2018 (12) TMI 135 - NAPA - GST

Penalty - Profiteering - benefit of reduction in the price granted - Section 122 (1) (i) of the CGST Act, 2017 - Held that - The Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and dishonest. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoice in which the base price was deliberately not reduced by the amount of CVD, SAD and CST chargeable under erstwhile scenario which is now chargeable as IGST in the GST regime and is available as ITC benefit and thus he had denied the benefit of reduction in the price granted vide IGST provisions to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017. The notice regarding imposition of penalty has already been issued to the Respondent on 11.09.2018. However, the Respondent has not furnished any reply or advanced any arguments on the quantum of penalty to be imposed on him. Keeping in view the principles of natural justice, opportunity of being heard has to be given to the Respondent before the penalty is imposed. Hence fresh notice be given to him to explain why penalty should not be imposed on him. It is clear that the Respondent did not pass on the benefit arising out of the increased ITC in the case of the subject transaction - the possibility of the Respondent having profiteered and thus unfairly benefited in the similar manner, in case of the other supplies affected by him to other customers, cannot be ruled out. We unequivocally opine that a fresh investigation by the DGAP covering all products supplied by the Respondent, within the confines of Section 171 of the CGST Act, is merited to unearth and quantify the benefit that the Respondent has failed to pass on to his customers - The DGAP is directed to initiate investigation against the Respondent in this regard.

Summary

Issues Involved:
1. Allegation of Anti-Profiteering.
2. Calculation of Profiteered Amount.
3. Respondent's Defense and Counterclaims.
4. Penalty and Further Investigation.

Issue-wise Detailed Analysis:

1. Allegation of Anti-Profiteering:
The Applicant No. 1 alleged that the Respondent charged 18% IGST on a pre-GST quoted price of ?59,06,000 for two imported items, denying the benefit of Input Tax Credit (ITC) after GST implementation. The Standing Committee on Anti-profiteering recommended an investigation, which was conducted by the Director General of Anti-Profiteering (DGAP).

2. Calculation of Profiteered Amount:
The DGAP's investigation revealed that the Respondent did not reduce the base price to account for the Countervailing Duty (CVD) that was subsumed in the IGST. The DGAP concluded that the total price should have been ?66,30,377 instead of ?71,08,462, resulting in a profiteered amount of ?4,78,085. The DGAP provided a detailed comparison of pre-GST and post-GST scenarios, showing that the Respondent should have reduced the base price by the amount of CVD and SAD, which were no longer applicable.

3. Respondent's Defense and Counterclaims:
The Respondent argued that additional costs related to accessories and materials supplied as a combo offer were not considered by the DGAP. The Respondent also claimed that the CST component was not considered in the profiteering calculation. However, the Authority found no evidence of the combo offer in the quotations or invoices and rejected the CST argument as the sale occurred post-GST implementation. The Respondent's claim of a price increase in January 2017 was also dismissed due to lack of evidence.

4. Penalty and Further Investigation:
The Authority concluded that the Respondent violated Section 171 of the CGST Act by not passing on the benefit of ITC to the customer and was liable for penal action under Section 122 of the CGST Act. The Respondent was directed to reduce the sale price and refund ?4,78,085 along with 18% interest to the Applicant No. 1 within three months. The Authority also ordered a fresh investigation by the DGAP to cover all products supplied by the Respondent to ensure no further profiteering occurred.

Conclusion:
The Respondent was found guilty of profiteering by not reducing the base price to reflect the benefits of ITC available under GST. The Authority ordered a refund to the Applicant and directed further investigation into the Respondent's other supplies. The Respondent was also liable for penal action under the CGST Act.