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TMI Blog2018 (12) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... of the base prices as well as the MRPs as he was charged increased base prices by his Distributors Viz. M/S CTC and M/S NE and hence the Respondent could not make any changes in the base prices and the MRPs - Held that:- It is apparent from the record that the Respondent is duly registered under the CGST/SGST Act, 2017 and therefore, he was under legal obligation to follow the Notification dated 14.11.2017 mentioned above vide which the rate of GST was reduced from 28% to 18% on both the above products. He cannot deny his accountability as well as the duty cast upon him under the above Notification by contending that he had not increased the base prices whereas he had charged the increased base prices on both the above products after 15.11.2017. The claim of the Respondent that his profit margins had remained the same is also not tenable as he had not only increased the base prices but had also earned additional margin on the enhanced prices. He had further forced his customers to pay additional GST on the increased base prices otherwise the customers should have got further benefit of reduced base prices. The Respondent has also argued that M/S CTC and M/S NE had not given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not passed on the benefit of such rate reduction to him. He had also submitted the pre rate reduction invoice No. 299238 dated 10.11.2017 and the post rate reduction invoice No. 311392 dated 16.11.2017 which showed that both the above products were sold by the Respondent @ ₹ 20/- per piece and ₹ 40/- per piece respectively before and after the rate of tax was reduced on them. Thus it had been alleged by the above Applicant that the Respondent had indulged in profiteering in contravention of Section 171 of CGST Act, 2017 and action should be taken against him. The above application was examined by theStanding Committee on Anti-Profiteering and was referred to the DGAP, vide minutes of it's meeting dated 20.12.2017 for detailed investigations under Rule 129 (1) of the CGST Rules, 2017. 2. The DGAP had called upon the Respondent to submit his reply on the above allegation and also asked him to suo moto determine the quantum of benefit which had not been passed on by the Respondent after the GST rate reduction for the period w.e.f. 15.11.2017 to 31.03.2018. The Respondent had submitted replies vide his letters dated 12.02.2018, 27.02.2018, 21.03.2018, 16.04.2018, 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) Base Sale price (Rs.) Margin of profit A B C D=(C-B)/B E F G=(F-E)/E Nestle Munch Nuts 32 Gm. Chocolate 14.01 15.63 11.50% 15.20 16.95 11.50% Cadbury Dairy Milk Chocolate 27.90 31.25 12.00% 30.27 33.90 12.00% 3. The DGAP's Report has submitted that the Respondent had also filed Purchase Sale invoices from November 2017 to March 2018, copies of the GSTR-3B from November, 2017 to March, 2018 along with copies of GSTR-I from November, 2017 to February, 2018 but did not provide the details of the invoice-wise outward supplies. The DGAP after examining the facts of the case has reported that vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 the o rate of tax on Chocolates was reduced from 28% to 18% w.e.f. from 15.11.2017. The Report also mentioned that from the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36.87 per unit. The Applicant No. 1 had bought one unit of this product at this increased price vide invoice dated 16.11.2017 at the same MRP of ₹ 40/- which he had paid on 10.11.2017. Thus the report submitted that from the above facts it was evident that the Respondent had sold the above products at higher prices inspite of rate reduction and had not passed on the benefit of rate reduction to the above Applicant. 4. The DGAP's Report further stated that from the records submitted by the Respondent it was revealed that he had purchased 910 units of Nestle Munch Nuts 32 Gm. and 4646 units of Cadbury Dairy Milk Chocolate during the period between 15.11.2017 to 31.03.2018. He has also reported that the Respondent had failed to supply the details of the invoices of the outward supplies pertaining to the above period and hence he had presumed that the above quantity of the Chocolates was sold by him during the period between 15.11.2017 to 31.03.2018. The DGAP had therefore, concluded that the Respondent had resorted to profiteering of ₹ 15,958/- as per the details given in the table below. He has also reported that the Respondent had profiteered an amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributors as the cost of Nestle Munch Nuts 32 Gm. to him was ₹ 14.01 per unit before 15.11.2017 which was increased to ₹ 15.20 after 15.11.2017 and he had sold the same at the base price of ₹ 15.63 before 15th November 2017 and at the base price of ₹ 16.95 after 15th November, 2017, thus keeping this margin same at 11.5%. He had further stated that the cost of Cadbury Dairy Milk Chocolate was ₹ 27.90 per unit before 15th November, 2017 which was increased to ₹ 30.27 after 15 th November, 2017 therefore, he had increased his base price from ₹ 31.25 to ₹ 33.90 maintaining the margin at 12% and hence he had not profiteered. 6. The Respondent had also submitted that as had been noted in para 10 of the Investigation Report he had reduced the rate of tax on the chocolates from 28% to 18% w.e.f. 15.11.2017 as per the Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017. He has also claimed that he did not intend to benefit on account of tax reduction and had not contravened the provisions of Section 171 (1) of the CGST Act, 2017. He has also quoted the case of Dinesh Mohan Bhardwaj v. Vrandavaneshwree Automotive (P) Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es during the period from November, 2017 to March, 2018, had given discount on the base price mentioned in para 1 1 of the Investigation Report was incorrect. He has also contended that the statement made in para 11 of the Report that M/S NE had clearly mentioned in his invoices With GST benefits wherever applicable was not correct as such statement was not found in his invoices for the month of November, 2017 and was added in his invoices during the month of January, 2018, whereas M/S NE had increased the base price from ₹ 14.01 per unit to ₹ 15.20 per unit after 14th November, 2017. 9. The Respondent has also raised objection against para 12 of the Investigation Report which stated that it was the responsibility and statutory obligation of the Respondent to pass on the benefit of tax reduction as he had not received any such benefit and his statutory obligation under Section 171 of the CGST Act, 2017 would arise only on the receipt of the benefit. The Respondent has also stated that the calculation of the profiteered amount in para 13 of the Report as ₹ 1.56 per unit in the case of Nestle Munch Nuts 32 Gm. bars calculated as a difference between the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Chocolates' had been computed in the manner furnished in the table below:- Products Cadbury Dairy Milk Nestle Munch Total Purchase made during 01.11.2017 to 31.03.2018 as per purchase calculantion sheet submitted by noticee (Units)(A) 4,731 1 ,024 Sale Made during 01.11.2017 to 14.11.2017 as per Sales Calculation Sheet submitted by Noticee (Units)(B) 85 114 Total Sale deemed to have been made during 15.11.2017 to 31.03.2018 (Units) (C)=(A)-(B) 4646 910 Profiteering Per Unit (In Rs.) (D) 3.13 1.56 Total Profiteering (In Rs.) (E)=(C)*(D) 14542 1,416 11. The Authority had decided to call the representatives of the Distributors viz. M/S CTC and M/S NE as the Respondent had specifically alleged that both of them had increased the base prices after 15.11.2017 and had also not given him any discounts to pass on the benefit of rate reduction. On 21.08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mained that the MRPs had remained unchanged. 13. Further Vide his written submissions dated 23.08.2018, the Respondent had specifically admitted profiteering on the closing stock of Chocolates lying with him as on 14th November, 2018. He had also accepted that M/S CTC had given him 6.6% discount on his invoice No. 53129 dated 28.112017 amounting to ₹ 647/-. Accordingly, suo moto he had deposited an amount of ₹ 1295/(Rs. 1250/- for Cadbury Dairy Milk and ₹ 45/- for Nestle Munch Nuts 32 Gm.) including the discount of ₹ 647/- which he had received from M/S CTC and had not passed on to his customers into the CWF vide Demand Draft dated 18.08.2018. He had also submitted that the amount of ₹ 15,958/- reported by the DGAP in his Investigation Report was not correct since he had not received any GST rate reduction benefit from the Distributors. 14. We have carefully heard both the parties and have also gone through the record of the case placed before us and it has been revealed that the Central Govt. vide Notification No. 41/2017Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 28% to 18% in respect of the above two products viz. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he record that the Respondent is duly registered under the CGST/SGST Act, 2017 and therefore, he was under legal obligation to follow the Notification dated 14.11.2017 mentioned above vide which the rate of GST was reduced from 28% to 18% on both the above products. He cannot deny his accountability as well as the duty cast upon him under the above Notification by contending that he had not increased the base prices whereas he had charged the increased base prices on both the above products after 15.11.2017. The Respondent has failed to produce any evidence to show that he had taken up the issue of giving benefit of reduced rate of tax to his customers with M/S CTC or M/S NE and informed them that he was bound to reduce the MRPs due to reduction in the rate of tax and both of them should either reduce/not increase the base prices or compensate him on account of the benefit which he was required to pass on to his customers, therefore, it is quite apparent that he had deliberately charged the enhanced prices with an intention to pocket the amount which he was bound to pass on to the recipients. The Respondent can also not legally maintain that since he had not received the benefit fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplies made during the above period the DGAP has rightly taken the above units to have been sold by the Respondent during the above period. It is also clear from the record that the Respondent had increased the base price by ₹ 1.56 per unit in the case of Nestle Munch Nuts 32 Gm. Chocolate and ₹ 3.13 per unit in respect of the Cadbury Dairy Milk Chocolate and hence the total amount of profiteering is determined as ₹ 15,958/- (Rs. 1416 + ₹ 14,542) on all the above units of both the products. The Respondent has claimed that the amount of profiteering should be calculated on the basis of the difference between the base price at which he had purchased the above products and the base price on which he had sold them, however, this argument of the Respondent is fallacious as the amount of profiteering has to include the amount of additional profit margin and the additional tax charged by the Respondent as both of them had been illegally charged by him otherwise the recipients should have got further benefit of reduction in the MRPs of both the products and hence this contention of the Respondent cannot be accepted. 19. The Respondent has claimed that only 944 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -x-x-x-x-x-x-x-x-x-x-x-xx-x-x-x-x-x-x-x-x-x-x-x-x-x-x- 22. Accordingly, the Respondent is directed to reduce the sale prices of the above products immediately commensurate to the reduction in the rate of tax as was notified on 14.11.2017 and pass on the benefit of reduction in the rate of the tax to his customers. Since the Applicant No. 1 has paid a higher price of ₹ 4.69 (1.56 + 3.13) for 02 items Viz. Nestle Munch Nuts 32 Gms. and Cadbury Dairy Milk Chocolate, the Respondent is directed to refund the same to the Applicant No. 1 along with interest @ 18% w.e.f. 16.11.2017 till the same is paid to the Applicant No. 1. The Respondent has also voluntarily deposited an amount of ₹ 1295/- in the CWF. Therefore, the balance profiteered amount of ₹ 14,658.31 (15,958 - {1295 + 4.69}) will be deposited into the CWF by the Respondent as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 along with the interest at the rate of 18% to be calculated from the date of collection of the higher amount till the date of the deposit of such amount. The above amounts shall be refunded or deposited by the Respondent within a period of 3 months from the date of receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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