2019 (6) TMI 1265 - NAPA - GST

Profiteering - supply of Sanitary Napkins - benefit of reduction in GST rate had not been passed on to the recipients by way of commensurate reduction in price - HELD THAT - It's an admitted fact that the rate of tax on the product was reduced from 12% to NIL w.e.f. 27.07.2018 without the benefit of ITC. The DGAP vide Annexure-15 of his Report dated 29.03.2019 has found that the Respondent had increased his base price inspite of reduction in the rate of tax from 12% to NIL. Accordingly the DGAP has arrived at profiteered amount of Rs, 5,282.51/- which includes the profiteered amount of ₹ 894.88/- on the closing stock as on 26.07.2018 and ₹ 4,387.63/- on the fresh stock for the period 27.07.2018 to 30.09.2018. The Respondent has neither disputed the quantity nor the profiteered amount as has been arrived at by the DGAP. The Respondent is hereby directed to reduce the price of the product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, by making commensurate reduction in the price, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. Penalty - HELD THAT - Respondent has issued incorrect invoices while selling the above products to his recipients as he has not correctly shown the basic prices which he should have legally charged from them. The Respondent has also collected additional GST on the increased prices through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he had failed to pass on. It is also established from the record that the Respondent has consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act - respondent is liable to penalty - In the interest of natural justice, notice may be issued to the Respondent to show cause as to why penalty should not be imposed on him as per the provisions of Section 122 of the CGST Act, 2017 read with Rule 133 (3) (d) of the CGST Rules, 2017. Application disposed off.

Summary

Issues:
1. Allegation of profiteering in the supply of "Sanitary Napkins" due to non-passing of GST rate reduction benefit.
2. Examination of application by the Standing Committee on Anti-profiteering and referral to the Director General of Anti-Profiteering for detailed investigation.
3. Submission of investigation report by the DGAP for the period of 01.07.2018 to 30.09.2018.
4. Analysis of the Respondent's actions regarding passing on the benefit of GST rate reduction.
5. Determination of profiteered amounts on closing stock and fresh stock post-GST rate reduction.
6. Consideration of Respondent's submissions regarding unintentional non-passing of benefit, payment made, and request to drop penalty proceedings.
7. Authority's decision on the profiteered amount, direction to reduce product price, and deposit the determined amount into Consumer Welfare Funds.
8. Accounting of the amount paid by the Respondent and imposition of penalty for issuing incorrect invoices and contravention of CGST Act.

Detailed Analysis:
1. The case involved an application alleging profiteering in the supply of "Sanitary Napkins" due to the non-passing of the benefit of GST rate reduction. The matter was referred to the DGAP for investigation.
2. The DGAP submitted a report stating that the Respondent had not passed on the benefit of the GST rate reduction from 12% to Nil, resulting in a profiteered amount.
3. The investigation revealed that the Respondent had increased the base price despite the tax rate reduction, leading to profiteering on both closing and fresh stock post-GST rate reduction.
4. The Respondent, in his submissions, acknowledged the mistake, paid the profiteered amount, and requested leniency, attributing the error to lack of knowledge and oversight.
5. The Authority determined the profiteered amount and directed the Respondent to reduce the product price to pass on the benefit to recipients, along with depositing the determined amount into Consumer Welfare Funds.
6. The Respondent's payment was acknowledged, and penalty proceedings were considered due to the issuance of incorrect invoices and contravention of CGST Act provisions, warranting a show-cause notice for potential penalty imposition.