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TMI Blog2019 (1) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... reduction the Respondent had increased the base prices of his products to the extent of GST rate reduction. It is established that out of the 388 products the base prices of 293 (259+34) products were increased by him inspite of the rate reduction to maintain the pre rate reduction prices. Accordingly the Respondent has charged increased base prices on the above products thus indulging in profiteering. Respondent has vehemently argued that he had no control on the fixing of base prices as well as the MRPs as both of them were fixed by the manufacturer M/S L'oreal India Pvt. Ltd. through it's software - Held that:- The discounts provided to the customers after GST rate reduction are required to be considered as the on going existing promotional schemes during the pre-GST rate reduction period. The argument of the Respondent that the prices were controlled by the manufacturer does not hold good in as much as he is registered supplier under the CGST/SGST Act, 2017 and is bound to follow the notification dated 14.11.2017 to pass on the benefit of GST rate reduction. The legal obligation imposed upon him cannot be .ignored only because he is not the manufacturer who controls the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the veracity of the complaint. The Standing Committee vide the minutes of it's meeting dated 13.04.2018 requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 stating that the Respondent had not fully passed on the benefit of the tax reduction from 28% to 18% granted vide Notification No. 41/2017-Central Tax (Rate) dated 14.1 1.2017, instead he had increased the base price to keep the MRP of his product Garnier Nat Shade 3 to maintain the same price which he was charging before the rate of tax was reduced on 15.11.2917 and thus, the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. In this connection the following invoices issued by the Respondent were also submitted to the DGAP for further investigation:- Sr.No. Invoice No. and date Description of products MRP (in Rs.) Discounted Base price (in Rs.) Rate of GST Price charged (inclusive of GST) (in RS.) 1. LCBL039761 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 3.78 per piece) offered under the Scheme, the base price of the product worked out to be ₹ 26.48 per piece, which was more than the pre rate reduction price of ₹ 24.41 per piece, charged by the Respondent for the same product. 5. The DGAP has further stated that the details submitted by the Respondent were analysed and it was found that 388 products supplied by the Respondent during the period between 15.11.2017 to 31.03.2018 were impacted by the reduction in the rate of GST from 28% to 18% w.e.f. 15.11.2017. Out of the above 388 products 81 products were not sold during the period between 01.11.2017 to 14.11.2017 and hence, the reference prices for calculating the profiteering amount for these products were not available. Of out these 81 products, 41 products were newly introduced items post GST rate reduction w.e.f. 15.11.2017. For the remaining 40 items, the reference prices for calculation of the profiteered amount had been taken from the price list (for the period pre 15.11.2017) submitted by the Respondent, which further revealed that out of these 40 items, the base prices of 34 products were increased by the Respondent and the base prices of 6 products were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded that while it has been alleged that the profiteering has been done by keeping the base price constant after GST rate reduction, the DGAP has failed to note that the base price has been kept constant even after increase in the MRP of the product. By paying the same base price as earlier, potential realization by retailer has increased to the extent of increase in the MRP (i.e. ₹ 5). He has also contended that the MRP was decided by the Manufacturer as required under the law as such he should not be questioned for any such revision of MRP. He has further contended that the calculation made by the DGAP was incorrect and the proposed demand was in excess of the profiteering liability. He has also stated that the present notice by proposing cancellation of registration obtained by him under GST the law as a measure of penalty was not only grossly disproportionate to the alleged contravention, but was also extremely prejudicial to the very sustenance of his operations. 9. The Respondent again vide his written submissions dated 03.10.2018 stated that as per the mathematical calculations the reduction in the GST was 7.8% so far as the above product was concerned. He has claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2017 (A) 23298 17,18,661.0 Benefit to be passed on (A) 1,34,055.6 Total benefit passed on Through GST Schemes 1,52,564.0 11. Clarification was sought from the DGAP on the issues raised by the Respondent in respect of the submissions dated 25.09.2018 made by the Respondent. The DGAP vide his Report dated 01.10.2018 has intimated that both the invoices had goods of same description with different MRPs and rest all the other issues raised by the Respondent had already been covered in the Investigation Report itself. 12. During the course of proceedings, M/s. L'oreal the manufacturer of the product in question, was also asked to clarify the claims made by the Respondent in respect of the control on the software and increase of base price after 14.11.2017. M/S. L'oreal in it's written submissions filed on 03.10.2018 stated that they had ensured that the benefits reach the ultimate consumer by instructing the distributors to reduce the prices. It has also claimed that the notice was liable to be drop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Thus it is established that out of the 388 products the base prices of 293 (259+34) products were increased by him inspite of the rate reduction to maintain the pre rate reduction prices. Accordingly the Respondent has charged increased base prices on the above products thus indulging in profiteering. 14. Accordingly, the Respondent has denied the benefit of Re. 3,43,109/- to his customers which he was required to pass on to them and thus it has been established that the Respondent has acted in contravention of the provisions of section 171 of the CGST Act, 2017 by not providing commensurate reduction in the prices of the products supplied by him. Accordingly the amount of profiteering is determined as ₹ 3,43,109/- as per the provisions of Rule 131(1) of the CGST Rules 2017. 15. The Respondent has vehemently argued that he had no control on the fixing of base prices as well as the MRPs as both of them were fixed by the manufacturer M/S L'oreal India Pvt. Ltd. through it's software. The Respondent has also claimed that the MRP of the above product was not increased from ₹ 35 to ₹ 40 but discount of ₹ 5 was given on it in the months of Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him in his business. Since the recipients in this case are not identifiable the above amount of profiteering of ₹ 3,43,109/- along with interest shall be deposited by the Respondent in the Consumer Welfare Fund of the Central Government and the State of Delhi respectively as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 under the supervision of the DGAP. The above amount shall be deposited within a period of 3 months by the Respondent from the date of receipt of this order failing which the same shall be recovered by the concerned Central/State GST Commissioner as per the provisions of the CGST/SGST Act, 2017 and shall be deposited as has been directed vide this order. Since the present investigation in to the issue of not passing on the benefit of reduction in the rate of tax by the Respondent has been conducted w.e.f. 15.11.2017 to 31.03.2018 only, the DGAP is directed to further investigate the quantum of profiteering which the Respondent has made thereafter and submit his report accordingly. 18. It is also established from the above facts that the Respondent had issued incorrect invoices while selling all the above products to his customers as he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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