2022 (9) TMI 1532 - NAPA - GST

Profiteering - Respondent had not passed on the benefit of reduction in the rate of tax to the customers by way of commensurate reduction in the price of the product sold by him - contravention of provisions of section 171 (1) of the CGST Act, 2017 - HELD THAT - There is no dispute with regard to the reduction of the tax in respect of subject products supplied by the Respondent with effect from 15-11-2017. The Government by Notification No. 41/2017-CT (Rate), dated 14-11-2017 has reduced rates on subject products. In view of the above said facts and the records, the Authority has observed that the Respondent, M/s. Raj Company was a distributor of M/s. L Oreal India Pvt. Ltd. The Authority finds that M/s. L Oreal India Pvt. Ltd. was investigated by the DGAP for allegations of profiteering and not passed on the benefit of reduction of GST rate after the said Notification dated 14-11-2017 and the Authority has found them violating the provisions of section 171 of the CGST Act, 2017 for the products sold by them for the period from 1-4-2018 to 31-12-2018, and, this Authority vide Order No. 26/2022 dated 23-6-2022, has also confirmed profiteering to the tune of Rs. 186,39,57,058/- against M/s. L Oreal India Pvt. Ltd. for the period from 15-11-2017 to 31-12-2018. This Authority is of the opinion that the amount of profiteering calculated against the Respondent might have been already calculated and confirmed against M/s. L Oreal India Pvt. Ltd. as the period of investigation in the present case is already covered in the period of investigation in case of M/s. L Oreal India Pvt. Ltd. and the products on which profiteering has been calculated in the present case, have been included in the case of M/s. L Oreal India Pvt. Ltd. - considering the above facts on record and to avoid the duplication and doubling of confirming of profiteered amount, this Authority directs the DGAP to re-investigate/re-examine the matter and make sure whether the amount of profiteering calculated in the present case has already been considered in the case of M/s. L Oreal India Pvt. Ltd. or not, under rule 133(4) of the CGST Rules, 2017. Application disposed off.

Summary

Issues:
1. Alleged profiteering by the Respondent for a specific period.
2. Investigation into the failure of the Respondent to pass on tax rate reduction benefits.
3. Examination of pricing practices post-GST rate reduction.
4. Determination of profiteering amount based on the investigation.
5. Consideration of the quorum requirement for decision-making.
6. Review of the profiteering allegations against the Respondent in light of another case.
7. Directive for re-investigation to avoid duplication.
8. Interpretation of the limitation period for making orders.

Issue 1: Alleged Profiteering
The National Anti-Profiteering Authority received a report alleging profiteering by the Respondent, which was determined in a previous order. Further investigation was directed for the period after the initial determination.

Issue 2: Failure to Pass on Tax Rate Reduction
The Director General of Anti-Profiteering found that the Respondent did not pass on the benefit of reduced tax rates to customers, resulting in undue profiteering, contravening section 171(1) of the CGST Act, 2017.

Issue 3: Examination of Pricing Practices
The investigation focused on whether the Respondent reduced prices of products impacted by the tax rate reduction in compliance with the NAA's order. The Respondent's failure to reduce prices post-GST rate reduction was highlighted.

Issue 4: Determination of Profiteering Amount
Detailed calculations were conducted to determine the profiteering amount, exemplified by a specific product. The Respondent was found to have profiteered in multiple transactions, totaling a significant amount.

Issue 5: Quorum Requirement
Due to a lack of the required quorum, the matter was not decided until new members joined. The Respondent was granted a hearing but did not participate.

Issue 6: Review of Profiteering Allegations
Considering a related case involving another entity, the Authority questioned the potential duplication of profiteering calculations and directed a re-investigation to avoid redundancy.

Issue 7: Directive for Re-Investigation
To prevent double-counting of profiteering amounts, the DGAP was instructed to re-examine the matter thoroughly, especially in relation to the findings of a previous case.

Issue 8: Interpretation of Limitation Period
Citing a court order, the Authority discussed the directory nature of the six-month limitation for making orders, emphasizing the absence of prescribed consequences for non-adherence.

The judgment delves into the investigation of alleged profiteering by the Respondent, focusing on the failure to pass on tax rate reduction benefits to customers. Detailed calculations and analyses were conducted to determine the profiteering amount, exemplified by specific transactions. The Authority considered quorum requirements, potential duplication of profiteering calculations, and the interpretation of the limitation period for making orders. The directive for re-investigation aimed to ensure accuracy and avoid redundancy in determining profiteering amounts.