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2022 (7) TMI 25 - NAPA - GSTProfiteering - supply of the products manufactured and sold by the Respondent - allegation is that the Respondent had not passed on the benefit of reduction of rate of tax to the consumers by way of commensurate reduction in base price of the products manufactured and sold by him - contravention of Section 171 of the CGST Act 2017 - penalty - HELD THAT - The rate of tax had increased from 21.16% to 28% post-GST in respect of some goods. There were such 491 other products where the rate of tax applicable in pre-GST era ranged from 18% to 25% that increased to 28% with introduction of GST. In respect of 27 products manufactured or traded by the Respondent the effective GST rate was 18% - the Authority finds that ass per the DGAP s Report in pre-GST era there were 490 such manufactured products on which the rate of consolidated tax (i.e. CENVAT/Central Excise VAT) applicable was 18% to 25% Ad-valorem i.e. less than 28% and the applicable rate of tax increased to 28% Ad-valorem with introduction of GST. Thus the provisions of Section 171 of the CGST Act 2017 are not applicable on supply of such goods. Further there was reduction in the rate of tax applicable on only 13 manufactured goods and 14 traded goods in the GST-regime as per the DGAP s Report and its Annexures (i.e. in comparison to the consolidated tax rate of tax i.e. CENVAT/Central Excise VAT applicable in pre-GST regime). It is also noted that the Respondent had not dealt in 13 of such 14 traded goods on which the rate of tax was decreased in post-GST regime. Hence the DGAP s has calculated profiteering in respect of 13 manufactured goods and 01 traded goods (on which rate of tax was decreased with the introduction of GST) in which the Respondent has dealt post-GST. The Authority finds that the Respondent s contention to consider rate price rather than transaction value for computation of profiteering is not sustainable as the transaction value is the base value (taxable value) upon which all the taxes are levied and paid to the Government. Therefore to pass on the benefit of any rate reduction in terms of Section 171 of the CGST Act 2017 the Supplier has to reduce the base value commensurately. Thus it is evident from the narration of facts that 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 he has thus committed an offence under Section 171(3A) of the above Act and therefore he is liable for imposition of penalty under the provisions of the above Section with effect from 01.01.2020 onwards for the amount profiteered. These provisions came into effect from 01.01 2020 i.e. penalty equivalent to ten per cent of the profiteered amount will be imposed upon him for the amount profiteered after 01.01.2020. However no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. Thus the profiteered amount is determined as Rs. 1, 18, 33, 987/-. Accordingly the Respondent is directed to reduce his prices commensurately in terms of Rule 133(3)(a) of the CGST Rules 2017. As per the outward sales data submitted by the Respondent it is gathered that all the transactions of the Respondent are B2B customers. Therefore each of the customer is identifiable. Hence we order that the profiteered amount of Rs. 1, 18, 33, 987/- shall be passed on/refunded along with interest @ 18% (from the date of receipt of the profiteered amount by the Respondent up till the date of passing on/refund of such profiteered amount to the recipients) by the Respondent as per Annexure-A and B to this Order within a period 3 months from the date of this order. Application disposed off.
The judgment involves the National Anti-Profiteering Authority (NAA) addressing allegations against M/s MYK Laticrete India Pvt. Ltd. regarding profiteering under the Central Goods and Services Tax (CGST) Act, 2017. The primary issues considered were whether the respondent violated Section 171 of the CGST Act by not passing on the benefits of reduced GST rates and additional Input Tax Credit (ITC) to consumers.
The core legal questions examined were:
In the detailed analysis, the legal framework under Section 171 of the CGST Act mandates that any reduction in tax rates or benefit of ITC must be passed on to consumers through commensurate price reductions. The investigation by the Director General of Anti-Profiteering (DGAP) revealed that the respondent had increased base prices despite a reduction in GST rates, thus contravening Section 171. The DGAP's report highlighted several key findings:
The court considered competing arguments from the respondent, who contended that market forces, not tax rates, primarily determined product prices. The respondent argued for using "rate price" rather than "transaction value" for calculating profiteering, citing variability in transaction values due to discounts. However, the court upheld the DGAP's methodology, emphasizing that transaction value is the base for tax calculations. The court concluded that the respondent violated Section 171 by not reducing prices commensurately with tax reductions and ITC benefits. Consequently, the court ordered the respondent to refund the profiteered amount with interest to affected consumers, identified as B2B customers. Significant holdings include:
The judgment underscores the importance of compliance with anti-profiteering provisions under the GST regime, emphasizing the need for businesses to pass on tax benefits to consumers. The decision also clarifies the methodology for calculating profiteering, reinforcing the use of transaction value as the basis for tax-related computations.
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