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2020 (6) TMI 81 - NAPA - GSTProfiteering - supply of Food Processor - allegation that the benefit of GST at the time of implementation of the GST, is not passed on - contravention of section 171 of CGST Act - levy of penalty - HELD THAT - It is evident from the details furnished in Annexure-17 18 that the profiteering is determined as ₹ 4,53,949/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the price of the impugned product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of ₹ 4,53,949/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of ₹ 2,26,975/- in the Central Consumer Welfare Fund (CWF) and ₹ 2,26,974/- in the State CWFs as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, as mentioned in the Annexures- 17 18, along with 18% interest. Imposition of penalty - HELD THAT - The Respondent has denied the benefit of reduction in the rate of tax to his buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017, and has thus resorted to profiteering. Hence, he has committed an offence under section 171 (3A) of the CGST Act, 2017, and therefore, he appears to be liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on them.
Issues Involved:
1. Whether there was a reduction in the rate of tax on the product w.e.f. 01.07.2017? 2. Whether any benefit of reduction in the rate of tax was to be passed? 3. Whether the benefit of reduction in tax was passed on to the recipient by way of commensurate reduction in prices? Issue-wise Detailed Analysis: 1. Reduction in the Rate of Tax: The DGAP's report clarified that the applicable tax rate on the product "Food Processor" (HSN Code 85094090) was 26.24% pre-GST and increased to 28% post-GST w.e.f. 01.07.2017. The rate was later reduced to 18% w.e.f. 15.11.2017. The DGAP found that there was no reduction in the rate of tax on the product w.e.f. 01.07.2017, and thus, the allegation of profiteering was not established for this period. 2. Benefit of Reduction in the Rate of Tax: The DGAP observed that the Respondent did not increase the MRP of the product, which remained ?5,795 during both the pre-GST and post-GST periods. The DGAP concluded that since there was no reduction in the rate of tax w.e.f. 01.07.2017, the provisions of Section 171 of the CGST Act, 2017, which require passing on the benefit of tax reduction, were not attracted. 3. Passing on the Benefit: The DGAP's further investigation found that the Respondent had not passed on the benefit of the reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017. The DGAP concluded that the Respondent had increased the base price of the product post-GST implementation and had not passed on the benefit of the reduced tax rate to the recipients. The DGAP calculated the profiteered amount as ?4,53,949/- for the period from 01.07.2017 to 31.12.2018. Conclusion: The Authority examined the DGAP's report and the submissions of the Respondent and concluded that the Respondent had not passed on the benefit of the reduction in the rate of tax to the recipients. The Authority directed the Respondent to reduce the price of the product and deposit the profiteered amount of ?4,53,949/- along with 18% interest in the Consumer Welfare Funds. The Authority also directed the DGAP to investigate other products supplied by the Respondent to determine if similar profiteering had occurred.
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