TaxTMI 
TaxTMI 
2022 (5) TMI 1595
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....s. Accordingly, an investigation was initiated by the DGAP to collect evidence necessary to determine whether the benefit of GST rate reduction had been passed on by the Respondent to the recipients in respect of supply of subject goods. 2. Thereafter, the DGAP had issued a notice to the Respondent on 7-2-2020, under rule 129 of the CGST Rules, 2017, asking the Respondent's reply as to whether he admitted that the benefit of GST rate reduction had not been passed on to the recipients by way of commensurate reduction in prices and if so, to suo motu determine and indicate the same in his reply to the Notice as well as to furnish all supporting documents. Vide the said Notice the Respondent was given an opportunity to inspect the non-confidential evidences/information furnished to him on 13-2-2020 or 14-2-2020., which the Respondent didn't avail. 3. The DGAP has submitted that in response to the Notice, the Respondent did not submit all the requisite documents by the due date, hence, reminders were issued to the Respondent on 16-3-2020, 30-4-2020, 13-5-2020 & 2-6-2020. The DGAP also stated that the Respondent did not submit requisite documents even after several reminders, ....
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....ourt's Orders dated 22-9-2020, and 30-9-2020, a fresh Notice was issued to the Respondent on 17-11-2020 with directions to furnish his reply on or before 1-12-2020, along with the requisite documents. Through the said Notice the Respondent was given an opportunity to inspect the relied upon documents on 26-11-2020 or 27-11-2020. Due to sudden surge in the Covid-19 cases, the Respondent vide letter dated 3-12-2020, requested the DGAP to supply the copies of relied upon documents. The DGAP had considered the request of the Respondent and supplied the copies of relied upon documents to the Respondent vide letter dated 24-12-2020. 6. The DGAP has also submitted that in response to the Notice, the Respondent did not submit complete requisite documents by due date. Hence reminder were issued to the Respondent on 3-12-2020 and 24-12-2020. The Respondent did not submit requisite documents even after several reminders, therefore, summons under section 70 of the CGST Act, 2017 read with rule 132 of the CGST Rules, 2017 were issued on 12-1-2021 to Sh. Vikram Jhala, AGM, Indirect Taxation of the Respondent to submit the requisite documents. In compliance of the said summons, the Responden....
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....2020, 21-5-2020, 18-7-2020, 8-8-2020, 9-8-2020, 29-8-2020, 05-9-2020, 3-12-2020, 31-12-2020, 25-1-2021, 19-2-2021, 20-2-2021, 19-3-2021, 17-7-2021 and 11-11-2021. The replies of Respondent have been summed up by the DGAP as follows:- (i) That the rate reduction had happened only in respect of 28 products by virtue of Notification No. 41/2017 dated. 14-11-2017. The GST rate was reduced from 28% to 18% in respect of two product categories i.e. Detergent Powder and Scouring Bar w.e.f. 15-11-2017. (ii) That as on the cut-off date i.e. 15-11-2017, the Respondent was having unsold stocks at his factory and Depots which were sold after rate reduction. However, the Respondent had passed on the benefits of rate reduction by charging applicable rate without increase in its basic selling price which could be understood with the below given example: Product: Nirma Yellow Powder -1Kg (Before 15/11/2017) (After 15/11/2017) Basic Rate per Kg 28.05 28.05 (Selling Price) - GST @28% 7.85 - GST@18% 5.05 - Rate to Distributor 35.90 33.10 - Distributor Margin 0.80 0.80 GST on Margin @28% 0.22 - GST on Margin @1....
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....Rosata Vitrified Pvt. Ltd, Morbi 22011/NAA/85/Rosata/2018/2339-2342 3-4-19 12 26/2019 25.04 2019 Mak Plywood Inds. Pvt. Ltd. Kerala 22011/NAA/77/Makply/2018 25-4-19 13 11/2020 04-3-2020 Bajaj Electricals Ltd. Mumbai 22011/NAA/69/Bajaj/2 019/1353-56 04-3-20 The Respondent based on his above had stated that in his case, there was no profiteering, hence he requested to close the proceedings initiated against him. (v) That he had a system of reviewing the cost vis-a-vis selling price of his products, normally on half yearly basis i.e. March/April and September/October unless there were some major factors affecting the cost of the products where immediate necessary changes in the selling prices of the products were to be made e.g. there was an increase in the rates in the month of December, 2017. He had also informed that the key and major components effecting the cost of Detergent including Scouring Bar were petroleum products, (a) The price of Crude Oil which governed the prices of petroleum products was at USD 52 per Barrel in April, 2017 which was substantially increased to USD 60 per Barrel in November, 2017 (b) the cost of advertisements, transportation and ....
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....nt was reduced from 28% to 18% w.e.f. 15-11-2017 and if so, (ii) Whether the Respondent had passed on the benefit of such reduction in GST rate to the recipients, in terms of section 171 of the Central Goods and Services Tax Act, 2017. 12. The DGAP has also mentioned that on scrutiny of letter dated 18-4-2019 of this Authority received through the Standing Committee, he had observed that the Respondent had furnished a list dated 6-8-2018, wherein details of impacted products were given. Further, in the Minutes of the Meeting of the Standing Committee dated 10-1-2020, the remark given in respect of the Respondent was that there was non-reduction of prices commensurate with reduction in GST from 28% to 18%, whereas in the said list there was no indication of prices at which the products were sold by Respondent to his recipients (distributors). There was only a reference of pre-rate reduction MRP and post-rate reduction MRP, effective rate of change in MRP, quantity sold at old MRP and sales value of quantity sold at old MRP. In this regard, the DGAP has submitted that section 171 of the CGST Act, 2017 does not specifically talk about the reduction in MRP, however, it stipulat....
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....spondent, he had observed that the Respondent had not increased the base prices of the subject goods when the rate of GST was reduced from 28% to 18% w.e.f. 15-11-2017. The following Table- A reflects the base prices of all the products of the Respondent which were impacted vide Notification No. 41/2017-Central Tax (Rate), dated 14-11-2017. The table indicates that the base prices of all the impacted products were not changed after rate reduction. It also indicates that the base prices in some cases were revised and in some case were not revised at all. Table-'A' No. Product Details Pre-rate reduction Post-rate reduction Period from which the product rates are revised Invoice No./Date Basic Price Per Kg/Box invoice No./Date Basic Price Per Kg/Box - Rs. Rs. - A B C D E F G 1 Nirma Yellow Powder, 1 kg 701052TI17000945 dated 30-10-2017 26.85 701052T117001170 dated 20-11-2017 26.85 29-11-2017 701134TI17001089 dated 14-11-2017 28.05 901002T117007590 dated 15-11-2017 28.05 13-6-2018 - - 701032T118001647 dated 22-3-2018 28.90 Sold Only in Post-rate reduction period 2 Nirma Yellow Powder, ....
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....11-2017 34.15 701033T117001473 dated 18-11-2017 34.15 Rates not revised Nirma Advance Detergent, 170 Gms 701134T117000929 dated 11-10-2017 37.60 701035T117001705 dated 15-11-2017 37.60 30-5-2018 Nirma Advance Detergent, 180 Gms - - 901008T117002283 dated 26-11-2017 38.10 Sold Only in Post-rate reduction period Nirma Advance Detergent, 165 Gms - - 901008T118001143 dated 4-8-2018 42.00 Sold Only in Post-rate reduction period Nirma Advance Detergent, 155 Gms - - 901008TI18002324 dated 29-12-2018 44.00 Sold Only in Post-rate reduction period Nirma Advance Detergent, 150 Gms - - 901004TI19004715 dated 16-3-2019 44.15 Sold Only in Post-rate reduction period 9 Nirma Advance Detergent, 500 Gms 701031TI17000311 dated 9-11-2017 34.00 701031 Tl 17000324 dated 17-11-2017 34.00 Rates not revised 701134TI17001088 dated 14-11-2017 33.90 701035T117001705 dated 15-11-2017 33.90 29-5-2018 (07-5-2019 for 25kg packing) - - 901004T117003796 dated 20-11-2017 33.50 Sold Only in Post-rate reduction period 10 Nirma Advance Detergent, 500 Gms + BSP70 701053T117000996 dated 13-11-2017 39.20 701025T117000211 dated 22-11-2017 39.20 Rates not revised Ni....
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.... 19 Nirma Super Powder, 1 Kgs 901002T117007536 dated 14-11-2017 49.50 901002T117007590 dated 15-11-2017 49.50 17-11-2017. 11-1-2018, 15-5-2018, 22-5-2018 701029T117003565 dated 28-10-2017 51.05 701202T117001006 dated 17-11-2017 51.05 20 Nirma Super Powder, 500 Gms 701134T117001082 dated 14-11-2017 49.50 901002T117007590 dated 15-11-2017 49.50 16-11-2017, 3-1-2018, 15-5-2018, 21-5-2018 701029T117003911 dated 10-11-2017 51.05 701029T117003955 dated 16-11-2017 51.05 21 Nirma Super Powder, 100 Gms 701020T117001048 dated 13-11-2017 59.15 901002T117007580 dated 15-11-2017 59.15 15-5-2018 22 Nirma Pink Powder, 1 kg 901002T117007560 dated 14-11-2017 25.00 901002T117007604 dated 16-11-2017 25.00 25-1-2018, 15-5-2018 23 Nirma Pink Powder, 180 Gms 701020T117001045 dated 10-11-2017 27.40 901002T117007604 dated 16-11-2017 27.40 02-2-2018, 3-1-2019 Nirma Pink Powder, 170 Gms - - 901002TI19010455 dated 23-1-2019 31.60 Sold Only in Post-rate reduction period 24 Nirma Bartan Bar, 100 Gms (2+1 Free) - - 901002TI19010196 dated 17-1-2019 310.60 Sold Only in Post-rate reduction period 25 Nirma Bartan Bar, 200 G....
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....ediate necessary changes in the selling price of the products were to be made. Explaining why the prices were revised afterwards, the Respondent submitted that they had increased the prices in December 2017. The Respondent had cited an example explaining why there was an increase in the rates in the month of December, 2017. Further, the DGAP has also submitted that the Respondent had increased the prices of non-impacted products namely Detergent Cakes (HSN Code 34012000) in December, 2017 where there was no reduction in rate of GST vide Notification No. 41/2017 dated November, 2017. The DGAP has further claimed that from the submissions of the Respondent the major components affecting the cost of detergent including scouring bar were variations in the prices of petroleum products, especially, the price of Crude Oil which governed the prices of petroleum products. It was at USD 52 per Barrel in April, 2017 which was substantially increased to USD 60 per Barrel in November, 2017. From the above, the DGAP has concluded that the Respondent had not increased the base prices in respect of the impacted products immediately after reduction in GST rate but only afterwards on account of afo....
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....ducts after reduction in rate of tax made vide Notification No. 41/2017 dated 14-11-2017. The Respondent had also submitted details of invoices evidencing that the base prices of impacted products were not increased. To corroborate his intent to pass on the benefit of reduction in tax rate the Respondent had communicated it to his distributors through circular dated 15-11-2017. 20. The DGAP has also mentioned that the Standing Committee had forwarded the case against the Respondent with the following remark: "Non-reduction of prices in commensurate with reduction of GST from 28% to 18%" The Standing Committee had also sent the sheet submitted by the Respondent containing the details of impacted products, his pre-& post-rate reduction MRP etc. However, no Anti-Profiteering Application Form (APAF) or any actual invoice was forwarded by the Standing Committee. The DGAP has further stated that while investigating the case, it was observed that section 171 of the CGST Act, 2017 did not specifically stipulate that there should be a reduction in MRP. However, it envisaged that the supplier had to pass on the benefit of rate reduction to his recipients by way of commensurate reduction....
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....dent that he had not increased the base prices of his products therefore, there was no violation of the provisions of section 171 of the above Act. 24. In this regard it would be relevant to refer to the provisions of section 171 (1) which state as under: "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. (emphasis supplied) It is clear from the plain reading of the above provision that whereas it refers to any supply in a singular manner, it does not refer to the price in the same manner but refers to the prices in plural term for one supply. Had the intention been only to reduce one price, the word 'prices' would not have been mentioned in the above section in respect of one item of supply. Therefore, it is clear that all prices fixed by a manufacturer/supplier, in respect of each SKU, have to be reduced commensurately and not only the base price. It is well established that, a SKU may have different prices due to the legal provisions, pricing strategy adopted, geographical reasons, availability of tax benefits in a particular State or prov....
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....claim that he has not violated the provisions of section 171 as he has not increased his base price when he has not reduced the MRP of the same product on which he is selling his product to the ultimate buyer. The benefit extended on one hand cannot be withdrawn by another. Accordingly, the finding recorded by the DGAP that the Respondent has not increased his base prices and passed on the benefit of tax reduction on the impacted SKUs is not substantiated and hence it cannot be accepted. It is also apparent from the letter dated 18-4-2019, addressed to the Standing Committee by this Authority, which was sent to the DGAP by it on 24-1-2020 for detailed investigation that the information supplied by the Respondent pertained to the pre-and post-15-11-2017, rate reduction MRPs of the impacted SKUs being sold by the Respondent. It was specifically mentioned that the data received may involve some profiteering. Again vide letter File No. 22011/NAA/39/Nirma/2018/5886, dated 6-11-2020, detailed information pertaining to the Respondent was again supplied to the DGAP by this Authority which does not appear to have been properly examined as it is apparent from the information supplied by the....
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....he Respondent cannot delegate the legal duty imposed on him by section 171 to pass on the benefit, to his Distributors/Wholesalers/Retailers. Therefore, there is no evidence to establish that the Respondent had reduced the MRPs commensurately and immediately after tax reduction and the ultimate consumer had got the benefit of tax reduction. Accordingly, the claim made by the DGAP in this regard cannot be accepted. 29. In view of the above findings, the law settled by this Authority vide Order No. 11/2020, dated 4-3-2020, in the matter of M/s Bajaj Electricals Ltd., Order No. 21/2018, dated 24-12-2018, in the matter of M/s Asian Granito India Ltd., Order No. 28/2018, dated 27-12-2018, in the matter of M/s Ahuja Radios., Order No. 13/2019, dated 1-3-2019, in the matter of M/s Velbon Vitrified Tiles Pvt. Ltd., Order No. 19/2019, dated 13-3-2019, in the matter of M/s Somany Ceramics Ltd., Order No. 18/2019, dated 13-3-2019, in the matter of M/s Asian Paints Ltd. and Order No. 24/2019, dated 3-4-2019, in the matter of M/s Rosata Vitrified Pvt. Ltd. does not apply to the facts of the present case. 30. The DGAP has also contended that, no Anti-Profiteering Application Form (APAF) or any....