TaxTMI 
TaxTMI 
2025 (1) TMI 392
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....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 detergent powder-500 g c. Nirma Super detergent powder-100g d. Nirma Pink detergent powder-1Kg....
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.... 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 the same base price and reduced tax rate (18%) in the post-reduction regime. 2) The DGAP concluded that Section 171 of the CGST Act, 2017 did not spec....
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....pondent 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 distributors. The above findings of the DGAP was also contrary to the provisions of the Section 171 of the CGST Act, 2017 as the benefit of tax reduction was not to be passed on to the distributors but to the ul....
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....arifications 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 issued to his distributors, wherein there was no increase in base price as on 15.11.2017 and reduced rate of tax had been charged. In the matter of Union of India v/s Mohit Minerals Pvt. Ltd. the philosophy of GST to be consumption and destination based tax....
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....reased. 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 effect coupled with increase in cost of advertisement and transportation. Therefore, the Respondent was compelled to increase the prices of his Products. Further, the DGAP observed that not only impacted products price was revised but the price revision was carried out for non-impacted products also. 10.....
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....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 etc. To allow them to do so would amount to unjust enrichment. Consequently, when the Goods and Services Tax rate gets reduced or the benefit of input tax credit, becomes available as a necessary consequence the final price paid by the recipient obviously requires to be reduced. In the absence of such anti-profiteering provisions, there would be no legal oblig....
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....c 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 171 of the Act, 2017 incorporates the principle of unjust enrichment. Accordingly, it has a flavor of consumer welfare regulatory measure, as it seeks to achieve the primary objective behind the Goods and Services Tax regime i.e, to overcome the cascading effect of indirect taxes and to reduce the tax burden on the final consumer." 14. From a bare perusal of the provisions of Sectio....
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....spondent 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 Subject: Labelling of MRP of pre-packaged commodities due to reduction in GST-reg. Sir/Madam, Reference is invited to this office letter No. WM-10(31)/2017 dated 29.09.2017 regarding declaration of MRP on unsold stock of pre-packaged commodities manufactured/packed/imported prior to 1st July, 2017. Subsequent to that, Government has reduced the rates of GST on certain specified items. Consequent upon that, permission is hereby granted....