2024 (7) TMI 1024 - HC - GST

Failure to pass the benefits of reduction in the rate of G.S.T. w.e.f. 01.01.2019 to the beneficiaries, i.e., the viewers of the cinema who had viewed the cinema from the petitioner s-theatre - default or not - HELD THAT - Some of the admitted factual matrix is that, up till 31.12.2018, the G.S.T. was being collected at cinema theatres at the rate of 28% 18% in two categories, i.e., tickets sold above Rs. 100/- and tickets sold below Rs. 100/-. From 01.01.2019, the aforesaid rate of tax got reduced to 18% for tickets more than Rs. 100/- and 12% for tickets below Rs. 100/-. The petitioner reduced the prices of tickets only w.e.f. 11.03.2019 for two months and ten days, i.e., w.e.f. 01.01.2019 till 10.03.2019. The price at which the tickets were sold was the same that were being sold as on 31.12.2019. There is no dispute so far as the petitioner having paid the G.S.T. at the rate fixed by the respondent-Department even on the price at which the tickets were sold. As a consequence, the Government has also got G.S.T. from the petitioner at the higher rate on which the tickets were sold which has thus added up the revenue to some extent. A plain reading of the provision of section 171 of CGST Act, clearly indicates that the said provision has been introduced to ensure that the supplier of goods and services should not make profit from the reduction of the tax rate under the G.S.T. law. Rather the intention of the Government is that the moment the rate of tax under the G.S.T. is reduced, the benefit should immediately be passed on to the end-user by way of reduction in the prices commensurate with the reduction in the rate of tax. There are no illegality committed by the respondent-Authority which has passed the impugned order in Case No. 22/2020, dated 07.10.2020 - there are no merit in the writ petition and the same deserves to be and is accordingly dismissed.

Summary

Issues:
1. Whether the petitioners have committed any default under the provisions of the G.S.T. Act by not passing on the benefits of reduced tax rates to cinema viewers.
2. Whether the petitioners are liable to be prosecuted and penalized for allegedly profiting extra due to failure to reduce ticket prices in line with reduced tax rates.
3. Whether the petitioners' actions were deliberate or unintentional, considering the complexities of the new G.S.T. law and regulatory constraints on ticket pricing.
4. Whether the impugned order by the National Anti-Profiteering Authority (G.S.T.) is legally sound and justified.

Analysis:
1. The primary issue in the present case revolves around whether the petitioners violated the G.S.T. Act by not passing on the benefits of reduced tax rates to cinema viewers. The petitioners were alleged to have failed to reduce ticket prices in line with the revised tax rates, leading to accusations of profiteering. The legal requirement under Section 171 (1) of the G.S.T. Act mandates that any reduction in tax should result in a corresponding reduction in prices to benefit consumers. The respondent authority contended that the petitioners' actions constituted a violation of this provision.

2. The allegation of profiteering and failure to pass on benefits to consumers raised the question of potential prosecution and penalties against the petitioners. The respondent argued that the petitioners had benefitted financially from not reducing ticket prices despite the tax rate reduction. The impugned order directed the re-computation of profiteering amounts, highlighting the seriousness of the issue and the legal consequences for non-compliance with G.S.T. regulations.

3. The defense presented by the petitioners focused on justifying their actions, emphasizing factors such as regulatory constraints on ticket pricing and technical challenges in implementing the new G.S.T. law. The petitioners claimed that they had not deliberately profited from the situation and had promptly reduced ticket prices once aware of the requirement. They argued that the short duration of non-compliance was due to the time needed to understand and implement the new law, coupled with the necessity for government approval to adjust ticket prices.

4. The final issue pertained to the validity of the impugned order issued by the National Anti-Profiteering Authority (G.S.T.). The court scrutinized the legal provisions of Sections 171 and 172 of the G.S.T. Act, emphasizing the strict adherence required to ensure that tax reductions are passed on to consumers. Ultimately, the court upheld the impugned order, ruling that the authority had acted within its legal mandate, and dismissed the writ petitions. The judgment underscored the importance of complying with G.S.T. regulations to prevent unjust enrichment and ensure consumer benefits.