2019 (3) TMI 430 - NAPA - GST

Profiteering - printing cartridges - benefit of reduction in the GST rates not passed on - section 171 of the CGST Act, 2017 - Held that - It is clear that anyone alleging profiteering can file a complaint. So it is not necessary that the complainant has to purchase the products, Moreover, all the details are available so the question of not considering the compliant do not arise at all. Even the MRP that is manually written happens to be correct MRP as admitted by the respondent. Therefore, the Standing Commitee has rightly forwarded the same the DGAP and the DGAP has accordingly completed its investigation and filed his report. In the present case, we are concerned with the supplier and the supplier is the respondent who has increased the price even after reduction of GST rate of tax. The passing of the benefit by the distributor or retailer does not rest on the fact that the manufacturer or his supplier should have passed on the same benefit to him first - the benefit of reduction of tax has to be necessarily has to be passed on to the recipients. Moreover the DGAP has rightly taken the transaction value of supplier which was the price that was charged by the respondent from his recipients which excluded the impact of discounts. Thus, the respondent is directed to reduce the price of the products as per provisions of Rule 133 (3) (a) of CGST Rules, 2017 by making commensurate reduction in the prices, keeping in view the reduction in the rate of tax. Penalty - Held that - It has been established that the Respondent has profiteered by increasing his base price. Hence he is liable for penalty under Section 122(1)(i) of the CGST Act, 2017, for issuing incorrect invoices. In the interest of natural justice before imposition of penalty a notice for hearing need to be issued.

Summary

Issues Involved:
1. Allegation of not passing on the benefit of GST rate reduction.
2. Examination of the complaint by the Standing Committee.
3. Investigation by DGAP and findings.
4. Respondent’s defense and submissions.
5. Calculation of profiteering amount.
6. Directions and penalties.

Detailed Analysis:

1. Allegation of Not Passing on the Benefit of GST Rate Reduction:
The Applicant alleged that the Respondent did not pass on the benefit of the GST rate reduction from 28% to 18% for printing cartridges (HSN 8443) effective from 15.11.2017. The Applicant supported this claim with two sale invoices dated 04.10.2017 and 09.12.2017.

2. Examination of the Complaint by the Standing Committee:
The Standing Committee reviewed the complaint on 25.05.2018 and decided to refer the matter to the Directorate General of Anti-Profiteering (DGAP) for investigation.

3. Investigation by DGAP and Findings:
The DGAP issued a notice to the Respondent on 10.07.2018 and extended the investigation period to 07.10.2018. The DGAP found that the Respondent increased the base price of the product post-GST rate reduction, thus not passing the benefit to the recipients. The DGAP calculated the profiteered amount as ?10,79,813.28.

4. Respondent’s Defense and Submissions:
The Respondent argued that:
- They were merely retailers and had no control over the MRP set by the manufacturer (HP).
- The increase in MRP was due to the increase in tax rates and customs duty.
- The sales during the "Great Indian Festival Sale" were at promotional prices, which were not comparable to regular sales.
- The DGAP’s report ignored several key facts and submissions.
- The complaint was against HP India, not the Respondent.

5. Calculation of Profiteering Amount:
The DGAP calculated the profiteering amount based on the increase in the base price post-GST rate reduction. The Respondent argued that the calculation should consider the entire period from 01.07.2017 to 14.11.2017 and the increase in procurement prices. The DGAP maintained that the calculation was based on the nearest pre-rate reduction prices.

6. Directions and Penalties:
The Authority directed the Respondent to:
- Reduce the price of the product to reflect the GST rate reduction.
- Deposit the profiteered amount of ?10,79,813.28 along with 18% interest in the Consumer Welfare Fund (CWF) of the Centre and respective States.
- Deposit the amount in a 50:50 ratio in the Central and State CWFs within three months.
- The Respondent was also found liable for a penalty under Section 122(1)(i) of the CGST Act, 2017, for issuing incorrect invoices, and a notice for hearing regarding the penalty was to be issued.

Conclusion:
The judgment concluded that the Respondent had profiteered by increasing the base price post-GST rate reduction, thus not passing the benefit to the recipients. The Respondent was directed to deposit the profiteered amount in the CWFs and reduce the product price accordingly.