2023 (12) TMI 146 - CCI - GST

Profiteering - supply of Services by way of admission to exhibition of cinematography films - Respondent did not pass on the benefit of reduction in the GST rate - increase in the base price to maintain the same cum-tax selling price - violation of section 171 of CGST Act - Penalty - HELD THAT - The Respondent has resorted to profiteering by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate on Services by way of admission to exhibition of cinematography films where price of admission ticket was one hundred rupees or less were reduced from 18% to 12% w.e.f. 01.01.2019 to 30.09.2019. On this account, the Respondent has realized an additional amount to the tune of Rs. 7,19,1871- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering amount is determined as Rs. 7,19,187/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his tickets as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of Rs. 7,19,1871- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of Rs. 3,59,594/- in the Central Consumer Welfare Fund (CWF) and Rs. 3,59,594/- in the Telangana State CWF respectively, as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. The above amount shall be deposited within a period of 3 months from the date of this Order failing which the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the CGST Act, 2017. Penalty - HELD THAT - It is evident from the narration of facts that the Respondent has denied benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. However, perusal of the provisions of Section 171 (3A), under which liability for penalty arises for the above violation, shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.09.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively for the said period.

Issues Involved:
1. Alleged profiteering by the Respondent by not passing on the benefit of GST rate reduction.
2. Investigation and findings by the Director-General of Anti-Profiteering (DGAP).
3. Responses and submissions by the Respondent.
4. Determination of the profiteering amount and order for its deposit.

Summary:

Issue 1: Alleged Profiteering
The Applicant No. 1 alleged that the Respondent did not pass on the benefit of reduction in GST rate on movie admission tickets from 18% to 12% w.e.f. 01.01.2019. Instead, the Respondent increased the base price to maintain the same cum-tax selling price, as detailed in Table-A.

Issue 2: Investigation and Findings by DGAP
The DGAP conducted a detailed investigation and found that the Respondent did not reduce the selling prices commensurately with the GST rate reduction. The DGAP's analysis showed that the Respondent increased the base prices of tickets, thereby denying the benefit of the reduced GST rate to consumers. The DGAP concluded that the Respondent profiteered an amount of Rs. 7,19,187/- during the period from 01.01.2019 to 30.09.2019.

Issue 3: Responses and Submissions by the Respondent
The Respondent argued that the theatre business operates on a day-to-day basis without stock in hand and that ticket prices are controlled by the Licensing Authority. The Respondent also claimed that any benefit from the GST rate reduction was reflected in the tax rate and not in the base price. The DGAP countered that the Licensing Authority only sets the maximum price and that the Respondent was free to reduce ticket prices to pass on the tax benefit.

Issue 4: Determination of Profiteering Amount and Order for its Deposit
The Commission found that the Respondent did not pass on the benefit of the GST rate reduction to consumers, as required under Section 171 of the CGST Act, 2017. The Respondent was directed to deposit the profiteered amount of Rs. 7,19,187/- along with 18% interest in the Central and Telangana State Consumer Welfare Funds. The penalty under Section 171 (3A) could not be imposed retrospectively as it was not in force during the period of violation. The jurisdictional Commissioners of CGST/SGST Telangana were directed to monitor the deposit of the profiteered amount.

Conclusion:
The Commission concluded that the Respondent had committed profiteering by not passing on the benefit of GST rate reduction and ordered the deposit of the profiteered amount along with interest into the respective Consumer Welfare Funds.

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