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2022 (5) TMI 631 - NAPA - GSTProfiteering - supply of Monitors and TVs of screen size upto 32 inches - benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in the price - contravention of Section 171 of the CGST Act, 2017 - levy of interest and penalty - time limitation - HELD THAT - A plain reading of Section 171 (1) of the CGST Act, 2017 indicates that it deals with two situation - one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the record that there has been a reduction in the rate of tax from 28% to 18% on Monitors and TVs of screen size upto 32 inches w.e.f. 01.01,2019, vide Notification No. 24/2018-C.T.(Rate) dated 31.12.2018. Therefore, the Respondent is liable to pass on the benefit of the above tax rate reduction to his customers in terms of Section 171 (1) of the above Act, It is also apparent that the DGAP has carried out the present investigation w.e.f. 01.01.2019 to 30.06.2019. It is also evident that for computing the profiteered amount the DGAP has calculated item-wise profiteering during the pre rate reduction period and calculated the average base price (without GST) of particular item by dividing the total taxable value with the total quantity of that item sold. He has compared the average pre rate reduction base price of the item with the actual selling prices of that item sold during the post reduction period i.e. after 01.01.2019 and assessed the profiteered amount on particular item. The mathematical methodology employed by the DGAP to compute the profiteered amount is correct, appropriate, reasonable and in consonance with the provisions of Section 171 (1) and the same has not been challenged by the Respondent in any of his submissions. Further, the Respondent has not submitted any argument against the charges framed in the DGAP's Report. Therefore there are no basis to differ from the findings of the DGAP that the Respondent had indeed contravened the provisions of Section 171 of the CGST Act 2017 - the profiteered amount is determined as Rs. 4,699/- for the period from 01.01.2019 to 30.06.2019 as mentioned in the DGAP's Report dated 28.02.2020 as per the provisions of Section 171 (1) read with Rule 133 (1) of the CGST Rules, 2017. Further, since the recipients to whom the benefit of rate reduction as determined above is required to be passed on, are not identifiable, the Respondent has deposited the profiteered amount of Rs. 4,699/- along with interest of Rs. 1,500/- in the CWFs of the Central and the State Government. Levy of interest - HELD THAT - It is revealed from the submissions of the Respondent that the Respondent has voluntarily paid the interest amount of Rs. 1500/-. However, the same has not been verified by the DGAP. Accordingly, the DGAP is directed to ensure that the interest, at the applicable rate, is paid by the Respondent and submit his report confirming payment of the interest within three months of this Order. Penalty - HELD THAT - The Respondent has contravened the provisions of Section 171 (1) of the CGST Act, 2017. However, since, the penalty prescribed under Section 171 (3A) of the CGST Act, 2017 for violation of the above provisions has come in to force w.e.f. 01.01.2020 and the infringement pertains to the period from 01.01.2019 to 30.06.2019 and the Respondent has also deposited the profiteered amount along with the interest therefore, no penalty is proposed to be imposed on the Respondent. Time limitation - HELD THAT - This Order having been passed today falls within the limitation prescribed under Rule 133 (1) of the CGST Rules, 2017. Application disposed off.
Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017. 2. Quantum of profiteering. Detailed Analysis: Issue 1: Violation of Section 171 of the CGST Act, 2017 The case revolves around an application alleging that the Respondent did not reduce the selling price of "Monitors and TVs of screen size up to 32 inches" when the GST rate was reduced from 28% to 18% effective from 01.01.2019. The Applicant No. 1 provided two invoices as evidence. The DGAP initiated an investigation upon receiving the reference from the Standing Committee on Anti-profiteering, which decided to investigate whether the benefit of the GST rate reduction was passed on to the recipients. The DGAP's investigation covered the period from 01.01.2019 to 30.06.2019. It was found that the Respondent did not reduce the selling price of the products despite the reduction in GST rates. The Central Government had indeed reduced the GST rate on these products from 28% to 18% effective 01.01.2019. The legal requirement under Section 171 (1) of the CGST Act, 2017 mandates that any reduction in the tax rate must be passed on to the recipient by way of a commensurate reduction in prices. This reduction must be in terms of money, ensuring that the final price payable by the recipient is reduced accordingly. The DGAP's analysis showed that the Respondent increased the base price of the products after the GST rate reduction. This was illustrated with specific data and tables comparing pre and post-rate reduction prices. The investigation concluded that the Respondent had indeed increased the base price of "Monitors and TVs of screen size up to 32 inches" in six out of 144 invoices during the investigation period, resulting in a total profiteering amount of Rs. 4,699/-. This amount included the excess GST collected due to the increased base price. The DGAP confirmed that the suppliers of the Respondent had passed on the benefit of the GST rate reduction to the Respondent. The Respondent had issued 124 invoices impacted by the GST rate reduction notification, and the profiteering was calculated accordingly. Issue 2: Quantum of Profiteering The DGAP's report calculated the profiteering amount by comparing the average base price of the products sold before the GST rate reduction with the actual selling prices post-rate reduction. The methodology used by the DGAP was found to be correct, appropriate, and reasonable. The Respondent did not challenge this methodology. The profiteering amount was determined to be Rs. 4,699/- for the period from 01.01.2019 to 30.06.2019. The Respondent agreed with the DGAP's findings and deposited the profiteered amount of Rs. 4,699/- in the Consumer Welfare Funds (CWFs). Additionally, the Respondent voluntarily paid an interest amount of Rs. 1,500/-. The DGAP verified the deposition of the profiteered amount but had not verified the interest amount paid by the Respondent. The Authority directed the DGAP to ensure that the interest is paid at the applicable rate and to submit a report confirming the payment within three months. The Authority concluded that the Respondent had contravened the provisions of Section 171 (1) of the CGST Act, 2017. However, since the penalty provisions under Section 171 (3A) came into force on 01.01.2020, and the infringement period was from 01.01.2019 to 30.06.2019, no penalty was imposed on the Respondent. Conclusion: The Respondent was found to have violated Section 171 (1) of the CGST Act, 2017 by not passing on the benefit of the GST rate reduction to the recipients. The total profiteered amount was determined to be Rs. 4,699/-, which the Respondent deposited in the CWFs along with an interest amount of Rs. 1,500/-. The DGAP was directed to verify the interest payment. No penalty was imposed due to the timing of the penalty provisions coming into force.
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