TaxTMI 
TaxTMI 
2022 (6) TMI 1253
X X X X Extracts X X X X
X X X X Extracts X X X X
....it of Rs. 13,07,118/-, shall be verified by the DGAP as per the provisions of Section 17 (2) of the CGST Act, 2017 read with Rule 42 of the CGST Rules, 2017 and his findings shall be recorded in the Report. iii. The issue of benefit of discounts shall be examined by the DGAP in terms of Section 15 (3) of the CGST Act, 2017 as per details submitted by the Respondent and a detailed Report shall be filed by him in this regard. iv. The profiteered amount shall be again computed by the DGAP on the closing and the fresh stocks separately and mentioned in his Report. 2. The brief facts of the case are that the Applicant No. 1 vide his complaint had alleged that the Respondent had not passed on the benefit of reduction in tax rate from 12% to Nil in the light of Notification No. 19/2018-CTR dated 26.07.2018 w.e.f. 27.07.2018 on the purchase of Stayfree Sanitary Napkins. The said complaint was examined by the Standing Committee on Anti-Profiteering in its meeting held on 27.03.2019 and forwarded to the DGAP for detailed investigation in the matter. On receipt of said reference from the Standing Committee on Anti-Profiteering, the DGAP had investigated the aforesaid matt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in a manner as specified in the Rule. Thus, the issue of common ITC and verification of common ITC reversal post rate reduction was to be done in terms of Rule 42(1) of the Rules. To substantiate the Respondent's claim of reversal, the amount of credit reversed by him, had been verified with the GSTR-3B Returns of the corresponding month and ledgers, as submitted by him. It is found that the ITC amount reversed in the Return was more than that of his submissions for common input tax credit reversal with respect to impugned products. Thus, the claim of reversal of credit was correct and it would impact the cost of the impugned product. To arrive at the base price for post-rate reduction, that reversal of common credit amounting to Rs. 13,02,995/- was to be distributed proportionately to the turnover of Rs. 13,15,87,568/- of the sanitary napkins during the investigation period, which is 0.99% of the turnover. Hence, the base price would increase by 0.99% for calculation of profiteering for the fresh stock. b. In respect of issue mentioned at para 1 (ii....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (increase in cost due to denial of input tax credit @ 12% of the basic purchase price of Rs. 66.91/-) and Rs. 1.08/-(profit margin for that SKU) i.e., Rs. 76.02/- per unit. Ongoing through the outward supply data of closing stock, as submitted by the Respondent, DGAP had observed that the Respondent had sold the same at Rs. 80/- per unit vide invoice no. UBO3-29100 dated 05.09.2018. Thus, the profiteering amount for "Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count)" for one unit is Rs. 3.98/-. Following the similar methodology, profiteering has been computed on the closing stock and the profiteered amount works out to Rs. 5,37,208/-. (ii). The profiteered amount on fresh stock: During the post-rate reduction period (27.07.2018 to 30.09.2018), the purchase price of the goods "Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count)" for the Respondent increased to Rs. 73.61/-. Hence, the commensurate selling price of the Respondent for the stock purchased after rate reduction w.e.f. 27.07,2018 should have been the sum of Rs 73.61/- (basic purchase price), Rs. 1.08/-(profit margin for that SKU) and Rs. 0.73 (0.99% of basic purchase price, as discussed in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 38 27 27-Maharashtra 77,429 44,880 1,22,309 28 29-Karnataka 97,782 49,208 1,46,991 29 30-Goa 2,065 5,084 7,149 30 31-Lakshdweep - 334 334 31 32-Kerala 5,720 16,803 22,523 32 33-Tamil Nadu 1,16,585 60,227 1,76,812 33 34-Pondicherry 986 716 1,702 34 35-Andaman & Nicobar Islands 376 559 935 35 36-Telangana 32,780 26,944 59,724 36 37-Andhra Pradesh 7,063 12,378 19,441 5,37,208 4,47,146 9,84,354 4. The above Report dated 31.12.2020 was considered by this Authority in its meeting held on 05.01.2021. Accordingly a Notice dated 05.01.2021 (enclosing the DGAP's Report dated 31.12.2020) was issued to the Respondent to explain why the above Report of the DGAP should not be accepted and his liability for profiteering should not be determined under Section 171 of the CGST Act, 2017. 5. Therefore, the Respondent vide his submissions dated 01.03.2021, has furnished his reply to this Authority, wherein the Respondent has reiterated and re-asserted the grounds taken by him in his previous submissions dated 11.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly for alleged profiteering of fresh stock and that such benefit will also be given to him in respect of out ward supply of closing stock. ii. In the said Report, the DGAP had given benefit to him only in respect of the input tax paid on purchase of closing stock of Sanitary Napkins, which was reversed by him when the closing stock was sold after exemption. He had quoted Rule 42 of the CGST Rules stating that it provides a specific methodology for availment/reversal of credit; (a) Non-availment or reversal (if already availed) of input tax pertaining exclusively to non-business purposes, exempt supplies, or for restricted purposes listed in Section 17(5) of the CGST Act, from the total input tax; (b) Crediting the differential input tax in the electronic credit ledger; (c) From such differential input tax credit availed, the input tax attributable exclusively to taxable supplies is segregated; (d) What remains is common credit, on which the formula prescribed in Rule 42 is to be applied to compute the common credit reversal. iii. Common credit was availed in addition to input tax credit pertaining exclusively to any supply and f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....13,02,9950 reversal done by him had already been incorporated to new stock. 7. The above said clarifications dated 16.03.2021 of the DGAP, were supplied to the Respondent for filing his rejoinder. The Respondent had filed his rejoinder dated 31.05.2021 reiterating the grounds taken earlier. It was further contended that the benefit of total common credit should be accorded to them, since one such credit was reversed, the same become cost and is appropriated by him in his pricing. The benefit of total loss incurred by him on account of common credit reversal of Rs. 13,02,995/- should be given to him against the total alleged profiteering calculated by the DGAP. He also submitted that the benefit of common credit reversal should be considered for arriving at the alleged profiteering in case of closing stock which was given to him. 8. Considering the above said rejoinder 31.05.2021 of the Respondent and his request for Personal Hearing, this Authority has granted a hearing on 28.04.2022 through video conferencing to the Respondent and the Applicant No.1. However the Respondent vide his letter dated 27.04.2022, has submitted that he does not wish to contest this matter and is rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....loyed by the DGAP to compute the profiteered amount is correct, appropriate, reasonable and in consonance with the provisions of Section 171 (1) of the CGST Act, 2017. 12. The Respondent has raised certain issues relating to reversal of common credit and the DGAP has replied to the said contention citing the relevant provisions of law. As such, the Authority finds that this contention of the Respondent is untenable. The Authority finds that the DGAP has correctly calculated the profiteered amount as Rs. 9,84,354/-(Rs. 5,37,208/- on closing stock & Rs. 4,47,146/- on fresh stock) as mentioned in Table-A above, which was to be passed on to the buyers of the impugned item by way of commensurate reduction in the prices in terms of Section 171 (1) of the CGST Act, 2017 during the above period, by the Respondent. Further, it is also observed that the Respondent vide his letter dated 27.04.2022, has submitted that he is ready to pay the profiteered amount as calculated by the DGAP in his above said Report dated 31.12.2020. 13. As per the above discussion and findings, this Authority as per the provisions of Section 171 of the CGST Act, 2017, determines the profiteered amount as Rs. 9....
X X X X Extracts X X X X
X X X X Extracts X X X X
....adhya Pradesh 6140.5 25 Consumer Welfare Fund of Gujarat 10496 26 Consumer Welfare Fund of Daman & Diu 95 27 Consumer Welfare Fund of Dadra & Nagar Haveli 19 28 Consumer Welfare Fund of Maharashtra 61154.5 29 Consumer Welfare Fund of Karnataka 73495 30 Consumer Welfare Fund of Goa 3574.5 31 Consumer Welfare Fund of Lakshdweep 167 32 Consumer Welfare Fund of Kerala 11261 33 Consumer Welfare Fund of Tamil Nadu 88406 34 Consumer Welfare Fund of Pondicherry 851 35 Consumer Welfare Fund of Andaman & Nicobar islands 467.5 36 Consumer Welfare Fund of Telangana 29862 37 Consumer Welfare Fund of Andhra Pradesh 9720.5 TOTAL= 984354/- 14. The Authority finds that the Respondent has contravened the provisions of Section 171 (1) of the CGST Act, 2017. Therefore he is liable for imposition of penalty under the provisions of Section 171 (3A) of the said Act. However, since, the provisions of Section 171 (3A) have come in to force w.e.f. 01.01.2020 and the offence pertains to the period from 27.07.2018 to 31.03.2019, hence penalty under the above section cannot....