TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1123
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 received on 16.04.2020 DGAP's first Report Under Rule 129(6) of CGST Rules, 2017 7. 05.05.2020 Notice Issued to Respondent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es 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. b. The DGAP had examined the above reference from the Standing Committee on Anti-profiteering on 09.10.2019 and a Notice under Rule129(3) of the CGST Rules, 2017, was issued by the DGAP to the Respondent on 23.10.2019 to reply whether he admitted that the benefit of reduc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 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 the help of one illustration viz., of a particular item "12" aloo patty Sub for which the average base price had been calculated during the per-GST reduction period of 1st November, 2017 to 14 November, 2017 and then profiteering had been calculated for post GST rate reduction invoice no. 1/A-24756 dated 15.11.2017 as tabulated below in "Table B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 supplementary Report was sought from the DGAP in response to the above submissions of the Respondent. The DGAP vide its submissions dated 01.07.2020 had filed its clarifications (Rejoinder) under Rule 133(2) of the CGST Rules, 2017 as summarized below: (a) That the increase or decrease in cost had nothing to do with the rate reduction in tax, and the availability of ITC and section 171 did not require the Respondent to seek appro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 of ITC it had been clearly mentioned at Para 19 of the Investigation Report dated 23.03.2020 that the denial of ITC of 7.54% was added to the base price of each product sold on or after 15.11.2017 for calculating profiteering and it was observed that the Respondent did not reduce the prices commensurately in terms of Section 171 of CGST Act, 2017 even after the benefit of reduced input credit were allowed to them. 7. In response, the Respondent had submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 (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 law for the time being in force, 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". Therefore, the above Section has already given po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 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 making his submissions in a timely manner, we are of the view that the matter needs to be reinvestigated by the DGAP under Rule 133(4) of the CGST Rules, 2017. On this part, the Respondent is directed to fully cooperate with the DGAP in the process of reinvestigation which includes submission of the requisite invoices/ debit notes pertaining to his supplies during the period July 2017 to October 2017, the ITC of which might have been claimed later till 31.12.2018." 10. Accordingly, the DGAP had carried out necessary re-inves....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hange 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 dated 02.03.2021 filed by the Respondent was supplied to the DGAP for the supplementary Report under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications dated 29.03.2022 on the Respondent's submissions and, inter alia, clarified that all the contentions raised by the Respondent in his submissions were already considered and no comments to offer. 14. Further, the Respondent was directed by the erstwhile Authority to appear before it on 06.07.2022 at 04:00 PM. In reply, the Respondent vide e-mail dated 02.07.2022 had submitted that he did not have add....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 needs to be reinvestigated by the DGAP under Rule 133(4) of the CGST Rules, 2017. Further, Respondent was directed to fully cooperate with the DGAP in the process of reinvestigation which includes submissions of the requisite invoices/debit notes pertaining to his supplies during the period July 2017 to October 2017, the ITC of which might have been claimed later till 31.12.2028. 20. Upon reinvestigation the DGAP called for documents from the respondent but it is submitted by the Departmental Representative of the DGAP that in spite of issuing notices time and again the Respo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ontention 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 prevention arising out of reduction of tax or passing of the Input Tax Credit also arose. The Hon'ble High Court of Delhi in paragraph 117 of the Judgement held that the contention of the petitioners that the fundamental presumption under section 171 that every tax reduction must result in 'price reduction' is not correct. It was also contended by the Respondent there-in who are to be Real Estate Developers, (and it was a question of the passing of the Input tax credit of Residential buildings to the allottees) that the use of expression "shall" in Section 171 of the CGST Act, 2017 mean....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, either before the investigating agency or before this Tribunal or the Erstwhile NAA. The Respondent did not produce any document to show that the price of the base price of the product had increased after 14.11.2017. So there is no rebuttal of the presumption that arises in favour of the DGAP's Report. 28. It may be noted here that there is no dispute that till 14.11.20217 the rate of GST for Restaurant Services was 18% as per notification dated 14.11.2017, it was reduced to 5% w.e.f 15.11.2017. It is also not disputed by the Respondent on 15.11.2017 and thereafter he continued the price of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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 provisions did not confine the power of the investigating agency, i.e. the DGAP or the adjudicating Authority, i.e. the erstwhile NAA and later on the Principal Bench, GSTAT, only to a particular product for which an objection or complaint has been raised. If a complaint has been raised by a person regarding a particular product which is a part of an array of products or services or both rendered by the registered person then it is appropriate on the part of the investigating agency i.e. the DGAP or the adjudicating Authority i.e. the erstwhile NAA to examine whether the reduction in the rates of the GST has been passed on by....