2023 (12) TMI 147 - 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 - contravention 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 services 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 from 18% to 12% w.e.f. 01.01.2019 to 31.07.2019. On this account, the Respondent has realized an additional amount to the tune of Rs. 14,62,604/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus, the profiteering amount is determined as Rs. 14,62,604/- 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. 14,62,604/- 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. 7,31,302/- in the Central Consumer Welfare Fund (CWF) and Rs. 7,31,302/- 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 also evident from the above 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 31.07.2019 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. Application disposed off.

Summary

Issues Involved:
1. Allegation of profiteering by not passing on the benefit of GST rate reduction.
2. Determination and quantification of profiteering.
3. Respondent's defense and submissions.
4. Commission's findings and directives.

Summary:

1. Allegation of Profiteering:
The Director-General of Anti-Profiteering (DGAP) received a reference from the Standing Committee on Anti-profiteering to investigate an application alleging that the Respondent did not pass on the benefit of GST rate reduction on movie admission tickets from 18% to 12% effective 01.01.2019. Instead, the Respondent increased the base prices to maintain the same selling prices.

2. Determination and Quantification of Profiteering:
The DGAP's investigation covered the period from 01.01.2019 to 31.07.2019. The Respondent admitted to increasing the base prices of tickets post-GST rate reduction. The DGAP concluded that the Respondent did not pass on the benefit of GST rate reduction to the recipients, resulting in profiteering amounting to Rs. 14,62,604/-. This amount was calculated based on the increase in base prices across different ticket categories.

3. Respondent's Defense and Submissions:
The Respondent argued that the cinema business operates on a show-to-show basis with no stock in hand, and ticket prices cannot be changed without permission from Licensing Authorities. The Respondent also claimed that the increase in ticket prices was due to pressure from distributors and was approved by relevant authorities. The DGAP countered that the benefit of tax reduction must be passed on transaction-wise, and the Respondent's arguments about stock and permission were not relevant to the anti-profiteering provisions.

4. Commission's Findings and Directives:
The Commission found that the Respondent had indeed profiteered by increasing base prices and not passing on the GST rate reduction benefit. The total profiteering amount was determined to be Rs. 14,62,604/-. The Respondent was directed to reduce ticket prices and deposit the profiteered amount along with 18% interest into the Central and Telangana State Consumer Welfare Funds. The Commission also noted that the penalty provisions under Section 171 (3A) could not be applied retrospectively. The jurisdictional Commissioners of CGST/SGST Telangana were instructed to monitor compliance with the order.

Conclusion:
The Respondent was found guilty of profiteering by not passing on the GST rate reduction benefit to recipients and was ordered to deposit the profiteered amount with interest into the respective Consumer Welfare Funds.