2020 (9) TMI 498 - NAPA - GST

Profiteering - supply of Services by way of admission to exhibition of cinematograph films - allegation that the benefit of reduction in the rate of GST not passed on by way of commensurate reduction in price - contravention of provisions of section 171 of CGST Act - penalty - HELD THAT - It is clear from the investigation carried out by the DGAP that the base price of the admission ticket has been increased from ₹ 84.75 to ₹ 89.29 for the Emerald Circle category and from ₹ 59.32/- to ₹ 60.50/- for the Dress Circle category as mentioned in Table-A above. Therefore, the Respondent has not reduced the base prices of the admission tickets in respect of the Emerald Circle and Dress Circle categories, instead maintained the pre-rate reduction cum tax prices by increasing the base prices of the above categories of admission tickets. Further, in respect of the prices of admission tickets for the Emerald category, it was found that no sales had been made by the Respondent during the period of investigation. Therefore, it can be concluded that there was no profiteering in the Emerald category of admission tickets. It has been established that the Respondent has resorted to profiteering by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate on Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019 to 30.06.2019. On this account, the Respondent has realized an additional amount to the tune of ₹ 5,31,625/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering is determined as ₹ 5,31,625/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his tickets 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 ₹ 5,31,625/- 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 ₹ 5,31,625/- in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF in two equal parts as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. Penalty - HELD THAT - The Respondent has denied the benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171 (1) during the period from 01.01.2019 to 30.06.2019 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. However, perusal of the provision of Section 171 (3A) of the CGST Act, 2017 under which penalty has been prescribed for the above violation shows that Section 171 (3A) of the Act has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.01.2019 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) of the Act cannot be imposed on the Respondent retrospectively - notice for imposition of penalty is not required to be issued to the Respondent.

Issues Involved:
1. Allegation of profiteering by the Respondent.
2. Investigation by the Director-General of Anti-Profiteering (DGAP).
3. Examination of GST rate reduction and its impact.
4. Determination and quantification of profiteering.
5. Compliance with Section 171 of the CGST Act, 2017.
6. Directions for depositing the profiteered amount.
7. Imposition of penalty under Section 171 (3A) of the CGST Act, 2017.

Detailed Analysis:

1. Allegation of Profiteering by the Respondent:
The case originated from an application alleging that the Respondent did not pass on the benefit of GST rate reduction on "Services by way of admission to exhibition of cinematograph films" from 18% to 12%, effective from 01.01.2019.

2. Investigation by the Director-General of Anti-Profiteering (DGAP):
The DGAP conducted a detailed investigation based on the reference from the Standing Committee on Anti-profiteering. Despite multiple notices and summons, the Respondent did not submit the requisite documents or respond to the investigation. The investigation covered the period from 01.01.2019 to 30.06.2019.

3. Examination of GST Rate Reduction and Its Impact:
The DGAP examined whether the GST rate reduction from 18% to 12% for admission tickets priced at ?100 or less was passed on to the recipients. It was found that the Respondent increased the base prices of tickets instead of reducing the final prices commensurately with the tax rate reduction.

4. Determination and Quantification of Profiteering:
The DGAP's analysis revealed that the Respondent increased the base prices of admission tickets in two categories: Emerald Circle and Dress Circle. The total profiteered amount was calculated to be ?5,31,625/-. The DGAP provided detailed tables illustrating the price changes and the resultant profiteering.

5. Compliance with Section 171 of the CGST Act, 2017:
Section 171 mandates that any reduction in the tax rate must be passed on to the recipients by a commensurate reduction in prices. The investigation concluded that the Respondent violated this provision by not reducing the ticket prices accordingly.

6. Directions for Depositing the Profiteered Amount:
The Respondent was directed to deposit the profiteered amount of ?5,31,625/- along with interest at 18% into the Central Consumer Welfare Fund (CWF) and the Telangana State CWF in equal parts. This amount must be deposited within three months from the date of the order.

7. Imposition of Penalty under Section 171 (3A) of the CGST Act, 2017:
Although the Respondent was found to have committed an offence under Section 171 (1), the penalty under Section 171 (3A) could not be imposed retrospectively as it was effective from 01.01.2020, while the violation occurred between 01.01.2019 and 30.06.2019.

Conclusion:
The Authority concluded that the Respondent contravened Section 171 (1) of the CGST Act, 2017 by not passing on the benefit of GST rate reduction to the recipients. The Respondent was ordered to deposit the profiteered amount with interest into the respective Consumer Welfare Funds and ensure compliance within the stipulated period. The Commissioners of CGST/SGST Telangana were directed to monitor the compliance and submit a report within four months.

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