9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (4) TMI 570 - NAPA - GSTProfiteering - restaurant service - allegation that the Respondent had increased the base prices of his products and had not passed on the benefit of reduction in the GST rate - contravention of Section 171 of the CGST Act, 2017 - penalty - HELD THAT - Section 171 of the CGST Act 2017 itself defines the term profiteered which means the amount determined on account of not passing on the benefit of reduction in the rate of tax on supply of goods and services or both or the benefit of Input Tax Credit to the recipient by way of commensurate reduction in the prices of the goods or services or both. We find it also pertinent that Section 171 of the CGST Act 2017 provides that the profiteered amount is to be computed in respect of each supply made by a registered person and that the scope of profiteering is confined to the question of whether the benefit accruing on account of reduction in the tax rate or the benefit of ITC as the case may be, has been passed on to the recipient/consumer or not. It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been a reduction in the rate of tax from 18% to 5% w.e.f. 15.11.2017, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 in the post GST period. It has been revealed from the DGAP's Report that the ITC which was available to the Respondent during the period July 2017 to October 2017 is 6.32% of the net taxable turnover of restaurant services supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the ITC was not available to the Respondent - Based on the above facts the profiteered amount is determined as ₹ 1,49,896/- as has been computed in Annexure-8 of the DGAP Report dated 17.09.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of ₹ 1,49,8961- in two equal parts of ₹ 74,948/- each in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund, as the recipients are not identifiable, as per the provisions of Rule 133 (3) (c) of the above Rules along with 18% interest payable from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. Penalty - HELD THAT - It is evident from the above narration of facts that the 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 resorted to profiteering. Hence, he has committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he is liable for the imposition of penalty under the provisions of the above Section - Accordingly, a notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
Issues Involved:
1. Violation of Section 171(1) of the CGST Act, 2017. 2. Determination of the additional benefit of ITC to be passed on to recipients. 3. Calculation of the profiteered amount. 4. Consideration of increased costs due to royalty, advertisement charges, and inflation. 5. Inclusion of GST in the profiteered amount. 6. Period of investigation for profiteering. 7. Right to trade under Article 19 (1)(g) of the Constitution of India. Detailed Analysis: 1. Violation of Section 171(1) of the CGST Act, 2017: The judgment confirms that the Respondent violated Section 171(1) by not passing on the benefit of the GST rate reduction from 18% to 5% effective from 15.11.2017. The DGAP's report revealed that the Respondent increased the base prices of 129 items, negating the effect of the reduced GST rate, which led to the consumers paying higher prices than they should have. 2. Determination of the Additional Benefit of ITC: The DGAP reported that the ITC available to the Respondent before the GST rate reduction was 6.32% of the net taxable turnover. Post-reduction, the Respondent should have reduced the base prices by this percentage to pass on the benefit to consumers. The Respondent failed to do so, leading to profiteering. 3. Calculation of the Profiteered Amount: The DGAP calculated the profiteered amount as ?1,49,896/-, which includes the excess base prices and the additional GST collected on these prices. The Respondent's contention that the DGAP incorrectly calculated the base price of the "Sub of the Day" (SOTD) was dismissed as there was no evidence to support the claim. The DGAP's method of using average pre-rate reduction prices for comparison was upheld. 4. Consideration of Increased Costs Due to Royalty, Advertisement Charges, and Inflation: The Respondent argued that increased costs due to royalty and advertisement charges post-rate reduction should be considered. However, the judgment clarified that Section 171 does not account for such internal cost increases. The focus is solely on whether the benefit of tax rate reduction has been passed on to consumers, irrespective of the supplier's costs. 5. Inclusion of GST in the Profiteered Amount: The judgment upheld the inclusion of the additional GST collected on the profiteered amount. The Respondent was not required to collect this excess GST, and doing so violated the provisions of Section 171(1). The excess GST collected was rightly included in the profiteered amount as it represented the benefit denied to consumers. 6. Period of Investigation for Profiteering: The Respondent's contention that the investigation period was too long was rejected. The judgment noted that the violation continued unabated until 31.03.2019, and the DGAP's investigation period from 15.11.2017 to 31.03.2019 was appropriate. The Respondent failed to provide evidence of passing on the benefit at any point during this period. 7. Right to Trade Under Article 19 (1)(g) of the Constitution of India: The Respondent argued that the anti-profiteering provisions violated their right to trade. The judgment clarified that the Authority and DGAP do not act as price controllers or regulators. The Respondent is free to set prices and profit margins but must pass on the benefit of tax reductions to consumers. The anti-profiteering provisions ensure that the benefit of tax rate reductions is passed on to consumers, aligning with the welfare intent of the law. Conclusion: The judgment directed the Respondent to reduce prices commensurately and deposit the profiteered amount of ?1,49,896/- in the Central and Maharashtra State Consumer Welfare Funds. The Respondent was also liable for a penalty under Section 171(3A) of the CGST Act, 2017. The SGST Commissioner, Maharashtra State, was tasked with ensuring compliance with the order and submitting a compliance report within four months.
|
