TaxTMI 
TaxTMI 
2025 (8) TMI 1123
X X X X Extracts X X X X
X X X X Extracts X X X X
.....2018, bearing No. 62/2018? 2. A chronological chart of events (or Date Chart) for better appreciation is placed below:- S.No. Date Event Remarks 1. 01.07.2017 GST Act, come into force Rate of GST for the Restaurant Service (food) was 18% 2. 14.11.2017 Effective date 15.11.2017 Rate of GST on Restaurant Services was reduced from 18% to 5% On Recommendation of GST Council, Rate of GST on Restaurant Services was reduced from 18% to 5% vide Notification No. 46/2017, with condition that the ITC on the Goods and Services used in supplying the service was not to be taken. 3. 28.11.2017 National Anti-Profiteering was formed Under section 171 of CGST Act, 2017, to ensure that the benefits of reduction in GST rates or input tax credit are passed on to consumers by way of commensurate reduction in prices, and to prevent profiteering by businesses. 4. 23.07.2019 Forwarding Complaint with respect of Anti-profiteering to the Standing Committee By Principal Commissioner & Member of Screening Committee. 5. 09.10.2019 Reference received from Standing Committee on Anti- profiteering to DGAP 6. 23.03.2020 rece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r No one appeared on behalf of the Respondent. 22. 22.07.2025 Hearing Concluded and matter reserved for judgment/order 3. It may be noted here that there is no dispute with regard to the fact that the rate of GST on Restaurant Services was reduced from 18% to 5% with effect from 15.11.2017, vide notification 46/2017dated 14.11.2017; and that the unit sale prices of various products of the Respondent remained unchanged even after the said reduction of rate of GST. 4. The facts of the case, shorn of unnecessary details are as follows:- a. A reference was received from Standing Committee on Anti-profiteering, under Rule 128 of the Central Government Goods and Services Tax Rules, 2017, hereinafter referred to as the CGST Rules, for brevity, on 09.10.2019, to conduct a detailed investigation of the allegations that the Respondent (Franchisee of M/s Subway Systems India Pvt. Ltd.) had not passed on the benefits of reduction in the GST rate from 18% to 5% vide Notification, dated 46/2017-Central Tax (Rate) dated 14.11.2017 by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017 in respect of Restaurant Services. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was 7.54% of the net taxable turnover of Restaurant Service amounting to Rs. 19,07,509/- supplied during the same period. With effect from 15.11.2017, when the GST rate on Restaurant Service was reduced from 18% to 5%, the said ITC was not available to the Respondent. A summary of the computation of the ratio of ITC to the taxable turnover of the Respondent was given in 'Table A' below: Table-A (Amount in Rs.) Particulars Jul-17 Aug-17 Sept.-2017 Oct.-2017 Total ITC Availed as per GSTR-3B (A) 26,144 32,157 32,119 53,453 1,43,873 Total Outward Taxable Turnover as per GSTR-3B (B) 4,83,201 4,74,699 5,08,620 4,40,989 19,07,509 Ratio of Input Tax Credit to Net Outward Taxable Turnover (C)=(A/B*100) 7.54% f. The Analysis of the details of item-wise outward taxable supplies during the period 15.11.2017 to 31.10.2019, reveals that the Respondent had increased the base prices of different items supplied as part of restaurant service to make up for the denial of ITC post-GST reduction. To ascertain the profiteering on the basis of the aforesaid pre-and the post-GST rates, the DGAP had explained the methodology with t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as after enactment of GST and as per C.B.I. & C. Press Release No. 62/2018, dated 18.10.2018, the last date to avail ITC in respect of invoices or debit notes relating to such invoices pertaining to period from July 2017 to March 2018 was extended up to 31st December 2018. Further, as already submitted that he was a smallrestaurant owner and did not have to follow the conditions for claiming ITC as mentioned in Rule 36 of CGST Rules, 2017. Therefore, the credit availed only during the period July 2017 to October 2017 considered for determination of ITC ratio was not proper. Even, due to the sudden change of rate, he was unable to take credit, which was a loss for him and was liable for consideration for the cost of the product while calculating profit. (c) The application filed by the Applicant was concerning only one product; hence, the investigation was limited to one product only. (d) That he had to increase the price of the product in his restaurant services, without an increase in his profit due to various reasons, including the denial of ITC. Thus, the allegation that the price was enhanced to adjust the profit margin was not correct and proper. 6. A sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; it meant that all of the supplies of the registered person needed to be examined from a profiteering angle. Such expanded investigation was the only obvious method to compute the profiteering because there was a single GST return for the supply of all the SKUs put together, supplied by a particular registered person, and also a single credit entry in the ITC ledger of the registered person for the particular month. It was not feasible to earmark a portion of the total ITC to a particular product SKU being supplied by him, as there were a lot of common input services for the products being supplied. Further, during the investigation of profiteering, it was observed that the Respondent did not pass on the benefit of rate reduction for the same product or other products sold to various other recipients. Once the above finding was observed, the same fact had to be mentioned in the Investigation Report. (d) That the contention of the Respondent that they had to increase the price due to various reasons, including denial of ITC, was incorrect. The issue related to costing, inflation, and other factors affecting the price had been dealt with in para 4 (a). As regards the denial....
X X X X Extracts X X X X
X X X X Extracts X X X X
....both the Central and the State Governments, which aimed to provide the benefit of rate reduction to the general public. The Respondent was legally not required to collect the excess GST and, therefore, he had not only violated 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, the gross amount had rightly been included in the profiteering amount. The Profiteering amount could also not be paid from the GST deposited in the account of the Central and state Governments by the Respondent, as the amount was required to be deposited in the CWFs as per the provisions of Rule 133 (3) (a) of the CGST Rules 2017. Depositing profiteered amount in the account of the Government as tax did not mean escaping from passing on the benefit of his recipient customers. ii) That the contention of the Respondent made in para 2 of his reply dated 06.10.2020 was not correct and it was submitted that Section 171 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7. As per CBIC press release No. 62/2018 dated 18.10.2018, the last date to avail ITC in respect of invoices or debits notes relating to such invoices pertaining to the period from July, 2017 to March, 2018 was extended up to 31st December, 2018. Therefore, the credit availed during the period July, 2017 to October, 2017, considered for determination of ITC ratio was not proper." (ii) (b) "The Director General of Anti-profiteering (DGAP) has also reported that press release no. 62/2018 has in no way restricted the Noticee to place the details of the invoices or the debit notes for the period from July, 2017 to October, 2017 before him." (iii) Para-26 "Given the above discussion, we observe that as per the CBIC Press Release No. 62/2018 dated 18.10.2018, the last date to avail ITC in respect of invoices or debit notes relating to such invoices pertaining to the period from July 2017 to March 2018 was extended upto 31st December 2018. However, the Respondent has not submitted the details of the same to the DGAP during the investigation. Therefore, in the interest of natural justice and keeping in view the COVID-19 pandemic could have prevented the Respondent from ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ober, 2017. Hence, there was change in the ratio of Input Tax Credit to taxable turnover, which was reported vide DGAP's Report dated 23.03.2020. V. For the contention raised by the Respondent regarding, press release no. 62/2018 has in no way restricted the Respondent to place the details of the invoices or the debit notes for the period from July 2017 to October 2017 before him. The DGAP replied that the Respondent had not submitted any invoice/debit note before, the DGAP despite being asked to do so. 11. Hence, the DGAP reported that there is no change in the amount of profiteering and is the same as was reported in DGAP's investigation report dated 23.03.2020. The final profiteering remains as Rs. 5,47,005/- only. 12. The Above report was carefully considered by NAA, and a copy of the investigation report dated 22.01.2021 was provided to the Respondent vide Notice dated 04.02.2021 as per the Minutes of the meeting of the erstwhile Authority held on 29.01.2021 to file his consolidated written submissions in respect of the above report of the DGAP. The Respondent vide letter dated 02.03.2021 filed his written submissions. 13. A copy of the above submissions date....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... application of availing the ITC for the aforesaid period. It was, therefore, contended by the Respondent before the Erstwhile NAA that the credit availed during the period July 2017 to October 2017 consider the determination of ITC ratio was not proper. 18. Before the erstwhile NAA the DGAP has also reported that the press release no. 62/2018 has in no way restricted the Respondent to place the details of the invoices or the debit notes for the period from July, 2017 to October 2017 before them. 19. On the aforesaid discussion, the erstwhile NAA observed that as the CBIC Press Release no. 62/2018 dated 18.10.2028, the last date to avail ITC in respect of invoices or debit notes relating to such invoices pertaining to the period from July 2017 to March 2018 was extended up to 31.12.2018. However, erstwhile NAA further observed that the Respondent has not submitted the details of the same to the DGAP during the investigation. Therefore, erstwhile NAA, in the interest of the natural justice and keeping in view the COVID-19 pandemic held that the Respondent could have been prevented from making his submissions in a timely manner and, therefore, it was of the view that the matter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by this tribunal to the respondent. Today also the Respondent did not appear for the Hearing. From the above, it is clear that even though erstwhile NAA took into consideration the submissions made by the Respondent that the ITC that have been claimed for the July 2017 to October 2017 on or before 31.12.2018 were factually not correct. The Respondent has failed to produce any document like the invoices or debit notes for the period of July 2017 to October 2017 either during the reinvestigation or during the pendency of cases before the erstwhile NAA or before this Tribunal. As this contention raised by the Respondent in course of 1st round of litigation that is before the passing of Interim order no. 32/2020 does not appear to be tenable. Therefore, this Tribunal refuses to accept such contention. 23. The next issue that is to be decided has been formulated by us as question no-I in paragraph no. 1 of this order. 24. Hon'ble High Court of Delhi, in the case of Reckitt Benckiser Pvt. Ltd. Vs. Union of India and others, 2024 SSC Online Del 588, has considered the constitutional validity of Section 171 of the CGST Act and upheld its validity. The question of profiteering and its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e needs to be justified by the supplier. The inherent presumption that these must necessarily be a reduction in prices of the goods and services is a rebuttable presumption. It is clarified that if the supplier is to assert reasons for offsetting the reduction, it must establish the same on cogent basis and must not use it merely as a device to circumvent the statutory obligation of reducing the prices in a commensurate manner contemplated under Section 171 of the Act. 27. Thus, it is clear as per the provision 171 if there is a reduction in the rate of tax as it is the case here it most be passed on end user or consumer by commensurate reduction in price. However, in cases where there has been any increase in the base price of the product or any other market forces have pushed up the price of the base product then that has to be considered. There is a presumption, though it is a rebuttable one, that once there is a reduction in rate of GST then it must passed on to the consumers but such presumption can be rebutted by cogent, clear and un-equivocal evidences or materials. In this case, the Respondent has not produced any documents or any evidence to rebut such a presumption, ei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. Rule 129(2) of CGST Rules, which is relevant for us, read as follows:- **129(2) The Director General of Anti-profiteering shall conduct investigation and collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices. 32. Thus, it is clear that the Central Government on the recommendations of the Council by notification has constituted the Authority and empowered it to examine whether the input tax credit availed by any registered person or reduction in tax rate has actually resulted in a commensurate reduction in price of the goods and services or both supplied by him. The provisions, therefore, has conferred power to the DGAP to investigate all suppliers made by the registered person. A plain reading of these provisions leaves no doubt in the minds of this Tribunal that the pr....