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2020 (3) TMI 184 - NAPA - GSTProfiteering - supply of Samsung 80 CM (32 inches) HD ready LED TV 32FH4003 - allegation that benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price - contravention of Section 171 of the Central Goods and Services Tax Act, 2017 - penalties. HELD THAT - If there was any increase in his costs the Respondent should have increased his prices before 31.12.2018, however, it cannot be accepted that his costs had increased on the intervening night of 31.12.2018/01 01.2019 when the rate reduction had happened which had forced him to increase his prices exactly equal to the reduction in the rate of such tax. Such an uncanny coincidence is unheard off and hence there is no doubt that the Respondent has increased his prices for appropriating the benefit of tax reduction with the intention of denying the above benefit to the consumers. The profiteered amount is determined as ₹ 37,85,342/-as per the provisions of Rule 133 (1) of the above Rules as has been computed vide Annexure-18 of the Report dated 12.09.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of ₹ 37,85,342/- in the CWF of the Central and the concerned State Government, as the recipients are not identifiable, as per the provisions of Rule 133 (3) (c) of the above Rules along with 18% interest payable from the dates from which the above amount was realised by the Respondent from his recipients till the date of its deposit. The above amount shall be deposited within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned Commissioners CGST/SGST. Penalties - HELD THAT - It is evident that the Respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is apparently liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017. Therefore, a show cause notice be issued directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him.
Issues Involved:
1. Alleged profiteering by not reducing the selling price of Samsung 80 CM (32 inches) HD ready LED TV after GST rate reduction. 2. Determination of whether the benefit of GST rate reduction was passed on to recipients. 3. Calculation of the profiteered amount. 4. Respondent's contention on being the supplier and the methodology used by DGAP. 5. Constitutional validity of Section 171 of the CGST Act. 6. Imposition of penalty under Section 171(3A) of the CGST Act. Issue-wise Detailed Analysis: 1. Alleged profiteering by not reducing the selling price of Samsung 80 CM (32 inches) HD ready LED TV after GST rate reduction: The Applicant alleged that the Respondent did not reduce the selling price of the Samsung 80 CM (32 inches) HD ready LED TV when the GST rate was reduced from 28% to 18% effective from 01.01.2019. The price of the product remained the same after the tax reduction, indicating that the benefit of the reduced GST rate was not passed on to the recipients. 2. Determination of whether the benefit of GST rate reduction was passed on to recipients: The DGAP conducted a detailed investigation and found that the GST rate on the Samsung 80 CM (32 inches) HD ready LED TV was indeed reduced from 28% to 18% effective from 01.01.2019. The investigation period covered from 01.01.2019 to 31.03.2019. The DGAP found that the Respondent did not reduce the selling price of the product commensurately with the GST rate reduction, thus violating Section 171 of the CGST Act, 2017. 3. Calculation of the profiteered amount: The DGAP calculated the profiteered amount by comparing the average base prices of the product before and after the GST rate reduction. The DGAP found that the Respondent had profiteered by an amount of ?466.11 on each item sold. The total profiteering amount was calculated to be ?37,85,342/- for the period from 01.01.2019 to 31.03.2019, including excess GST collected from recipients. 4. Respondent's contention on being the supplier and the methodology used by DGAP: The Respondent argued that he was not the supplier of the goods in question and that the suppliers were two separate dealers. However, the DGAP found that the complaint was against the Respondent and not the intermediate suppliers. The Respondent also contended that the methodology used by DGAP was arbitrary. The DGAP compared the average base prices pre and post-GST rate reduction, which was found to be logical and reasonable. 5. Constitutional validity of Section 171 of the CGST Act: The Respondent argued that Section 171 of the CGST Act violated Article 19(1)(G) of the Constitution, which guarantees the right to trade freely. The Authority found that Section 171 does not control prices but requires the benefit of tax reduction to be passed on to recipients. Therefore, it does not violate the right to trade freely. 6. Imposition of penalty under Section 171(3A) of the CGST Act: The Authority determined that the Respondent had denied the benefit of tax reduction to customers, thus profiteering in violation of Section 171(1) of the CGST Act. A show cause notice was issued to the Respondent to explain why the penalty prescribed under Section 171(3A) should not be imposed. Conclusion: The Authority ordered the Respondent to reduce prices commensurately and deposit the profiteered amount of ?37,85,342/- in the Consumer Welfare Fund (CWF) of the Central and State Governments along with 18% interest. The Commissioners of CGST/SGST were directed to monitor the compliance of this order under the supervision of the DGAP. A report on compliance was to be submitted within four months from the date of receipt of the order.
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