2026 (2) TMI 273

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....by M/s C.G. Foods (hereinafter referred to as the "Respondent"), by way of not passing on the benefit of reduction in the rate of tax from 18% to 12% vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 w.e.f. 15.11.2017, in alleged contravention of Section 171 of the CGST Act, 2017. 2. The DGAP, on receipt of the reference from the Standing Committee on Anti-Profiteering dated 23.08.2024, issued a Notice of Investigation dated 03.09.2024 under Rule 129 of the CGST Rules to the Respondent, calling upon them to reply as to whether they admitted that the benefit of GST rate reduction had not been passed on to the recipients by way of commensurate reduction in price, and if so, to suo moto determine and indicate the same in their reply to the Notice, along with furnishing all supporting documents. The Respondent was also provided an opportunity to inspect the non-confidential evidence and information furnished by the Applicant on 19.09.2024 or 20.09.2024, though such an opportunity was not availed by the Respondent. 3. The investigation was carried out over an extended period with multiple reminders and follow-up letters issued by the DGAP. The time limit to complet....

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....applicable tax rate on noodles was 12- 15%, which increased to 18% w.e.f. 01.07.2017. However, despite the increase in the tax rate, the MRP of the products was not increased and was maintained at pre-GST levels due to intense competition in the market. 4.6 That there was a continuous increase in the prices of major ingredients such as flour, palm oil, and spices, which exerted sustained pressure on selling prices and adversely affected profitability. The Respondent further submitted that the subsequent reduction in GST rate provided only marginal relief, which was insufficient to offset the substantial increase in input and operational costs. 5. The DGAP examined the Respondent's submissions in light of the rebuttable presumption principle laid down by the Honourable Delhi High Court in its Order dated 29.01.2024, wherein the Court held that any finding of profiteering operates as a rebuttable presumption, and such presumption may be rebutted by demonstrating genuine increases in cost of production with contemporaneous evidence of cost escalation placed on record. 6. However, upon scrutiny of the invoices, and the documents submitted by the Respondent DGAP found that:....

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....on with GST) L=K*1.12     237.57 12. Excess amount charged or profiteering M=L-G 10.91 13 Total Profiteering N= M*J 6545 8. Based on the detailed calculations as set forth in Annex-11 of the DGAP Report, the DGAP determined that the total amount of profiteering on all goods impacted by the GST rate reduction from 18% to 12% w.e.f. 15.11.2017, supplied by the Respondent during the period 15.11.2017 to 31.12.2018, comes to Rs. 90,90,310/- (Rupees Ninety Lakh Ninety Thousand Three Hundred and Ten Only). 9. The state-wise or union territory-wise break-up of the profiteered amount was as follows: State-wise Break-up of Profiteered Amount Table-B S. No. State Code State Profiteered Amount (in Rs.) 1 10 BIHAR 1063.80 2 11 SIKKIM 186.76 3 12 ARUNACHAL PRADESH 8,49,948.72 4 13 NAGALAND 12,48,748.36 5 14 MANIPUR 2,40,282.10 6 15 MIZORAM 2,27,527.15 7 16 TRIPURA 33,495.92 8 17 MEGHALAYA 4,69,367.34 9 18 ASSAM 55,39,781.79 10 19 WEST BENGAL 4,79,908.17 Grand Total 90,90,310 10. The above report was co....

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.... ITC shall be passed on to the recipient by way of commensurate reduction in prices." It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations, one relating to the passing on the benefit of a reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. In the above case, it is apparently clear from the DGAP's report that it is a case of a reduction in the rate of tax from 18% to 12% as per the notification no. 41/2017-Central Tax(rate) dated 14.11.2017 w.e.f 15.11.2017. 16. It is undisputed that the GST rate on instant noodles falling under HSN 1902 was reduced from 18% to 12% with effect from 15.11.2017 vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017. The Respondent revised its prices with effect from 16.11.2017. However, the DGAP's invoice-wise analysis reveals that the Respondent increased the base prices of several affected SKUs in the post-rate-reduction period as compared to the pre-rate-reduction period of 01.11.2017 to 14.11.2017. 16.1 Though the Respondent produced documents evidencing increase in costs of raw materials, packaging, fuel and freight, such increases ....