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2022 (7) TMI 1274 - NAPA - GSTProfiteering - supply of Power Bank Portronics Power Slice 10 - benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price - contravention of section 171 of CGST Act - Penalty - HELD THAT - A plain reading of Section 171 (1) of the CGST Act, 2017 indicates that it deals with two situation - 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 record that the Central Government, on the recommendation of the GST Council vide Notification No. 24/2018-Central Tax (Rate) dated 31.12.2018 had reduced the GST rate on Power Bank from 28% to 18% w.e.f. 01.01.2019. Therefore, the Respondent is liable to pass on the benefit of the above tax rate reduction to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the DGAP has carried out the present investigation w.e.f. 01.01.2019 to 31.03.2019. It has been established that the Respondent has increased the base price of the product i.e. Power Bank, despite the reduction in the GST rate from 28% to 18% during the period 01.01.2019 to 31.03.2019. Thus, the benefit of reduction in the GST rate has not been passed on to the recipients by way of commensurate reduction in the prices by the Respondent, in terms of Section 171 (1) of the CGST Act, 2017 during the above period. It is also clear that the Respondent has not passed on the benefit amounting to Rs. 96,354/- (inclusive of GST) to his customers/ recipients. Thus the profiteering is determined as Rs. 96,354/- as per the provisions of Section 171 read with Rule 133 (1) of the CGST Rules 2017 and accordingly the Respondent is directed to commensurately reduce the prices of his product i.e. Power Bank in line with the provisions of Section 171 (1) read with Rule 133 (3) (a) of the CGST Rules 2017. Penalty - HELD THAT - Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come in to force w.e.f. 01.01.2020. by inserting Section 171 (3A). Since, no penalty provisions were in existence between the period from 01.01.2019 to 31.03.2019 when the Respondent had violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017. 2. Quantum of profiteering. 3. Investigation of credit notes and their impact on profiteering. 4. Mismatch between GST returns and sales data. 5. Respondent's calculation of profiteering. 6. Channel/segment-wise sales data and its impact on profiteering. Detailed Analysis: Violation of Section 171 of the CGST Act, 2017: The judgment revolves around the allegation that the Respondent did not reduce the selling price of the Power Bank "Portronics Power Slice 10" when the GST rate was reduced from 28% to 18% effective from 01.01.2019. The Director General of Anti-Profiteering (DGAP) confirmed that the Respondent increased the base price of the product, thus not passing the benefit of the reduced GST rate to the customers, which is a violation of Section 171 of the CGST Act, 2017. Quantum of Profiteering: The DGAP's investigation revealed that the Respondent had profiteered by an amount of Rs. 5,21,965/- initially, which was later revised to Rs. 96,354/- after further investigation. The profiteering amount was calculated by comparing the average base prices of the product sold before and after the GST rate reduction. Investigation of Credit Notes and Their Impact on Profiteering: The Respondent contended that the negative figures in his sales data related to credit notes raised due to sales returns. The DGAP verified and found that the credit notes did impact the profiteering amount, reducing it by Rs. 354/-. Mismatch Between GST Returns and Sales Data: There was a noted mismatch between the Respondent's GST return for January 2019 and the sales data. The Respondent clarified that the difference was adjusted in subsequent months (August and September 2019) and reflected in the annual return (GSTR-9). The DGAP concluded that this mismatch did not affect the profiteering calculation as all impacted invoices were covered. Respondent's Calculation of Profiteering: The Respondent suggested using the average sale price of the product from November and December 2018 instead of just December 2018 to calculate the profiteering amount. The DGAP rejected this suggestion, stating that the average base price of the month immediately before the rate reduction was most representative. Channel/Segment-wise Sales Data and Its Impact on Profiteering: The Respondent used various sales channels/segments, and the DGAP recalculated the profiteering amount channel/segment-wise. The final profiteering amount was determined to be Rs. 96,354/-, inclusive of GST. Conclusion: The Authority concluded that the Respondent had indeed contravened the provisions of Section 171 of the CGST Act, 2017 by not passing on the benefit of the reduced GST rate to the customers. The Respondent is directed to reduce the prices of the Power Bank accordingly and deposit the profiteered amount of Rs. 96,354/- along with interest into the Consumer Welfare Funds (CWFs) of the Central and respective State governments. The DGAP is tasked with ensuring compliance and submitting a report within four months. Penalty: No penalty was imposed on the Respondent as the specific penalty provisions under Section 171(3A) of the CGST Act, 2017, introduced by the Finance Act, 2019, were not in force during the period of violation (01.01.2019 to 31.03.2019). Monitoring and Compliance: The concerned Commissioners of CGST/SGST/UTGST are directed to monitor the compliance of this order under the supervision of the DGAP. The Supreme Court's orders regarding the extension of limitation periods due to the COVID-19 pandemic were acknowledged, ensuring that this order falls within the prescribed limitation period.
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