelled against him. C. In response to Paragraphs C, the Respondent submitted that the DGAP had completely misinterpreted Section 171 of the CGST Act. The submission of the DGAP that "while arriving at profiteering in terms of Section 171 of CGST Act, the costs or escalations are not considered" was vehemently denied. If such an interpretation of the provision were to be accepted by this Authority, it would defeat the very essence of the provision itself. For, every act of adjustment/ increase/ correction of sale price due to rising costs of raw materials, would amount to an act of profiteering. It was submitted that the same would lead to disastrous consequences and would make the provision vulnerable to being misused by the DGA....
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....ing, there is no substance in the application filed." F. In response to Paragraph E of the DGAP's Report dated 24. 03.2021, it was submitted that "Methodology and Procedure" notified by this Authority under Rule 126 of the CGST Rules did spell out the parameters to be considered while determining whether or not there was incidence of "profiteering". It was, however, obvious that in order to examine whether there had been profiteering or not, it was incumbent on the DGAP to consider the market price as the base price. A discount was after all, a loss to the seller which it chose to absorb internally. Therefore, a discounted price, which by definition was a loss to the seller, could not be the basis to claim "profiteering". Accordingly, the existing base price would necessarily have to mean the non-discounted price and not the discounted price. In other words, in order to calculate the "commensurate reduction in prices", this Authority ought to have considered the base price of the goods supplied de hors the discounts offered to the Applicant No. 1. Therefore, the contention of the DGAP that "existing base price" of the product was to be taken into account while computin....
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....as denied that there had been any additional benefit to the Respondent. The cited decision of Kumar Gandharv v. KRBL Ltd (supra) was squarely applicable to the facts of the present case for the reasons mentioned herein above in Paragraphs D and F. 37. The proceedings in the matter could not be completed by the Authority due to lack of required quorum of members in the Authority during the period 29.04.2021 till 23.02.2022, and that the minimum quorum was restored only w.e.f. 23.02.2022 and hence the matter was taken up for proceedings vide Order dated 23.03.2022 and hearing in the matter through Video Conferencing was scheduled to be held on 31.03.2022. 38. Personal Hearing was held on 31.03.2022. Same was attended by Shri Sunil Deshpande for the Applicant No. 1, Shri Lal Bahadur, Assistant Commissioner for the DGAP and Shri Reji Methew, Chartered Accountant and Shri Aditya Chatterjee, Advocate for the Respondent. The Respondent and the Applicant No. 1 were heard. During the personal hearing the Respondent has re-iterated his arguments based on his written submissions dated 26.11.2020, 15.02.2021, 04.03.2021 and 08.03.2021. The Respondent and the Applicant No. 1 further reque....
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.... 5 1790080 03/08/17 Rs.20,75,414.40 Rs.3,73,574.59 Rs.24,48,989/- 6. 1790081 03/08/17 Rs.20,75,414.40 Rs.3,73,574.59 Rs.24,48,989/- 7. 1790122 06/10/17 Rs.9,60,840.00 Rs.1,72,951.20 Rs.11,33,791/- 8. 1790123 06/10/17 Rs.19,60,113.60 Rs.3,52,820.45 Rs.23,12,934/- Total Rs.1,43,67,743.83 Rs.25,86,193.97 Rs.1,69,53,937.00 e. That the Respondent continued to supply material to the Applicant No. 1 at quoted rates as per Purchase Order plus 18% GST without reducing tax component of Customs and other duties that were subsumed in GST. f. That the Applicant No. 1 had committed to GSIDC and the project management consultant that he would be using the Respondent's make/ products for the metal false ceiling, and therefore the Applicant No. 1 continued with purchases from the Respondent as it was certain that he would definitely follow the taxation law of the land and pass on the tax benefit if any as per law. g. That the Applicant No. I raised running account bill to GSIDC Ltd. in the post GST era at his rates prior to GST regime. However GSIDC reduced his....
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.... pre GST period and the prices (exclusive of IGST on supply) at which such goods were supplied during the GST regime remained the same as is evidenced in the Tables at paragraphs 17, 18 and 21 above. 43. This Authority also finds that, the Respondent supplied the above 04 categories of goods i.e. Anutone Serge Astral Lay-in Aluminium Unperforated Aquila 595*595*0.6mm, Anutone Serge Astral Lay-in Aluminium Unperforated Aquila 1200*1200*0.6mm, Anutone Serge Astral Lay-in Aluminium Perforated Mensa (2.5 mm dia) 595*595*0.6mm and Anutone Serge Astral Lay-in Aluminium Perforated Mensa (2.5 mm dia) 1200* 1200*0.6mm, as per the order placed during February 2017 on the prices agreed as per the offer of the Respondent given during November 2016. At the time of placing order, since it was an inter-state transaction, CST of 2% was applicable. Consequent to the introduction of GST, IGST @ 18% was applicable on the inter-state supply of such goods. The Respondent had been charging 2% CST prior to July 2017 and started charging 18% IGST from July 2017, but, the basic price of the goods remained unchanged. The Respondent, an importer of the said goods, was not eligible to avail the input tax c....
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....h IGST, the price of supply should have been reduced commensurate to the amount of such ITC of IGST the amount of Rs. 12,79,304/- which is the amount factored into the base prices quoted by the Respondent on account of the incidence of Additional Duty of Customs (referred as CVD) in the pre GST period. The benefit equal to such amount should have been passed on to the Applicant No. 1 by the Respondent by commensurate reduction in prices. There has been no commensurate reduction in prices and hence, this Authority finds that, the provisions of Section 171(1) of the CGST Act, 2017 had been contravened in the present case. 46. The Respondent vide his written submissions contended that the Notice issued by the DGAP was defective and did not meet the mandate under Rule 129(3) of the CSGT Rules, 2017 and that, the investigation was in violation of principles of natural justice. Further, the Respondent contended that the DGAP has wrongly assumed admissions on part of the Respondent. This Authority finds that, the State Screening Committee of the State of Karnataka vide its letter dated 12.07.2019 to the Standing Committee on Anti-Profiteering had mentioned that the Applicant No. 1 had ....
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....Additional Duty of Customs (referred as CVD), payable at the time of import and on which no ITC was then available, was necessarily factored into the prices. As per the mandate of Section 171 of the CGST Act, 2017, if the benefit of ITC, which was not available earlier, was made available to the Respondent in the post GST period, it was incumbent on the Respondent to pass on such benefit to the Applicant no. 1 by commensurate reduction in price. Hence, this Authority finds that, while arriving at profiteering in terms of Section 171 of the CGST Act, 2017, the DGAP has correctly examined as to whether the Respondent had benefited by any additional amount of ITC, and if so, the quantum thereof, and whether the Respondent had passed on the said benefit to the Applicant No. 1 by commensurate reduction in prices. The Authority also finds that, Section 171 of the CGST Act 2017 itself defines, the term "profiteered" which means the amount determined on account of not passing on 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 or both. ....
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....ence, the Authority holds this contention of the Respondent devoid of any merit. 50. The Respondent has contended that, neither the CGST Act nor the CGST Rules provide the methodology for calculating the amount of profiteering. The Authority finds that, the main contours of the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself. It mandates 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". Section 171 (2) requires the Authority "......to examine whether input tax credits availed by a registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of goods or services or both supplied by him" Therefore, Section 171 itself provides the procedure and methodology for passing on the said benefit by way of commensurate reduction in the price. The Respondent has got benefit of ITC which he is required to pass on by commensurate reduction in price. 51. The Responden....
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....ces to the extent of the Additional Duty of Customs (referred as CVD) that was no longer to be paid by the Respondent as well as to the extent of the IGST paid at the time of import, the credit of which was now available. This proceeds on the fact that, in the GST period, the Additional Duty of Customs (referred as CVD) is subsumed under the GST and in particular by the IGST to be paid at the time of import. On the one hand, there has been no incidence of the Additional Duty of Customs (referred as CVD) on the goods imported and supplied by the Respondent to the Applicant No. 1, whereas on the other hand such Additional Duty of Customs (referred as CVD) had been subsumed in the IGST paid on such goods by the Respondent and ITC of such IGST was made available for to the Respondent for payment of IGST on the same goods supplied to the Applicant No. 1. This Authority finds that, the invoices raised by the Respondent to the Applicant No. 1, for the supply of said 04 goods on which IGST @18% was charged by the Respondent show that, the base prices of the goods remained the same, as reflected in the purchase order dated 18.02.2017. The benefit of the ITC of IGST paid at the time of impor....
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....follows:- "A period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings." Further, the Hon'ble Supreme Court, vide its subsequent Order dated 10.01.2022 has extended the period(s) of limitation till 28.02.2022 and the relevant portion of the said Order is as follows:- "The Order dated 23.03.2020 is restored and in continuation of the subsequent Orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general of special laws in respect of all judicial or quasi-judicial proceedings." Accordingly this Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. 58. A copy of this order be sent to the Applicant No. 1, the Respondent, Commissioners of CGST/SGST, State of Karnataka, free of cost for necessary action. 59. A copy of this order be supplied to the ....