TaxTMI 
TaxTMI 
2022 (6) TMI 1076
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....Applicant No. 1 & 2 had alleged that the Respondent did not pass on the benefit of reduction in the GST rate on "Services by way of admission to exhibition of cinematograph fi lms", which was reduced w.e.f. 1.1.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018 by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017, and instead, increased the base prices to maintain the same cum-tax selling prices of the admission tickets. (ii) The aforesaid applications were examined by the Standing Committee on Anti-profiteering, in its meeting, the Minutes of which were received by the DGAP on 06.05.2020, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. The Standing Committee forwarded the following submission/documents of the Applicant Nos. 1 & 2:- a. Online complaints NAACMP34678 & NAACMP3716 filed by the Applicant No. 1 & 2 respectively. b. Letter dated 30.09.2019 of the Respondent to the Superintendent (Anti-Evasion) regarding his working of ticket prices with GST rates from 1.1.2019 to 3.2.2019. (iii) After the receipt of the reference from the Standing C....
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....ema screens only. b. That he had collected prices fixed as per the license per Order No. GO. Ms. No. 54, Home (Gen. A) Department, dated 26.04.2017, wherein the Government of Telangana accorded permission for the rate of admission to Recliner and Regular Seats, details of which have been mentioned below:- Sr.No. Screen Total No. of Seats Recliner Seats Regular Seats No. of Seats Rate of admission ticket Rate of admission to 3D films No. of Seats Rate of admission ticket Rate of admission to 3D films 1. Screen-1 94 0 0 0 94 150 175 2. Screen-2 455 28 200 225 427 150 175 3. Screen-3 131 0 0 0 131 150 175 4. Screen-4 607 29 200 225 578 150 175 Total 1287 c. That the Respondent had applied before the licensing authority to allow an increase in the rates of tickets for certain movies and provided copies of such applications. However, the Respondent had not submitted the approval for the higher costs, if received from the licensing authority d. The Responden....
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.... e. Price list of the movie admission tickets, pre, and post-01.01.2019. f. High Court for Telangana and Andhra Pradesh Orders in WP No. 37873 of 2018. g. License Copy (License No. C2/M2/Cinema/RPC/2016) dated 29.05.2017. h. Sample copies of Invoices/tickets pre and post-01.01.2019. 3. The reference received from the Standing Committee on Anti-profiteering, various replies of the Respondent, and the documents/evidence on record had been examined in detail by the DGAP. The findings of the DGAP are as under:- (i) The main issue to be looked into was whether the rate of GST on the "Services by way of admission to exhibition of cinematography films where price of admission ticket was above one hundred rupee? was reduced from 28% to 18% w.e.f. 01.01.2019 and "Services by way of admission exhibition of cinematograph films where price of admission ticket was one hundred rupees or less "was reduced from 18% to 12% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. (ii) The DGAP has further submitted that Section 171(1)....
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..../- and interest of Rs. 60,049/-. (iv) There were two classes of seats with distinct prices for normal and 3D cinema i.e. Recliner (Rs. 200/225) and Regular (Rs. 150/175), including taxes, during the pre-rate reduction period effective from 29.05.2017, and the same prices for these two categories were maintained post rate reduction w.e.f. 01.01.2019. Further, the Respondent was charging the same prices for tickets in both categories of seats irrespective of the fact whether the film was a normal one or a 3D film. Similarly, post GST rate reduction w.e.f. 01.01.2019, the Respondent had maintained the same prices in both categories of seats irrespective of the fact whether the film was a normal or 3D film. Also, the Respondent had provided copies of the Application made to the Licensing authority requesting him to hike prices across different categories for specific movies. However, he had not produced a copy of the approval received on his requests. In light of the Respondent's inability to submit substantive & conclusive evidence that such increment in prices were allowed to him by the Authorities, there was no ground to accept his contention. Further, it had been observed th....
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.... exhibition of cinematography firms", was not passed on to the recipients. (vii) Having established the fact of profiteering, the next step was to quantify the same. Based on aforesaid pre/ post reduction in GST rates and the details of outward supplies for the period 01.12.2018 to 30.04.2020 submitted by the Respondent, it was observed that profiteering during the period from January 2019 to April, 2020 from the sale of tickets in two categories mentioned in table 'B' below amounts to 1,31,292/- for Recliner Category, 11,52,707/- for Regular Category and 84,18,946/- for exceptions in both the categories of tickets. The total amount of net higher sales realization due to an increase in the base prices of the movie tickets, despite the reduction in GST rate from 28% to 18% or in other words, the profiteered amount comes to 97,02,945/-. The brief of the computation has been furnished in the Table 'B' below:- Table-B Sr.No. Category 01.01.2019 to 30.04.2020 Base Price per unit in pre-rate-reduction (Excl.GST) Commensurate Price per unit post-rate reduction Actual Selling Price post-rate-reduction Profiteering per unit (Incl.GST) Qty Sold. ....
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....(Gold class) and Regular seats (Executive class), and 'Exceptions Category', which also had two sub-heads of recliner seats (Gold class) and Regular seats (Executive class). The working amount of profiteering under 'Regular Category' for the recliner and regular seats has been summarized herein below:- Sr.No. Category Ticket Price before 1-1-2019 Ticket Price After 1-1-2019 Alleged profiteering per ticket No. of tickets sold Total profiteering A Recliner (Gold Class) 200 200 15.63 8400 1,31,292 B Regular (Executive class) 150 150 11.73 98270 11,52,707 Total Regular category 1,06,670 12,83,999 b. That it was a fact on record that the rate of GST in respect of "services by way of admission to of cinematographic films" was reduced from 28% to 18% w.e.f. 01.01.2019. Looking to this reduction in rates of GST, the ticket prices for the regular category- recliner and regular seats -were revised by the Respondent from 04.02.2019 from Rs. 150/- to Rs. 138/- for regular seats and from Rs. 200/- to Rs 184/- for recliner seats. Therefore, the present dispute ....
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....g. That 49.65% of the revenue received on the sale of tickets pertained to distributors, hence, shared by the Respondent with the distributors and the remaining 50.35% only pertained to Respondent and was retained by the Respondent. Therefore, out of the above alleged excess amount collected as per the above calculation Rs. 5,33,104.29/- only pertained to the Respondent. Copy of agreement with the distributors for such Revenue sharing arrangement was enclosed with the DGAP's Report. h. That the distributors' share was collected by Respondent in the capacity as agent of such distributors therefore no demand for profiteering could sustain on present the Respondent to the extent of revenue remitted to distributors. i. That if any demand for recovery of the profiteered amount was made on the Respondent, then the same should be made to the extent of 50.35% of such amount which pertained to Respondent's share of the revenue from the sale of such tickets. (ii) 'Exceptions Category' - Recliner and regular seats:- a. The calculation of profiteering under 'Exception Category' for the recliner and the regular seats has been summa....
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....yderabad issued from File No. A4/03/Cinemas/Cyb/2018-19 dated 20.11.2019 to the owner of the said property M/s Global Home and Hearth Pvt. Ltd., Ameerpet, Hyderabad in which Respondent's theatre (Shalini Shivani) was being run. The screening permission was granted by the above said permission dated 20.11 2019. ii. That copy of letter no. GH&H/CP/2019-20 dated 21.11.2019 written by M/s Global Home and Hearth Pvt. Ltd., Ameerpet, Hyderabad to the Commissioner of Police, Cyberabad Commissionerate, Cyberabad, Ranga Reddy District requesting an increase the ticket price for screening in multiplex theater by the Respondent. This showed that the application for an increase in ticket prices under the exceptions category was made on 21.11.2019 i.e. when the prevailing GST rate was 18% only and therefore, it could be safely concluded that the inbuilt GST rate under the exception category was the prevailing rate of 18% and not 28%. iii. That copy of the Order dated 26.11.2019 of Hon'ble High Court for the State of Telangana at Hyderabad issued in favour of the property owner granting an interim direction permitting to run the Respondent's theatre by collecting the en....
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....n the same should be Rs. 5,33,104.29/- only (on the Respondent's share of the revenue from the sale of such tickets) which was admitted to be paid by the Respondent. c. That proposition of penalty was not sustainable. (iv) That there was no contravention of any provision of law, no profiteering was involved, hence, no penalty was imposable:- a. In the present case penalty had been proposed upon Respondent under Section 171 (3A) of the CGST Act, 2017. b. That the proposition of penalty was based on the presumption that the ticket prices for regular seats and recliner seats under the 'Exception Category' were decided by taking GST @ of 28%. It was submitted that the submissions on merits in this regard had been made in the foregoing Paras showing that there was no profiteering involved on the part of the Respondent under the 'exception' category. Therefore, a penalty under Section 171(3A) of the CGST Act, 2017 could not be imposed on the Respondent. c. That the penal proceedings were, by their very nature, quasi-criminal proceedings and, therefore, unless it was established that he acted in conscious disregard of the le....
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....ss GST and therefore, he had violated the provisions of sub-section 2 of Section 32 of the CGST Act, 2017 and had also acted in contravention of the provisions of Section 171 (1) of the above Act as he had denied the benefit of tax reduction to his customers by charging excess GST. c. That the quantification of the profiteering had been calculated based on the data submitted by the Respondent and was presented as an annexure appended to the Report submitted to this authority. d. That from the Agreements entered into by the Respondent with the Distributors, appended to his submissions, it was observed that the exhibitor (Respondent) had to pay a fixed percentage of amounts on the net collection to the Distributor and the Distributor had not fixed the price at which the tickets were to be sold. There was no clause related to the control of the prices of the tickets to be sold. The provisions of Section 171 of the CGST, 2017 require a registered person under GST to pass on the benefit of additional ITC or reduction in the rate of tax by way of commensurate reduction in the prices of goods or services supplied by him. Hence, it was the responsibility of the Respondent....
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.... the Respondent and the Applicant No. 1 & 2 were granted a hearing in the matter on 06.04.2022 through Video Conferencing. 8. The hearing in the matter through Video Conferencing was held on 06.04.2022. It was attended by Shri Shyam Dhar Pal and Shri Keshav Malloo, Chartered Accountants for the Respondent, and Shri Venkata Kameswara Rao, Superintendent for the DGAP. During the hearing, the Respondent reiterated his earlier written submissions dated 06,02.2021 and 17.05.2021. The Respondent accepted the liability in respect of 'Regular Category' seats as mentioned in the written submissions but contested the profiteering allegation in respect of the 'Exceptional Category' movie tickets. The Respondent during the hearing further requested time till 08.04.2022 to file his written submissions against the Report of the DGAP which have been filed by the Respondent vide his email dated 07.04.2022. 9. The Respondent vide his written submissions dated 07.04.2022 has submitted a summary of the demand of Rs. 84,18,945/- under 'Exception Category' along with details of each Hon'ble Telangana High Court Order vide which such special ticket rates were fixed. The....
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....fore it. The rates of GST on "Services by way of admission to exhibition of cinematograph films where the price of admission ticket was above one hundred rupees' was reduced from 28% to 18% and "Services by way of admission to exhibition of cinematograph films where the price of admission ticket was one hundred rupees or less" was reduced from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018. The benefit of reduction in GST rates was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the above Act. 11. The Authority needs to determine whether the benefit of reduction in the GST rate was passed on or not to the recipients as provided under Section 171 of the CGST Act, 2017 in the facts mentioned herein above. Section 171 of the CGST Act provides as under:- "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. (2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an....
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....to work out the proportionate base rates of tickets keeping into consideration the various cost indicating taxes. It is obvious that when the tax rates were reduced, the Respondent was required to at least maintain the same base prices of the tickets and pass on the benefit of reduced GST to the consumers. The benefit of the reduced tax rate should have been passed to the consumers in terms of Section 171(1) of the CGST Act, 2017. 14. The Respondent has accepted that at maximum liability in respect of Regular Category, may be fastened upon them, which was further sub-categorized into Recliner seats (Gold class) and Regular seats (Executive class) seats/tickets during the hearing but contested the "Exceptional Category" tickets, which too had two sub-heads of recliner seats (Gold class) and regular seats (Executive class) vide his various submissions. In this regard, it is to mention that the profiteering has been calculated for the investigation period i.e. 01.01.2019 to 30.04.2020 on the basis of the information/data provided by the Respondent and the maximum rates prescribed by the Government of Telangana communicated vide order dated 29.5.2017 to the Respondent under GO. Ms. ....
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....by his application dated 21.11.2019. The Hon'ble High Court has noted that in similar circumstances, the interim order dated 13.8.2019 has been passed in W.P. No. 17241 of 2019 and passed an interim order dated 26.11.2019 permitting the Respondent to run his theatre by collecting proposed enhanced ticket rates. However, it was made clear that the petitioner shall inform the authorities concerned as to the ticket rates which he intended to collect in respect of all classes till adjudication of the issue in question by respective committees. The petitioner was directed to pay taxes proportionate to the proposed enhanced tax rates. It is gathered from the website of the Hon'ble High Court of Telangana that the matter in the W.P. No. 17241 of 2019 is pending. 16. From the facts mentioned in the paragraph above, it would emerge that there is no dispute relating to the fact that the Respondent has increased the base prices of the admission tickets in respect of the regular category and continues to charge the cine-goers at the prevailing rates despite a reduction in the GST w.e.f. 1.1.2019 vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. The Respondent in the....
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....t fixed the price at which the tickets were to be sold. There was no clause related to the freedom of fixation of the prices of the tickets to be sold, by the distributor. The provisions of Section 171 of the CGST, 2017 require a registered person under GST to pass on the benefit of additional ITC or reduction in the rate of tax by way of commensurate reduction in the prices of goods or services supplied by him. Hence, it was the responsibility of the Respondent to comply with the provisions of Section 171 of the CGST Act, 2017, Therefore, the submission of the Respondent was untenable and hence rejected. 19.The Respondent has claimed that profiteered amount determined by the DGAP also included GST and the same needs to be deducted for working out the amount. The refund of GST and its provisions are separately provided under the CGST Act and said refund has to be considered as per the said provisions. 20.The Authority finds that the Respondent has also relied upon the Order passed by the Hon'ble Supreme Court in the case of:- a. Uniflex Cables Ltd. vs. Commissioner of Central Excise, Surat-II reported at 2011-TIOL-85-SC-CX b. Wiptech Peripherals Pvt. Ltd....
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.... the 'Regular Category' was 12,83,999/-. 23.This Authority based on the facts discussed above has found that the Respondent has clearly resorted to profiteering in respect of 'Regular Category' by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate on "Services by way of admission to an exhibition of cinematograph films where the price of admission ticket is above one hundred rupees" from 28% to 18%" w.e.f. 01.01.2019 to 30.04.2020. On this account, the Respondent has realized an additional amount to the tune of Rs. 12,83,999/-from the recipients of 'Regular Category' which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering amount is determined as Rs. 12,83,999/-as per the provisions of Rule 133 (1) of the CGST Rules, 2017 in respect of 'Regular Category' only. 24. Given the facts mentioned above and for the reasons discussed hereinabove, the Respondent is therefore directed to reduce the prices of his tickets of regular category as per the provi....