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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.
Issues Involved:
1. Alleged profiteering by not passing on the benefit of GST rate reduction and additional ITC to consumers. 2. Determination of whether the rate of GST on the impacted products was reduced. 3. Assessment of additional benefit of ITC available to the Respondent. 4. Computation of profiteering amount. 5. Consideration of "rate price" vs. "transaction value" for computing profiteering. 6. Inclusion of excess GST charged in the profiteering amount. 7. Applicability of penalty under Section 171(3A) of the CGST Act, 2017. Detailed Analysis: 1. Alleged Profiteering: The Applicant No. 1 alleged that the Respondent did not pass on the benefit of GST rate reduction from 18% to 12.5% and VAT from 14.5% to consumers, as required under Section 171 of the CGST Act, 2017. The DGAP's investigation confirmed these allegations, noting that the base prices were not reduced commensurately. 2. GST Rate Reduction: The DGAP's report highlighted that the Central Government, on the recommendation of the GST Council, levied 28% GST on certain products and 18% on others. The Respondent's products fell under these categories. The DGAP found that the Respondent did not reduce the base prices of the products after the GST rate reduction, thus indulging in profiteering. 3. Additional Benefit of ITC: The DGAP noted that the Respondent received an additional benefit of ITC in the post-GST period, which was not passed on to the consumers. The Respondent was required to reduce the base prices commensurately but failed to do so. 4. Computation of Profiteering Amount: The DGAP computed the profiteering amount by comparing the average base prices of products during the pre-GST period with the actual selling prices in the post-GST period. The total profiteering amount was determined to be Rs. 1,18,33,987/- (Rs. 1,15,96,899/- for manufactured goods and Rs. 2,37,088/- for traded goods). 5. Consideration of "Rate Price" vs. "Transaction Value": The Respondent argued that "rate price" (uniform price) should be considered for computing profiteering instead of "transaction value" (variable price). However, the DGAP and the Authority concluded that the transaction value is the base value upon which taxes are levied and paid to the Government. Therefore, the benefit of any rate reduction must be passed on by reducing the base value commensurately. 6. Inclusion of Excess GST Charged: The DGAP included the excess GST charged in the profiteering amount, as the customers had to bear the increased base price and the GST levied on it. The Respondent's contention that the excess GST should not be included was rejected, as the additional GST amount is part of the profiteered amount. 7. Applicability of Penalty: The Respondent contended that no penalty should be levied for the period before the insertion of Section 171(3A) of the CGST Act, 2017, which came into effect on 01.01.2020. The Authority agreed that the penalty would be applicable only for the amount profiteered after 01.01.2020. The Respondent is liable for a penalty equivalent to 10% of the profiteered amount if not deposited within thirty days of the order. Conclusion: The Authority determined that the Respondent violated Section 171 of the CGST Act, 2017, by not passing on the benefits of GST rate reduction and additional ITC to consumers. The total profiteered amount was Rs. 1,18,33,987/-. The Respondent is directed to refund this amount along with interest at 18% to the recipients within three months. The jurisdictional CGST/SGST Commissioner is tasked with ensuring compliance and publishing the details for public awareness.
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