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2020 (4) TMI 903 - NAPA - GSTProfiteering - supply of Stayfree Sanitary Napkins - it is alleged that the Respondent had not passed on the benefit of tax reduction from 12% to Nil, by way of commensurate reduction in price - contravention of provisions of section 171 of CGST Act - HELD THAT - It is clear from the Report dated 17.12.2019 filed by the DGAP that the above three issues mentioned in the Paras supra are required to be further investigated by the DGAP and only then this Authority can determine the profiteered amount as per the provisions of Section 171 of the CGST Act, 2017 read with Rule 133 of the CGST Rules, 2017. Accordingly, this Authority directs the DGAP to carry out further investigation under Rule 133 (4) of the above Rules, on the following issues - (i) The issue of the common input tax credit shall be investigated by the DGAP and a detailed Report shall be submitted accordingly. (ii) The claim of reversal of common credit of Rs. 13,07,118/- made by the Respondent, shall be verified by the DGAP as per the provisions of Section 17 (2) of the CGST Act, 2017 read with Rule 42 of CGST Rules, 2017 and his findings shall be recorded in the Report. (iii) The issue of benefit of discounts shall be examined by the DGAP in terms of Section 15 (3) of the CGST Act, 2017 as per the details submitted by the Respondent and a detailed Report shall be filed by him in this regard. (iv) The profiteered amount shall be again computed by the DGAP on the closing and the fresh stocks separately and mentioned in his Report. Investigation on the above issues shall be completed by the DGAP within a period of 3 months from the date of passing of this order and Report submitted under Rule 129 (6) of the CGST Rules, 2017. The Respondent is also directed to extend full co-operation to the DGAP during the course of the investigation - As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules.
Issues Involved:
1. Allegation of not passing on the benefit of GST rate reduction. 2. Validity of DGAP’s investigation and methodology. 3. Calculation and verification of profiteering amount. 4. Reversal of common input tax credit. 5. Benefit of discounts. Issue-wise Detailed Analysis: 1. Allegation of Not Passing on the Benefit of GST Rate Reduction: The Standing Committee on Anti-profiteering requested the DGAP to investigate the allegation that the Respondent did not pass on the benefit of GST rate reduction from 12% to Nil on "Stayfree Sanitary Napkins" effective from 27.07.2018. The DGAP's investigation revealed that the Respondent increased the base prices of sanitary napkins when the GST rate was reduced, thereby not passing on the commensurate benefit to the recipients. The total profiteered amount was calculated to be Rs. 19,61,033/- for the period from 27.07.2018 to 31.03.2019. 2. Validity of DGAP’s Investigation and Methodology: The Respondent raised several objections against the DGAP's investigation, including claims that the investigation was beyond the provisions of Section 171 of the CGST Act, 2017, and that the method adopted was unworkable due to dynamic pricing. The Respondent also argued that the investigation should be limited to the closing stock and that the period of investigation chosen by the DGAP was arbitrary. The DGAP responded by stating that the legislative intent behind Section 171 was to ensure the benefit of tax rate reduction was passed on by reducing prices, not merely by charging GST at a reduced rate. 3. Calculation and Verification of Profiteering Amount: The DGAP calculated the profiteering amount by comparing the transaction values before and after the rate reduction. The Respondent argued that the DGAP had computed profiteering twice on the closing stock by treating it as new stock. The DGAP admitted that there were errors in the computation and agreed to re-investigate and recompute the profiteered amount, considering the discounts and ensuring no double counting of the closing stock. 4. Reversal of Common Input Tax Credit: The Respondent claimed a reversal of common input tax credit amounting to Rs. 13,07,118/-. The DGAP acknowledged that this issue was not addressed in the initial report and agreed to verify the authenticity and veracity of the claimed reversal as per Section 17 (2) of the CGST Act, 2017 read with Rule 42 of the CGST Rules, 2017. 5. Benefit of Discounts: The Respondent argued that discounts offered should be considered in the computation of profiteering. The DGAP agreed that discounts should be allowed as per Section 15 (3) of the CGST Act, 2017, and committed to verifying the details submitted by the Respondent and recomputing the profiteered amount accordingly. Conclusion: The Authority directed the DGAP to carry out further investigation on the issues of common input tax credit, verification of the claimed reversal, benefit of discounts, and accurate computation of the profiteered amount. The DGAP was given three months to complete this investigation and submit a detailed report. The Respondent was instructed to cooperate fully during this process. The order was delayed due to the COVID-19 pandemic and was passed under the provisions of Notification No. 35/2020-Central Tax dated 03.04.2020.
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