TaxTMI 
TaxTMI 
2024 (7) TMI 518
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.... an application dated 22 05.2019 filed by Applicant Na 1. under Rule 128 of the CGST Rules, 2017 (hereinafter referred to as "the Rules"). The Applicant No. 1 had alleged that the Respondent did not pass on the benefit of reduction in the GST rate on the movie admission tickets from 28% to 18% w.e.f 01.01.2019. vide Notification No. 27/2018-C.T. (Rate) dated 31.12 2018 and instead. increased the base price to maintain the same cum-tax selling price, alleging profiteering by the Respondent with regard to supply of "Services by way of admission to exhibition of cinematography films'. 2. Vide the above-mentioned Report. the DGAP inter-alia stated that - i. On receipt of the reference from the Standing Committee on Anti-profiteering a notice under Rule 129 of the Rules was issued by him on 02.06.2020. calling upon the Respondent to reply as to whether he admits that the benefit or ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so to suo moto determine the quantum(hereof and indicate the same in his reply to the notice as well as furnish all supporting documents Vide the said notice; the Respondent was also given an opportu....
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....ce, the investigator was limited to reduction in rate of GST from 28% to 18% only for one category of ticket. viii. From the sales data made available. it appeared that the Respondent increased the base price of the admission ticket when the GST rate was reduced from 28% to 18% w.e.f. 01.01.2019 in the manner illustrated in Table-A below:- Table-A Sr. No. 01.12.2018 to 31.12.2018 01.01.2019 to 30.04.2020 Price of Ticket Inclusive of tax (in Rs.) GST Rate (%) Amount charged i.e. Base Price (In Rs.) Price of Ticket Inclusive of tax (in Rs.) GST Rate (%) Amount Charged i.e. Base Price (In. Rs.) Commensurate Base Price (in Rs.) Amount which was to be Charged (in Rs.) A B C D=(B/128%) E F G H I=(H*118%) 1. 130 28 101.56 130 18% 110.17 101.56 119.84 ix. From the above Table- 'A', it was apparent that the Respondent had increased the base price of admission ticket i.e. from Rs 101.56 to 110.17. Thus, it was noted that the actual cum-tax price of the ticket was not reduced to Rs. 119.84 as was required after the GST rate reduction The Respondent continued to charge the pre rate reduc....
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....e consumers had been provided. ii. In view of the aforementioned findings, it appeared that Section 171 (1) of the CGST Act, 2017. requiring that 'any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices", had been contravened by the Respondent in the present case. 4. The above Report dated 25 09.2020 was carefully considered by the erstwhile Authority (hereinafter referred to as "the NAA") and it was decided to allow the Respondent and the Applicant to file their consolidated written submissions by 15.10.2020. Accordingly a notice dated 01.10 2020 was issued to the Respondent to explain why the Report dated 25 09.2020 furnished by the DGAP should not be accepted and his liability for profiteering in violation of the provisions of Section 171 should not be fixed and to file his reply. 5. The Respondent filed his written submissions on 20 10 2020 vide which he has inter-alia stated that:- i. The DGAP should have computed the profiteering, if any, only in case of the movies which were going on during the GST rate change period Prices of tickets for every....
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....eived from the Applicant No 1. The said application was by one Applicant. namely Sh. Hrushikesh Hence, the investigation cannot go beyond the application and cover other customers also who had not questioned the benefit passed on to them. In this regard, reliance was placed on the following orders of the NAA, wherein investigation report and final order of the NAA all were only on the product for which complaint was filed in the respective cases: a M/s. U.P. Sales & Services vs. M/s Vrandavaneshwree Automotive Private Limited reported at 2018-VIL-01-NAA: In this case the applicant filed an application alleging that the supplier did not pass on the benefit of reduced rate of tax on Honda Car having Model No WR-V 1.2 VXMT (i-VTEC) and purchased by the applicant The NAA in this case while holding that the supplier had not contravened the provisions of Section 171 of the CGST Act, 2017 limited his enquiry and order. only to the particular model of car b. Shri Rishi Gupta vs. M/s Flipkart Internet Pvt Ltd. reported at 2018 VIL-04-NAA: In this case, the applicant filed an application Stating that he paid extra amount for Godrej Interio Slimline Metal Almirah to the supp....
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.... was liable to be set-aside. In this regard, reliance was placed on the cases of Eternit Everest Ltd. vs. UOI, reported at 1997 (89) E.L.T. 28 (Mad.), Commissioner of Income Tax, Bangalore vs. B.C. Sanivasa Shetty, reported at (1981) 2 SCC 460, Samsung (India) Electronics Pvt. Ltd. vs. Commissioner of Commercial Taxes U.P. Lucknow, reported at 2018 (11) G.S.T.L 367 and Union of India vs. Suresh Kumar Sense/ reported at 2017 (4) G.S.T.L. J128 (S.C.). v. The lack of a judicial member in the Constitution of the NAA exercising the judicia/quasi-judicial functions was against the basic structure of Constitution of India and it takes away the independence of judiciary and was therefore against the rule of law It was submitted that the proceedings being violative of principles of natural justice was liable to be dropped in entirety. Reliance was also placed on following cases: a. Madras Bar Association vs. Union of India, 2014 (308) ELT 209 (SC). b. Union of India v. R. Gandhi. President Madras Bar Association, (2010) 11 SCC 1. c. Rojer Mathew vs. South Indian Bank Limited and Ors., 2018 (13) GSTL 129 (SC). d. Gujarat Urfa Vikas Nigam Limited v....
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....s Publication and Oxford English Reference Dictionary - Oxford University Press. vii. The period covered under the investigation was from 01.01.2019 to 30 04.2020 This covered the business operations of the Respondent for 14 months While the GST rate was reduced from 01.01 2019, there was no reason adduced by the DGAP as to the date of 30.04.2020 being reckoned for conducting the investigation The Report was silent on the grounds or reasons based on which such period was selected by the DGAP for investigation. The period covered under investigation does not have any statutory basis. The Respondent had requested the DGAP to confine the period of investigation to a maximum of three months as during such period the cost of doing business would have changed and Respondent would have revised the price based on such cost. It was pertinent to mention that a supplier considers various factors like direct and indirect costs. demand & supply. customer perception, competition, product positioning, legal compliances profit. etc.. while determining the price of his goods. It was submitted that Respondent had not been able to pass on the increased cost to the recipients by way of increa....
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....isions/judgments referred supra. 6. Copy of the above submissions filed by the Respondent was forwarded to the DGAP for clarifications under Rule 133 (2A) of the CGST Rules. 2017. The DGAP submitted his clarifications on 16.11.2020 vide which he has clarified that - i. The DGAP had computed profiteering with respect to movies which were shown in his multiplex after the GST Rate reduction, as mandated by the provisions of Anti-profiteering. Section 171 of CGST Act, 2017 did not restrict or debar passing on the benefit of GST rate reduction in case films which were running at the time of rate reduction or after the rate reduction Moreover, the contention of the Respondent was not acceptable because it was observed that prior to rate reduction and after the rate reduction, there was only ono category of tickets priced as Rs. 130/- for all the different types of films shown in his theatre. Therefore, the Respondent ought to have given the benefit of rate reduction by reducing the base price commensurate to the benefit of rate reduction extended by the Government The Respondent failed to do so in case of all subsequent films and hence the profiteering could not be restricted....
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....e rate of tax on the impugned services was reduced w.e.f. 01.01.2019 and therefore, it was statutory obligation on the Respondent to pass on the benefit of tax reduction from the above date as per the provisions of Section 171 (1) of the CGST Act During the course of investigation. it had been found that the Respondent instead of reducing his prices commensurately had in fact increased the base price from the above date Therefore, as per provisions of Section 171 of the CGST Act, 2017. Respondent was liable to be investigated till the time he has not passed on the benefit of tax reduction, as he could not misappropriate the above benefit. The Respondent had failed to produce any evidence which could show that he had passed on the above benefit to all the recipient of service other than the Applicant and hence he had been rightly investigated as he had failed to fulfil the statutory requirement Section 171 of the Act nowhere mentions or restricts that the benefit of rate reduction should be limited to the Applicant only. Further the Respondent had cited several case laws of NM and observation of Screening Committee of Kerala to substantiate his claim that investigation coul....
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....methodology of FMCG sector to a supplier of a cinema sector would in fact lead to erosion of justice in the name of uniformity. The case laws cited by the Respondent were not applicable to the present case in view of above explanation. v. The Commission had been constituted under Section 171 (2) of the CGST Act, 2017 read with Rule 122 of the CGST Rules, 2017. The said Act or the Rules. nowhere mention requirement of a judicial member in the Authority. The Parliament, the State legislatures. The Central and State Government as well as the GST Council In his wisdom, had not found it expedient to constitute the NAA by providing a judicial member in the NAA. Such a Member had also not been provided in the other such Authorities like the TRAI or the Authorities on Advance Rulings on the Income Tax. Authorities on Advance Rulings on the Central Excise and the Goods and Services Tax. Moreover. the orders passed by the NAA was in full consonance of the 'Principles of Natural Justice' and was subject to judicial review and hence, no prejudice had been caused to the Respondent because of absence of a Judicial Member in the NAA. The case laws sated by the Respondent were not relevan....
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....espondent was labouring under the wrong impression that the Anti-profiteering provisions were transitionary. which was not the case, as provisions of Section 171 was permanent and enforceable perpetually till it was repealed by the Parliament and all the State Legislatures. viii. The Respondent had not only collected excess base prices from his customers which they were not required to pay due to the reduction in the rate of tax but the Respondent had also compelled customers to pay additional GST on these excess base price which he should not have paid. By doing so the Respondent had defeated the very objective of both the Central and the State Governments, which aimed to provide the benefit of rate reduction to general public The Respondent was legally not required to collect the excess GST and therefore, he had not only violated the provisions of the CGST Act. 2017 but had also acted in contravention of the provisions of Section 171 (1) of the Act supra. as he had denied the benefit of tax reduction to his customers by charging excess GST. Had he not charged the excess GST. The customers would have paid less price while purchasing goods from the Respondent and hence, ab....
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....guments before the Commission. The Counsel also requested 'one weeks' time to submit written submissions along with relevant documents The Commission considered the request of the Respondent and decided to grant one weeks' time to submit written submissions along with relevant documents. Accordingly, the Respondent has filed his submissions on 16.05.2024. Vide its submissions dated 16.05.2024. the Respondent has submitted a short synopsis on arguments in addition to the previous written submissions which are as follows - i. The DGAP failed to take into consideration that the prices being charged by the Respondent were within the maximum permissible limit set by the Regulating Authority i.e., the State Government ii. The DGAP has misconstrued the scope and ambit of Section 171 of the CGST Act. iii. The DGAP has gone beyond the purview of the complaint made by the Applicant No. 1. iv. Rule 133 (3) mentions a 'recipient to whom the benefit was not passed and not 'recipients'. Section 2 (93) of the CGST Act defines a 'recipient' Hence. the profiteered amount has to be determined in relation to a 'recipient' only. 9. The Commission has carefully ex....
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....ondent as per the provisions of Section 171 of the above Act. 12. The Respondent has contended that Profiteering if any, should have been computed only in respect of the movies which are going on during the GST rate reduction period It is submitted that in the instant case, every movie should be treated separately Further. the DGAP has been computing the profiteering amount separately for each and every project in construction sector on the basis of launching dates, separate ITC and turnover etc. In this regard, the Commission observes that the Respondent has only category of tickets i.e.. Premium Category having price of Rs. 130/- for all the different types of films shown in his theatre. Further. Section 171 of CGST Act, 2017 does not restrict or debar passing on the benefit of GST rate reduction in cases, where films were running at the time of rate reduction or after the rate reduction. Further, the Respondent has compared the "Service by way of admission to exhibition of Cinematography film" with Real Estate Sector. In this regard, the Commission finds that in the real estate sector. the complaint is made against one or two flats but all the flats of the said project are....
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....s of the Cinema tickets by taking into consideration the various factors including cost. In the interest of cinema goers and the Respondent is always at liberty to reduce his prices in accordance with the provisions of Section 171 of the CGST Act. 2017 at the time of rate reductions Therefore. the above contention of the Respondent is not tenable. 14. The Respondent has contended that the investigation cannot go beyond the application submitted by the Applicant No. 1 and cover other customers also who have not questioned the benefit passed on to them. In this regard, reliance is placed on the cases of M/s. U.P. Sales & Services vs. M/s Vrandavaneshwree Automotive Pvt Ltd [2018-VIL-01-NAA] and Sh. Rishi Gupta vs. M/s Flipkart Internet Pvt. Ltd. [2018 VIL-04-NAA], wherein investigation, report and final order of the NAA. all were made, only on the product tor which complaint was files in the respective cases. In this regard it is to mention that Section 171 (2) of the CGST Act 2017 states that "The Central Government may on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any taw for the time being i....
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....hich means that if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails 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, hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear. unambiguous. mandatory and legally enforceable. Computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from Stock Keeping Unit (SKU) to Stock Keeping Unit or unit to unit or service to service and hence no fixed mathematical methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a buyer Similarly computation of the profiteered amount is also a mathematical exercise which can be done by any person who has elementary knowledge of accounts and mathematics However, to further explain the legislative intent behind the above ....
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.... till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Fund referred to in section 57; (c) imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act. (iv) to furnish a performance report to the Council by the tenth day of the close of each quarter." Therefore, the sequitur of the discussion above is that- (a) the Commission did not replace or substitute any function which Courts were exercising hitherto; (b) it performs quasi-judicial functions but cannot be equated with a judicial tribunal; (c) it performs its functions in a fair and reasonable manner in accordance with the Act but does not have the trappings of a Court and (d) absence of a judicial member does not render the constitution of the Commission unconstitutional or legally invalid. Further, in the case of Namit Sharma vs. Union of India, (2013) 1 SCC 745, the Hon'ble Supreme Court considered the question of the requirement of a judicial member for ....
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....pients 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 SKU of each product or unit of construction or service to every buyer and in case they are not passed on. The quantum of denial of these benefits or the profiteered amount has to be computed, for which investigation has to be conducted. in respect of all such SKUs/units/services by the DGAP. What would be the 'profiteered amount has been clearly defined in the explanation attached to Section 171, which states as under - "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 ITC to the recipient by way of commensurate reduction in the price of the goods or services or both. The expression "profiteered" has been defined in the Explanation to Section 171 of the Act, 2017 to 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....
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....e DGAP has received the reference from the Standing Committee on Anti-profiteering on 06 05.2020 and issued Notice of Investigation on 02.06.2020. the period till 30.04.2020 was correctly covered as the Respondent has not produced any evidence to pass on the benefit of tax reduction to the recipient/customers. The Respondent is liable to be investigated till the time he has not passed on the benefit of tax reduction. Therefore, the above contention of the Respondent is untenable and hence it cannot be accepted. 19. The Respondent has further contended that alleged profiteering amount has been incorrectly inflated in the Report by adding GST and the same is not sustainable. In this connection the Commission holds that the Respondent has not only collected excess base prices from his customers which they were not required to pay due to the reduction in rate of tax but the Respondent has also compelled his customers to pay additional GST on the excess base price which they should not have paid. By doing so. the Respondent has defeated the very objective of both the Central and the State Governments which aimed to provide the benefit of rate reduction to the general public The Respo....
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....AP and the same has been supplied to the Respondent. Hence, there is no need to issue separate show cause notice to the Respondent on the above grounds The Respondent has been supplied all the material documents which have been relied upon by the DGAP while framing the Report and hence the Respondent has no ground to allege violation of principles of natural justice Hence, the contention of the Respondent is devoid of merit and cannot be accepted. 21. The Respondent has contended that the DGAP had not considered the fact of increase in the cost of the Respondent due to restriction on collection of parking fee and increase in rent in his investigation report. In this regard, it may be mentioned that the main factor under consideration for determining the profiteered amount are base prices of tickets. 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 ITC to the recipients by way of commensurate reduction in prices. The willful action of not passing on the above benefits to the recipients in the manner prescribed amounts to profiteering and the Respondent had indulged in....
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....he judgement of Competition Commission of India v. Bharti Airtel Ltd.& Ors. by the Respondent Is completely misplaced as the facts and circumstances of the said case are different and distinct from facts of the case at hand. In the said judgement the Hon'ble Supreme Court has acknowledged the exclusive jurisdiction of the Competition Commission of India arising under the Competition Act. 2002. Further, arguendo, even if it Is assumed that the said judgement is applicable to the present case, there are no jurisdictional facts which need to be ascertained from the Licensing Authority. The Respondent should have kept his base prices same to transfer the benefit of rate reduction to the consumers. Instead, he increased the base prices of tickets thereby wrongly appropriating the benefit of rate reduction. Therefore. the above contention of the Respondent cannot be accepted. 23. The Respondent has also averred that the DGAP has misconstrued the scope and ambit of Section 171 of the CGST Act, 2017. In this regard, the Commission finds that Section 171 of the CGST Act. 2017 mandates that any benefit of reduction in the rate of tax or the benefit of ITC which accrues to a supplier mu....
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....in GST rate "Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees" from 28% to 18% wet 01.01 2019. It Is also clear to us that the Respondent has not passed on the benefit of rate reduction for the period from 01 01.2019 to 30.04.2020 amounting to Rs. 88.67.790/- (inclusive of GST) to his customers/recipients Thus, the profiteering is determined as Rs. 88,67.790/-as per the provisions of Section 171 read with Rule 133 (1) of the CGST Rules 2017 and accordingly the Respondent is directed to commensurately reduce the prices of movie tickets in line with the provisions of Section 171 (1) read with Rule 133 (3) (a) of the CGST Rules, 2017. 27. Further, since the customers/ recipients, in this case. are not Identifiable, we direct the Respondent to deposit the profiteered amount of Rs. 88,67,790/-along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited, in two equal parts, in the Central Consumer Welfare Fund and the Telangana State Consumer Welfare Fund as per provisions of Section 171 (1) read with Rule 133 (....