2022 (5) TMI 1416 - NAPA - GST

Profiteering - supply of Services by way of admission to exhibition of cinematography films - benefit of reduction in the GST rate not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT - It has been established that the Respondent has profiteered by way of increasing the base prices of his supplies of the three categories of movie tickets by maintaining the same selling prices of the movie admission tickets despite the 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. It is also clear that the Respondent has not passed on the benefit amounting to Rs. 1,31,754 (inclusive of GST) to his customers/recipients. Thus the profiteering is determined as Rs. 1,31,754/- as per the provisions of Section 171 read with Rule 133 (1) of the CGST Rules 2017 and accordingly the Respondent is directed to commensurately reduce the prices of the three categories of movie tickets in line with the provisions of Section 171 (1) read with Rule 133 (3) (a) of the CGST Rules 2017. Further, since the customers/ recipients, in this case, are not identifiable, the Respondent are directed to deposit the profiteered amount of Rs. 1,31,754/- 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, in two equal parts, in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF as per provisions of Section 171 (1) read with Rule 133 (3) (c) of the CGST Rules 2017. Penalty - HELD THAT - It is revealed that vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come in to force w.e.f. 01.01.2020, by inserting Section 171 (3A). Since, no penalty provisions were in existence between the period from 01.01.2019 to 30.09.2019 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) can not be imposed on the Respondent retrospectively. Also this Order falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.

Summary

Issues Involved:
1. Allegation of profiteering by the Respondent.
2. Investigation process by the DGAP.
3. Determination of profiteering and quantification.
4. Compliance with Section 171 of the CGST Act, 2017.
5. Directions for depositing the profiteered amount.

Issue-wise Detailed Analysis:

1. Allegation of Profiteering by the Respondent:
The primary issue was the allegation that the Respondent did not pass on the benefit of the GST rate reduction from 18% to 12% on "Services by way of admission to exhibition of cinematography films where the price of admission ticket was one hundred rupees or less" effective from 01.01.2019. Instead, the Respondent increased the base prices of the tickets to maintain the same cum-tax selling prices as in the pre-rate reduction period.

2. Investigation Process by the DGAP:
The DGAP conducted a detailed investigation under Rule 129 of the CGST Rules, 2017, based on an application filed by Applicant No. 1. The investigation covered the period from 01.01.2019 to 30.09.2019. Despite multiple notices and summons, the Respondent did not submit the requisite records/documents. The jurisdictional GST office provided month-wise details of outward taxable supplies, category-wise price lists, sample tickets, and GSTR-1 and GSTR-3B returns.

3. Determination of Profiteering and Quantification:
The DGAP observed that the Respondent maintained the same cum-tax prices for all categories of tickets (Balcony- Rs. 70, 1st Class- Rs. 50 & Third Class- Rs. 10) after the GST rate reduction, resulting in profiteering. The methodology adopted to compute profiteering was in 'lump sum' due to the Respondent not maintaining class/category-wise details. The total profiteering amount was determined to be Rs. 1,31,754/- for the period from January 2019 to September 2019.

4. Compliance with Section 171 of the CGST Act, 2017:
Section 171 mandates that any reduction in the rate of tax on any supply of goods or services should be passed on to the recipient by way of commensurate reduction in prices. The Respondent's failure to reduce the base prices of the tickets despite the GST rate reduction was a clear contravention of this provision. The Respondent's argument that there was no variation in his price list before and after the GST rate reduction was not accepted as it was an admission of the charges framed.

5. Directions for Depositing the Profiteered Amount:
The Authority directed the Respondent to deposit the profiteered amount of Rs. 1,31,754/- along with interest at 18% from the date of collection till the date of deposit. The amount was to be deposited in two equal parts in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF within three months from the date of receipt of the Order. The Commissioners of CGST/SGST Telangana were directed to monitor the compliance of this Order under the supervision of the DGAP.

Conclusion:
The Respondent was found to have contravened Section 171 of the CGST Act, 2017, by not passing on the benefit of the GST rate reduction to the recipients. The total profiteering amount of Rs. 1,31,754/- was determined, and the Respondent was directed to deposit this amount along with interest in the respective Consumer Welfare Funds. The Order was passed within the limitation period prescribed under Rule 133(1) of the CGST Rules, 2017, considering the exclusion of the period from 15.03.2020 to 28.02.2022 due to the COVID-19 pandemic as per the Hon'ble Supreme Court's directions.