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2019 (5) TMI 783 - NAPA - GSTProfiteering - supply of luggage trolley bag/suitcases , namely Tropic 45 Weekender Black and Neolite Strolly 53 360(VlP) FIR - benefit of reduction in the rate of tax not passed on - contravention of provisions of Section 171 of the CGST Act, 2017 or not - penalty - HELD THAT - The Respondent had increased the base prices of his products w.e.f. 15.11.2017 despite reduction in the rate of GST from 28% to 18%. The DGAP in his Report has also revealed that the amount profiteered by the Respondent in respect of supplies of the products during the period 15.11.2017 to 31.08.2018 is ₹ 18,887/-. Therefore the Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 in as much as he did not pass on the benefit of reduction in the rate of tax to his recipients by way of commensurate reduction in the prices. Penalty - HELD THAT - It is established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act and hence he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 - In the interest of natural justice before imposition of penalty a notice be issued to him asking him to explain why penalty should not be imposed on him. Application disposed off.
Issues Involved:
1. Allegation of profiteering by the Respondent. 2. Investigation and findings by the Director General of Anti-Profiteering (DGAP). 3. Respondent's defense and submissions. 4. Calculation and determination of the profiteered amount. 5. Directions for the Respondent to reduce prices and deposit the profiteered amount. 6. Issuance of incorrect invoices and imposition of penalty. Issue-wise Detailed Analysis: 1. Allegation of Profiteering by the Respondent: The Kerala State Screening Committee on Anti-Profiteering referred the matter to the Standing Committee, alleging that the Respondent did not pass on the benefit of GST rate reduction from 28% to 18% on the supply of "luggage trolley bags/suitcases" to the recipients. The Applicant No. 1 relied on two invoices issued by the Respondent, one pre-GST rate reduction and the other post-GST rate reduction. 2. Investigation and Findings by the DGAP: The DGAP initiated an investigation under Rule 129 (1) of the CGST Rules, 2017, to determine if the Respondent passed on the benefit of GST rate reduction to the recipients. The investigation covered the period from 15.11.2017 to 31.08.2018. The DGAP found that despite the reduction in GST rate, the Respondent increased the base prices of the products, implying that the benefit of the rate reduction was not passed on to the recipients. 3. Respondent's Defense and Submissions: The Respondent argued that his distributor's margin remained unchanged, and he did not derive any additional benefit from the tax rate reduction. He claimed that he had absorbed the additional cost when the GST rate was initially increased to 28% from 18% and that the subsequent reduction to 18% merely corrected the excessive tax burden. The Respondent submitted relevant documents, including invoice-wise details, price lists, and tax returns, to support his claims. 4. Calculation and Determination of the Profiteered Amount: The DGAP reported that the Respondent had increased the base prices of the products when the GST rate was reduced, leading to a profiteering amount of ?18,887/- during the investigation period. The detailed calculation was provided in tabular form, showing the difference between the actual selling price and the commensurate price after the GST rate reduction. 5. Directions for the Respondent to Reduce Prices and Deposit the Profiteered Amount: The Authority directed the Respondent to reduce the prices of the products commensurate with the GST rate reduction and to deposit the profiteered amount of ?18,887/- along with interest at 18% from the date of collection till the deposit date. Since the recipients were not identifiable, the amount was to be deposited equally in the Central Consumer Welfare Fund (CWF) and the Kerala State CWF within three months, failing which the amount would be recovered by the Commissioner CGST/SGST. 6. Issuance of Incorrect Invoices and Imposition of Penalty: The Authority found that the Respondent issued incorrect invoices, showing incorrect base prices and charging additional GST on increased prices, which contravened the provisions of the CGST Act, 2017. This act was deemed an offense under Section 122 (1) (i) of the CGST Act, making the Respondent liable for a penalty. A notice was to be issued to the Respondent to explain why a penalty should not be imposed. Conclusion: The judgment concluded that the Respondent had acted in contravention of Section 171 of the CGST Act, 2017, by not passing on the benefit of the GST rate reduction to the recipients. The DGAP was also directed to investigate the aspect of profiteering by the manufacturer of the products. Copies of the order were to be sent to both Applicants and the Respondent.
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