TaxTMI 
TaxTMI 
2026 (1) TMI 764
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....nti-Profiteering from the Principal Commissioner, Medchal Commissionerate, Hyderabad, alleging profiteering by the Respondent. The Standing Committee referred the matter to DGAP on 28.06.2019 for a detailed investigation. The DGAP's report was received by the erstwhile NAA on 20.12.2019 and notice was issued to the Respondent on 24.12.2019 under Rule 129(3) of the CGST Rules, 2017. 3. The DGAP, in its investigation report dated 18.12.2019, observed that the Respondent continued charging the same gross ticket prices of Rs. 100/- Rs. 70/- and Rs. 30/- (inclusive of Rs. 3/- tax-free theatre maintenance charge) both before and after 01.01.2019. Prior to rate reduction, GST @18% was paid on base prices of Rs. 84.75 Rs. 59.33 and Rs. 25.42 respectively. Post rate reduction, GST @12% was paid on increased base prices of Rs. 89.29 Rs. 62.50 and Rs. 26.79 respectively. The Respondent claimed that no profiteering benefit accrued as gross prices remained unchanged and pre-GST entertainment tax @14.5% was also embedded in the ticket amounts. 4. The DGAP examined sales data for ticket categories namely Maharaja Circle (Rs. 118 Rs. 100), Dress Circle (Rs. 70), First Class (Rs. 30) pre-....
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....12 2 Dress Circle 68.75 56.78 11.97 1.44 13.41 8539 1,14,480 59.82 56.78 3.04 0.37 3.41 38540 1,31,297 3 First Class 33.04 22.88 10.15 1.22 11.37 3796 43,171 24.11 22.88 1.23 0.15 1.37 33980 46,651 Grand Total 11,88,482 5. The DGAP concluded that the Respondent profiteered by Rs. 11,88,482/- which was required to be passed on to the recipients by commensurate price reduction under Section 171. Since recipients were not identifiable, the amount was liable to be deposited in Consumer Welfare Funds. The report was considered by erstwhile NAA which issued notice dated 24.12.2019 to the Respondent to show cause why the findings should not be accepted. 6. The Respondent challenged the NAA notice by filing Writ Petition No. 3041/2020 before the High Court of Telangana. Interim orders were passed but were vacated on 03.06.2021, after which proceedings continued before this Tribunal. 7. The Respondent filed written submissions on various dates, finally on 13.10.2025 along with annexures. The Respondent contended that cinema ticket prices in Telangana are regulat....
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.... (The Malaysia Net Profit Margin Regulations, 2014 and the Australia Net Dollar Margin Rule) and inconsistent DGAP methodologies across cases. Section 171's "commensurate reduction" considers all pricing factors, not just tax benefit in monetary terms. 11. The Respondent contended inclusion of 18% GST in profiteering amount is erroneous as all collected GST was remitted to Government exchequer without loss to public revenue (citing R.S. Joshi v. Ajit Mills). Excess GST paid on increased base prices (Rs. 0.53/ticket for Maharaja Circle Rs. 0.37/ticket for Dress Circle Rs. 0.15/ticket for First Class, totaling Rs. 69,455/-) should be excluded from profiteering. The investigation period (01.01.2019-30.06.2019) lacks statutory basis and should be limited to 3 months to account for cost changes. 12. A copy of the Respondent's submissions was forwarded to DGAP for clarification. The DGAP submitted that the Respondent's claim of price control by producers/distributors and licensing authority approval is contradictory and unsupported by evidence. Letters dated 07.01.2019 and 25.04.2019 to Commissioner of Police, Cyberabad were mere intimations, not permissions, as no appr....
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....ng interest applicable only from amendment date. Thus, interest, if any, is confined to the period from 28.06.2019 to 30.06.2019. 15. I have carefully examined the facts of the case, the contents of the DGAP's report alleging anti-profiteering of Rs. 11,88,482/- by the Respondent as well as the written submissions made by the Respondent during the proceedings and the clarifications given on those submissions by the DGAP. It is an undisputed fact that the GST rate on Cinema Tickets was reduced with effect from 01.01.2019 vide Notification No. 27/2018-CT (Rate) dated 31.12.2018 for tickets priced at Rs. 101 or more, from 28% to 18%, and for tickets priced Rs. 100 or below, from 18% to 12%. It is also an undisputed fact that the Respondent had not reduced the Cinema Ticket prices, after reduction of GST rates with effect from 01.01.2019. The various contentions of the Respondent are examined below: - 15.1 Prices are regulated under the Telangana Cinemas (Regulation) Act,1955 and through Government Orders; High Court orders allowed individual pricing subject to intimation/approval, so ticket pricing followed that regime: The Respondent's reliance on the Telangana Cinemas (....
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....al stamps or formal permissions under the Cinemas Act. No supporting documents evidencing actual grant of enhanced pricing authority were produced, rendering the claim unsubstantiated. During the proceeding before the Bench the Respondent has failed to submit any evidence that he has got approval about the intimation for increase in the prices submitted to Commissioner of Police, Cyberabad. There is no merit in the contention of the Respondent for treating each movie as a separate "project" (analogous to real estate) and the same is rejected as cinema ticket sales constitute a continuous supply, not discrete projects, and the Respondent never reduced regular prices even post-GST cut (unlike Miraj Entertainment, where regular ticket prices were reduced from February 2019). The systematic maintenance or increase of gross prices from 01.01.2019 across all categories confirms non-passing of benefits, as verified in Tables A & B of the DGAP's report mentioned in para 4 above, which the Respondent has not disputed. 15.3 There is no clear statutory methodology; international practice and inconsistency in DGAP approaches make the proceedings arbitrary; "commensurate reduction" must cons....
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....pondent either as to methodology or figures. This method-computing a "commensurate base price" by applying the reduced GST rate to the pre‑reduction all‑inclusive price and then comparing it with the actual post‑reduction base price provides a rational and workable formula which can safely be adopted in similar cases, unless specifically rebutted on the basis of cogent material. 15.4 GST component should not be treated as profiteering since it was remitted to Government; investigation period should be shorter to reflect changing costs. The Respondent's contention that the GST component (quantified at approximately Rs. 69,455/-, comprising excess GST per ticket such as Rs. 0.53/- for Maharaja Circle Rs. 0.37/- for Dress Circle, and Rs. 0.15/- for First Class) ought to be excluded from the profiteered amount since all collected GST was duly remitted to the Government exchequer without any loss to public revenue, is wholly untenable and contrary to the statutory scheme under Section 171 of the CGST Act. 15.4.1 As observed by the DGAP in its response dated 26.06.2024, Section 171 mandates the pass-through of tax rate reduction benefits to the recipient/consu....
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....he profiteered amount was introduced vide Notification No. 31/2019-Central Tax dated 28.06.2019 (Fourth Amendment Rules), which, per sub-rule (2) of Rule 1 thereof, came into force on the date of publication in the Official Gazette (28.06.2019), save as otherwise provided; no deferred date was specified for Rule 17 amending Rule 133(3)(c), unlike Rule 5 (QRMP scheme). This provision creates a substantive and onerous liability, imposing a new burden, attracting the presumption against retrospective operation embodied in the maxim nova constitutio futuris formam imponere debet non praeteritis, absent express words or necessary implication to the contrary; it is neither clarificatory nor curative, as the word "further" in the notification signals prospective advancement, not past clarification. Thus, interest liability arises only pro-rata for the three days within the investigation period falling on or after 28.06.2019 (i.e., 28.06.2019 to 30.06.2019), computed on 3/181 of the total profiteered amount of Rs. 11,88,482/- (≈ Rs. 19,723/- principal at 18% p.a. yielding ≈ Rs. 92/- interest), which sum is negligible and, in line with the Mallikarjuna precedent, waived in exerc....