TaxTMI 
TaxTMI 
2025 (1) TMI 392
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....butors/Wholesalers/ Retailers by whatever name known? ii. Whether the Respondent had affixed stickers or stamped or online printed the reduced MRPS on the stock lying with him or his dealers as on 15.11.2017 and thus passed on the benefit of tax reduction on it? iii. Whether the Respondent had charged 18% GST after rate reduction on the impacted SKUs after rate reduction? iv. On which grounds the Respondent had increased the base prices of his products in the month of November, 2017 immediately after the tax reduction on 15.11.2017? v. What evidence regarding increase in the prices of Crude Oil was available on the basis of which it had been claimed that the Respondent had increased his prices due to the increase in the prices of the Crude Oil? vi. Whether the Respondent had violated the provisions of Section 171 of the Act and if so what was the quantum of profiteering? 2. The DGAP vide his Report dated 27.01.2023 has inter-alia submitted the following: - 1) i. That out of 32 impacted products; MRP was not reduced in respect of the following 5 SKUs: a. Nirma Super detergent powder-1kg b. Nirma Super deterge....
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....on the said benefit. Thus, there was no contravention of the provisions of Section 171 of the CGST Act, 2017. The DGAP further stated that under Section 171 of the CGST, Act, the Respondent was required to pass on the benefit to his recipient alone. By not increasing the base price and reducing the tax after rate reduction, the Respondent had complied with the provisions of Section 171 as long as the supply of goods by the Respondent to his recipient was concerned. In the GST regime each supply in a supply chain was separately assessed and each registered person was liable to comply with the provisions of CGST Act and Rules separately. Further, the Respondent was not obliged to reduce MRP under the CGST Act and as long as the Respondent passed on the commensurate benefit to his distributors, it would be treated as compliance of Section 171 of the CGST Act, 2017. While the point that MRP was required to be reduced or not was debatable and subject to further technical interpretation, it was evident that the price at which transaction was made between the Respondent and his recipient (Distributors) in the pre-reduction period, was commensurately reduced by way of maintaining ....
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....3 and issued notice dated 05.07.2023 to the Respondent directing him to file his submissions on the DGAP's report on the following points:- i. That the DGAP reported that the Respondent had not reduced the Maximum Retail Prices (MRPs) i.e. Retail Sale Prices of the impacted Stock Keeping Units (SKU) w.e.f. 15.11.2017 after the tax rate reduction which appeared to be contrary to the provisions of the Section 171 of the CGST Act, 2017 as the Respondent was legally required to reduce the MRPS after the tax rate reduction. ii. That the DGAP also stated that the Respondent had not affixed stickers or stamped or printed reduced MRPS on the SKUs lying in the stock as on 15.11.2017, which also appeared to be against the provisions of Section 171 of the CGST Act, 2017. The Respondent was legally required to fix such stickers or stamp or on-line print the reduced MRPS on the SKUs lying in your stock as on 15.11.2017 which had resulted in denial of passing on the benefit of tax reduction to the ultimate buyers who bear the burden of tax. iii. That the DGAP also submitted that the Respondent had charged reduced rate of tax @18% w.e.f. 15.11.2017 from his distribu....
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.... USD 60 per barrel. 5. The Commission vide OM dated 21.08.2023 forwarded a copy of the Respondent's submissions dated 11.08.2023 to the DGAP for clarifications under Rule 133(2A) of the CGST Rules, 2017. The DGAP submitted his clarifications dated 27.09.2023 vide which it was clarified that: - i. The Respondent had sold products to his distributors at decreased rate of GST without change of base price. The Respondent left onus only to the distributors/retailers to pass on the benefit to the consumer of reduction of MRP. ii. Rule 6(3) of the legal Metrology (Packaged Commodities) Rules, 2011 did not mandate that the MRP sticker could not be affixed. The Respondent's plea could not be considered for non-affixing the stickers of revised MRP. iii. The Respondent's obligation to the end consumer as a manufacturer was of utmost importance as only passing on the benefit to the very next stage of transaction was not the fulfillment of duties as the manufacturer as they were also obligated towards end consumer. However, the Respondent's contention that the benefit of tax reduction was passed on to their recipient was evident from the invoices is....
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....price of the impacted SKUs commensurately after the reduction of tax rate w.e.f. 15.11.2017 by way of circulars dated 15.11.2017 & 17.11.2017 respectively to his immediate recipient i.e. the distributor, to pass on the benefit of tax reduction to the consumers. The base price had not been increased. However, the revised stickers could not be fixed on the items due to the fact that the subject goods had been dispatched from the manufacturer's place to the distributor's place. ii. That the Rule 6(3) of the Legal Metrology (Packaged Commodities) Rules, 2011 read with Advisory no WM-1093102017 dated 16.11.2017 of the Department of Consumer Affairs provided to affix an additional sticker or stamping or online printing for declaring the reduced MRP on the pre-packaged commodity. The relaxation had also been provided in the case of unsold stocks manufactured/packed/imported after 1st July 2017 where the MRP would reduce due to the reduction in the rate of GST post 1st July, 2017. iii. That the price of Crude Oil was 52$ per barrel in April, 2017 and around 60$ per barrel in November, 2017. There was increase in the prices of Petroleum Products having cascading ef....
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....ate of passing of the order by the Authority. 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." 13. Further, the Hon'ble Delhi High Court vide its judgment dated 29.01.2024 in W.P. 7743/2019 & others 106 connected matters stated as under:- "SECTION 171 MANDATES THAT TAX FOREGONE HAS TO BE PASSED ON AS A COMMENSURATE REDUCTION IN PRICE 97. Section 171 of the Act, 2017 mandates that the suppliers shall pass on the benefit of reduction of the rate of Goods and Services Tax or Input Tax Credits by way of commensurate reduction in prices to the recipient. Section 171 deals with amounts that the Central and State Governments have foregone from the public exchequer in favor of the consumers. This Court is of the view that the amounts foregone from the public exchequer in favor of the consumers cannot be appropriated by the manufacturers, traders, distributors e....
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....aving arises due to the reduction in rates of tax or the benefit of the Input Tax Credit, in rupee and paisa terms, must be reflected as equal or near about reduction in price. In other words, tax foregone by the authorities has to be passed on to the consumer as commensurate reduction in price. 100. Accordingly, Section 171 of the Act, 2017 has been enacted, in public interest, with the consumer welfare objective of ensuring that suppliers pass on the benefit of Input Tax Credits and reduction of rate of Goods and Services Tax to the consumers. The Section does this by firstly creating a substantive obligation under sub-section (1) requiring manufacturers/suppliers to pass on benefits of Input Tax Credits and/or reduction in rate of tax by way of commensurate reduction in prices to the recipients. The said Section further enables the establishment of an Authority to determine whether Suppliers have passed on the benefits of Input Tax Credits and reduction of the tax rates, and to exercise such other powers and functions as may be prescribed. 102. To summarize, Section 171 of the Act, 2017 mandates that whatever is saved in tax must be reduced in price. Section 17....
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....nner given below; Maximum or max. retail price Rs....... inclusive of all taxes or in the form MRP Rs..Rs. ......incl..., if all taxes after taking in to account the fraction of less than fifty paise to be rounded off to the preceding rupee and fraction of above 50 paise and upto 95 paise to be rounded off to fifty paise;" 15.1. Therefore, as per Legal Metrology Act and Rules stated above the Respondent was legally required to display the revised MRPs i.e. Retail Sale Prices of the impacted SKUs (after commensurate tax reduction) on the stock available as on 15.11.2017, which was not done by the Respondent. 15.2. Further, as per order no. WM-1093102017 dated 16.11.2017 of the Department of Consumer Affairs, the Respondent was under further legal obligation to affix an additional sticker or stamp or online print the reduced MRPs on the SKUs lying in stock as on 15.11.2017; WM-10(31)/2017 Government of India Ministry of Consumer Affairs, Food and Public Distribution Department of Consumer Affairs Legal Metrology Division Krishi Bhawan, New Delhi Dated: 16.11.2017 To, The Controllers of Legal Metrology, All States/UTS ....