NAA RULING ON SUPPLY OF LIFT : NO ANTI-PROFITEERING CHARGE PROVED

[Dr. Sanjiv Agarwal]

Undue anti-profiteering being resorted to by businesses and trade in GST regime are yet to be proved by the customers or victimized complainants and so also affirmed by and action taken against them by the National Anti-profiteering Authority (NAA) in India. The third order of NAA on the complaint M/s Abel Space Solution LLP, New Delhi against M/s Schindler India Pvt. Ltd. Mumbai has been pronounced in favour of supplier. Thus all three NAA order pronounced so far have gone in favour of supplier of goods or services / companies and against the complainants.

The NAA order have so far been in favour of companies, viz,

Order No.	Date of Order	Complaint Against	Business Activity
1.	27.03.2018	Vrandavaneshwree Automotive Pvt. Ltd, Bareilly [ 2018 (4) TMI 1377 - THE NATIONAL ANTI-PROFITEERING AUTHORITY ]	Car Dealer
2.	04.05.2018	KRBL Ltd., New Delhi [ 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY ]	Basmati rice Manufacturer
3.	31.05.2018	Schindler India Pvt. Ltd., Mumbai [ 2018 (6) TMI 687 - THE NATIONAL ANTI-PROFITEERING AUTHORITY ]	Elevator / Lift Manufacturer

In the latest Order dated 31.05.2018 in Schindler India case (manufacturer of elevators), the NAA has dismissed the complaint filed by a Delhi against elevator manufacturer, Schindler India for charges of undue profiteering business. The complaint pertained to charging of service tax on the payment made to Schindler India before GST implementation on July 1, 2017 and GST for the payment installments made in July when the installation took place. However, since elevators were delivered to the firm before July 1, the tax had been charged without excluding the pre-GST regime excise duty. Hence, the applicant was charged twice once on the pre-GST excise duty and subsequently on the full value of the material used in the lift. But even before the NAA order, the complainant had requested for withdrawal of application, citing inadequate understanding of GST provisions at the time of filing the complaint in September, 2017. But the authority considered the investigative report of the Directorate General of Safeguard (DGS) before ordering the dismissal of complaint.

The NAA ruled that in respect of the two invoices dated July 27, 2017, as the installation of the second lift had been completed after coming into force of the CGST Act, 2017, he was liable to be charged GST at the rate prevalent on July 27, 2017.

Case Facts

Case No.	4/2018
Complainant	Abel Space Solution LLP, New Delhi
Supplier of Goods	Schindler India Pvt. Ltd., Mumbai
Date of Application	20.09.2017
Date of forwarding to DGSG by Standing Committee	15.02.2018
Report of DGSG	16.04.2018
Date of Institution of case	17.04.2018
Date of NAA order	31.05.2018
Order	By 3 Members Bench (including Chairman, NAA)

In the instant case two lifts were ordered in December, 2016 out of which first lift was supplied, installed, invoiced and paid for before GST regime itself. However, in respect of second lift, material was dispatched on 29.03.2017 (pre-GST) and installation completed on 25.07.2017 in GST regime for which three invoices were raised – one invoice issued on 28.06.2017 (with Service Tax) and two on 27.07.2018 (with GST). The allegation was that on the two invoices issued on 27.07.2017 i.e. after coming in to force of the GST, the tax had been charged without excluding the pre-GST regime Excise Duty and hence he had been charged tax twice once on the pre-GST Excise Duty and subsequently on the full value of the material used in the lift.

The Applicant had paid advance for purchase of this lift and he was charged the Service Tax which was leviable at the time of issue of the invoice on 28.06.2017, which he has not disputed and which is also correct as the Applicant was liable for payment of Service Tax under the then applicable provisions of Finance Act, 1994.

According to factual matrix, applicant filed the application under Rule 123 of the CGST Rules, 2017 to the Standing Committee alleging that company had not charged GST on the base price of the lift ordered by him from the company, after excluding the pre-GST Excise Duty on the material component and thus he had been charged tax twice on the same material. This was referred by the Standing Committee to DGSG for further investigations.

The complaint had subsequently withdrawn his complaint vide letter dated 28.03.2018 sent to DGSG and he also did not availed the opportunity of being heard before NAA. The reason cited for withdrawal was that he was not fully aware of the provisions of the CGST Act, 2017 when he had filed his application on 20.09.2017 and since the issues pertaining to case had been further clarified subsequently, his application should be treated to have been withdrawn.

According to law,  the supply and installation of lift amounted to ‘Works Contract’ and as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006, value of the service portion of the works contract was to be taken as equivalent to the gross amount charged for the works contract minus the value of property in goods transferred in the execution of the said works contract and on the goods transferred Value Added Tax was to be charged and on the service portion, Service Tax was leviable. As per Section 142 (10) and 142 (11) of the CGST Act, 2017, the goods or services or both supplied after coming in to force of the above Act, in pursuance of a contract entered into prior to the appointed day were liable to GST but no tax was payable under this Act to the extent the tax was leviable on the said goods or services under the erstwhile VAT Act of the State or Chapter V of the Finance Act, 1994. As per the explanation to Rule 3 of Point of Taxation Rules, 2011, wherever any advance was received by the service provider against the taxable service, the point of taxation was to be construed as the date of receipt of such advance. The installation of elevator was completed in the GST regime, and hence the point for levy of tax for supply of material fell under the GST regime and accordingly, two more invoices were issued on 27.07.2017 wherein the applicable GST was correctly charged.

The company claimed that the Excise Duty benefit could only be given if the material was dispatched on or after 01.07.2017 and since all the material was delivered before 30.06.2017 and hence, he was not in a position to pass such benefit to the Applicant.

The NAA, therefore, finally ordered that there is no substance in the claim made by the applicant and therefore, the Authority accepted the report dated 16-04-2017 filed by the DGSG under Rule 129 (6) of the CGST Rules, 2017. The proceedings were dropped as no violation of the provisions of Section 171 of the CGST Act, 2017 has been established.

It is understood that NAA has under its sleeve over 50 complaints to be examined and adjudicated. It is hoped that in next few weeks, we may witness more orders from NAA against the anti-profiteering complaints. Though the NAA has passed the orders on merits after due examination of facts and following the principle of natural justice, the orders so far must give comfort to industry who were fearing the implementation of anti-profiteering law in India.