9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 993 - NAPA - GSTProfiteering - supply of Kit Kat 4 Finger 18 - allegation that the Respondent had not passed on the benefit of reduction in the GST rate - contravention of section 171 of CGST Act - penalty - HELD THAT - On perusal of records, it is clear that the Respondent has indulged in profiteering in violation of the provisions of Section 171 (1) of the CGST Act, 2017 and has not passed on the benefit of reductions of tax given vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and Notification No. 06/2018 dated 25.01.2018 in respect of the 116 products as per the details given, to his customers and has thus profiteered an amount of ₹ 16,45,559/- therefore, he is liable for action under Rule 133 of the CGST Rules, 2017. Accordingly, a sum of ₹ 16,45,559/- is determined as the profiteered amount in respect of the 116 products including an amount of ₹ 14,62,981/- which has been profiteered in respect of 81 products on which the rate of tax was reduced from 28% to 18% and an amount of ₹ 1,69,379/- on 32 products on which the GST was reduced from 18% to 12% w.e.f. 15.1112017 and 3 products on which the tax rate was reduced from 18% to 12% w.e.f. 25.01.2018, as per the provisions of Rule 133 (1) of the CGST Rules, 2017 - The Respondent is directed to reduce the sale prices of the above products immediately commensurate with the reductions in the rates of tax as were notified on 14.11.2017 and 25.01.2018 respectively and pass on the benefit of reductions in the rates of tax to his customers. Penalty - HELD THAT - The Respondent has profiteered an amount of ₹ 16,45,559/- as he has not passed on the benefit of tax reductions to his customers. It is also apparent that the Respondent has deliberately and consciously acted in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and hence he is liable for imposition of penalty under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 - Keeping in view the principles 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 under the above provision.
Issues Involved:
1. Allegation of not passing on the benefit of GST rate reduction. 2. Determination of the quantum of benefit not passed on. 3. Compliance with Section 171 of the CGST Act, 2017. 4. Examination of the Respondent's defense and evidence. 5. Calculation and recovery of the profiteered amount. 6. Imposition of penalty under Section 171 (3A) of the CGST Act, 2017. Issue-wise Detailed Analysis: 1. Allegation of Not Passing on the Benefit of GST Rate Reduction: The case originated from a reference alleging that the Respondent did not pass on the benefit of GST rate reduction from 28% to 18% effective from 15.11.2017 on the product "Kit Kat 4 Finger 18". The DGAP's investigation revealed that the Respondent increased the unit base price from ?17.40 to ?18.76 post-GST rate reduction, maintaining the cum-tax selling price almost the same, thus not passing on the benefit to the recipients. 2. Determination of the Quantum of Benefit Not Passed On: The DGAP reported that the Respondent only passed a 2.6% benefit by way of discounts, whereas the effective benefit required was 7.8%. The DGAP found that the Respondent increased base prices of most products post-GST rate reduction, resulting in a total profiteering amount of ?16,45,564.62 for 116 products during the period from 15.11.2017 to 31.05.2018. 3. Compliance with Section 171 of the CGST Act, 2017: Section 171 (1) mandates that the benefit of tax rate reduction must be passed on to the recipients by way of commensurate reduction in prices. The Respondent's actions of increasing base prices instead of reducing them were found non-compliant with this provision. The Respondent's claim of the billing software being controlled by the manufacturer was not accepted as a valid defense. 4. Examination of the Respondent's Defense and Evidence: The Respondent argued that the billing software was managed by M/s. Nestle India Ltd. and that he was unable to produce documents due to his godown being sealed. He also requested adjournment of proceedings until the conclusion of related proceedings against M/s. Nestle India Ltd. However, the Authority held that the Respondent, being a registered person, was independently responsible for passing on the benefit of tax reduction and could not shift this responsibility to the manufacturer. 5. Calculation and Recovery of the Profiteered Amount: The Authority determined that the Respondent profiteered ?16,45,559 by not passing on the benefit of tax reductions. The Respondent was directed to reduce the sale prices of the products commensurate with the tax reductions and to deposit the profiteered amount of ?8,22,779.50 each in the Central and Delhi State Consumer Welfare Funds along with 18% interest from the date of collection within three months. 6. Imposition of Penalty under Section 171 (3A) of the CGST Act, 2017: The Authority found that the Respondent deliberately acted in contravention of Section 171 (1) and was liable for penalty under Section 171 (3A). A notice was issued to the Respondent to explain why a penalty should not be imposed. The earlier show cause notice dated 13.11.2018 was withdrawn to the extent of invoking penal provisions under Sections 29, 122-127 of the CGST Act, 2017. Conclusion: The Authority concluded that the Respondent had indulged in profiteering by not passing on the benefit of GST rate reductions to his customers, amounting to ?16,45,559. The Respondent was directed to deposit the profiteered amount in the respective Consumer Welfare Funds and to reduce the prices of the products accordingly. A notice for penalty imposition was also issued.
|
