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TMI Blog2019 (2) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... taurant services with the stipulation that no ITC would be available on the goods and service supplied under the above services, accordingly, 398 items which were being supplied by the Respondent were impacted with the reduction in the rate of tax, the benefit of which was required to be passed on by the Respondent to his customers by commensurate reduction in his prices as per the provisions of Section 171 of the CGST Act, 2017. It is revealed from the record that the Respondent had himself admitted before the DGAP, as has been mentioned in Para 4 (e) supra that the price of Type A Pizza was ₹ 440/- per unit and that of Type B was ₹ 470/- per unit respectively up to 14.11.2017, before the rate of tax was reduced and was ₹ 450/- and ₹ 485/- per unit respectively post 14.11.2017 after the rate of tax was reduced. Hence there was increase in the base price by ₹ 10/- in respect of Type A Pizza and ₹ 15/- in respect of the Type B Pizza. Perusal of Annexure23 attached by the DGAP with his Report also shows that the base prices of both these products were in fact increased by the amount shown above by the Respondent. Therefore, even if it is admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us disregard of the obligation which was cast upon him by the law, by issuing incorrect invoices in which the base prices were deliberately enhanced more than what he was entitled to increase due to denial of ITC and thus he had denied the benefit of reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017. Therefore, a show cause notice be issued to the Respondent to explain why penalty under the provisions of the above Section should not be imposed on him. Application disposed off. - Case No. 04/2019 - - - Dated:- 31-1-2019 - SH. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, MS. R. BHAGYADEVI, TECHNICAL MEMBER, MR. AMAND SHAH, TECHNICAL MEMBER Present:- None for the Applicant No. 1 Ms. Gayatri Verma, Deputy Commissioner, Mr. Akshat Aggarwal, Assistant Commissioner and Mr. Bhupender Goel, Assistant Director (Costs) for the Applicant No. 2. Mr. Prakash Bisht, EVP CFO, Mr. J. Devarajan, vp, Mr. V. Lakshmikumaran, Advocate, Mr. Manish Gaur, Advocate, Mr. Dhruv Gupta, Advocate, Mr. Rachit Jain, Advocate, Mr. Gaurav Gogia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Rules, 2017. 3. The DGAP in his Report has stated that a notice under Rule 129 of the CGST Rules, 2017 was issued on 25.01.2018 (Annexure-5 of the Report) calling upon the Respondent to reply as to whether or not he admitted that the benefit of reduction in the rate of GST had been passed on by him to his recipients by way of commensurate reduction in prices. The Respondent was also asked to suo-moto determine the quantum of benefit not passed on to his customers, if any, and intimate the same in his reply. The DGAP had also asked the Respondent to furnish the required information which was supplied by him vide his letters attached as Annexures-8 to Annexure-17 with the Report including the confidential information. The Applicant No. 1 was also given an opportunity by the DGAP vide his e-mail dated 28.06.2018 (Annexure-6 of the Report), to inspect the non-confidential records/replies submitted by the Respondent but the above Applicant did not avail of this opportunity. The DGAP has informed that the present investigation was conducted for the period between 15.11.2017 to 31.05.2018. 4. As per the DGAP s Report the Respondent had made the following claims:- (a) That the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence they couldn t be compared, as the invoice dated 20.10.2017 pertained to the Medium Veg Extravaganza Pizza Normal Crust Hand Tossed ( Type A ) and the invoice dated 19.11.2017 referred to the Medium Veg Extravaganza Pizza Pan Crust ( Type B ); the prices of both of them before and after tax reduction were as follows:- Base Price in Rs. Increase in Base Price Up to 14.11.2017 Post 14.11.2017 Type A Type B Type A Type B Type A (Rs.) % increase in Type A Type B (Rs.) % increase in Type B 440 470 485 10 2.27% 15 3.19% (f) The Respondent had also stated that w.e.f. 15.11.2017, the denial of ITC had resulted in the monthly average cost of input GST on account of direct and indirect expenses of ₹ 6.60 Crore and ₹ 7.70 Crore respectively in terms of the ITC availed during the period between July, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate but had also reduced their prices and incurred substantial losses. (j) He has further claimed that after 15.11.2017, he had not availed any ITC for the restaurant services and the ITC claimed after 15.1 1.2017 pertained to the States where he had commissary or warehouses which made stock transfers and had output GST liability. He has also stated that in lieu of the ITC register, he was maintaining purchase register and was availing ITC on the interstate stock transfers to his restaurants and no ITC was availed by the restaurants. (k) He has also intimated that he was running 1,128 restaurants all over the country each of which on an average was issuing 250-300 tax invoices per day with an average of 3 products per invoice. He has further intimated that the outward taxable supplies would be in excess of 10 crore line items therefore the details of outward taxable supplies had been supplied on a product level basis after reconciliation with the GSTR-I returns. 5. The DGAP has also intimated that it was a matter of record that the Central Govt. on the recommendation of the GST Council, vide its Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 had reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITC in the increase which he had made in the prices and had also not taken in to account inflation in the cost of inputs while fixing the revised base prices and hence he had faced decline in his profit margins. A summary of the sales and the profit before exceptional items and tax of the Respondent has been supplied by the DGAP as per the Table given below:- Period [Financial Year (FY)/ Quarter Ending (QE)] Sale of Products Profit Before Exceptional Items Tax Change in Sale and Profits Sales (Rs. Lakh) % increase over previous period Profit (Rs. Lakh) % increase over previous period FY 2014-15 2,07,409.32 17,206.12 FY 2015-16 2,40,947.65 16.17% 16,696.21 -2.96% Sale 16%; Profit 3% FY 2016-17 2,54,606.98 5.67% 10,992.14 -34.16% Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the above items, inspite of the reduction in the rate of tax. 9. The DGAP in his report has further stated that the impact of denial of ITC required the determination of the ITC as a percentage of the total outward taxable turnover during the periods pre and post GST rate reduction and accordingly he has calculated the same by taking into consideration the period from 01.07.2017 to 31.10.2017 and not up to 14.11.2017 due to the following reasons:- (a) The Respondent has reversed the ITC on the closing stock of inputs and the capital goods as on 14.11.2017 and this credit was not available in the GSTR-3B return of November, 2017. As these inputs would have been used after 15.11.2017, their ITC had been left out as no ITC could be claimed after the above date. (b) The details of the invoice-wise outward taxable turnover for the month of November, 2017 were not supplied by the Respondent to calculate the taxable turnover for the period between 01.11.2017 to 14.11.2017. (c) Random checks of the invoices on which the ITC was availed by the Respondent during the month of November, 2017 revealed that in a few cases credit was taken by the Respondent without fulfilling t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices was reduced from 18% to 5%, the ITC was not available to the Respondent. A summary of the computation of the ratio of input tax credit to the taxable turnover of the Respondent is given in the Table below: - Particulars Jul-17 Aug-17 Sept.-2017 Oct.-2017 Total ITC Availed as per GSTR-3B (A) 9,59,21,833 21,19,96,345 24,71,23,168 22,77,09,524 78,27,50,870 Less : Tax on Inter unit branch transfers as per Sales register (B) 4,86,70,456 6,34,79,714 5,65,75,226 5,9015,082 22,77,40,478 Net Input Tax Credit available for the period July, 2017 to October, 2017 (C)=(A-B) 4,72,51,377 14,85,16,631 19,05,47,942 16,86,94,442 55,50,10,392 Total Outward Taxable Turnover as per GSTR-1 (D) 2,78,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Annexure-23 of the Report. This amount was inclusive of ₹ 5.65/- which was the profiteered amount in respect of the Applicant No. 1. 13. The above Report was considered by the Authority in its meeting held on 17.07.2018 and it was decided to hear the Applicants and the Respondent on 02 08.2018 but the hearing was postponed to 13.08.2018 on the request of the Respondent. On 13.08.2018 none appeared for the Applicant No. 1, Applicant No. 2 was represented by Ms. Gayatri Verma, Deputy Commissioner, Mr. Akshat Aggarwal, Assistant Commissioner and Mr. Bhupender Goel, Assistant Director, (Costs). The Respondent was represented by Mr. Prakash Bisht, EVP CFO, Mr. J. Devarajan, VP, Mr. V. Lakshmikumaran, Advocate, Mr. Manish Gaur, Advocate, Mr. Dhruv Gupta, Advocate, Mr. Rachit Jain, Advocate, Mr. Gaurav Gogia, CA, Mr. Keshav Kumar Sharda, GM, Mr. Ashish Srivastava, Manager, Ms. Disha Jain, Advocate and Ms. Uma Kapoor, Manager (Taxation). On the specific request of the Respondent, 3 further hearings were held on 21.08.2018, 11.09.2018 and on 22.10.2018. 14. The Respondent has filed detailed written submissions on 13.08.2018, 21.08.2018, 11.09.2018, 17.09.2018, 05.10.2018 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples of natural justice. Quoting Rule 126 of the CGST Rules, 2017 the Respondent has further stated that the Authority hadn t determined the methodology and the procedure under the above Rule for determination whether the benefit of reduction in the rate of tax on the supply of goods or services or the benefit of ITC had been passed on by the registered person to the recipient by way of commensurate reduction in the prices or not. He has also mentioned that the Procedure and Methodology issued on 19.07.2018 by the Authority only provided the procedure pertaining to investigation and hearing but no method/formula had been notified/prescribed pertaining to calculation of profiteered amount and there was no indication how to conclude that there was profiteering due to change in the rate of tax and whether such computation had to be done invoice-wise, product-wise, business vertical-wise or entity-wise etc. He has therefore contended that due to lack of transparency the results could vary from case to case resulting in arbitrariness and violation of Article 14 of the Constitution of India. 16. The Respondent has also stated that in order to control rise in inflation on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n entity supplying restaurant services, and once his operations were assessed on the basis of his status of being a restaurant , a holistic approach should be applied by the authorities for computation of the profiteered amount. He has further claimed that the profiteered amount should be calculated on the basis of Profit Loss (P L) Account and not item (SKU) wise. He has also contended that while computing the profiteered amount the DGAP had not taken into the account those items (SKUs) where the price increase was within the permissible limit and the amount of profiteering for such products had been kept as zero (0). While referring to Section 171 of the CGST Act, 2017 and Rule 127 (i) and (ii) of the CGST Rules, 2017 and the notes on Section 171, the Respondent has submitted that from a joint reading of the above provisions, it was apparent that a registered person should pass on the benefit of reduction in the rate of tax or ITC to the recipient by way of commensurate reduction in prices by keeping both of them as separate entities. The Respondent has also alleged that the DGAP had treated him as an entity although all the stores of the Respondent were separately registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uy a variety of food and beverages from his outlets and they had not suffered the price increase above 5.59%. He has also submitted that in the present case the DGAP had made item-wise/SKU-wise analysis and concluded that the Respondent had increased base prices by more than 5.59% in respect of 170 items however the DGAP had not taken into account the prices of 223 items on which the Respondent had reduced the prices. He has further submitted that he was one entity and the entire data of his supply was required to be considered as such entity and then compared with the erstwhile figures as the rate of tax on all the supplies made by the Respondent was same. 21. The Respondent has also stated that he had not increased the prices of all the SKUs w.e.f. 15.11.2017 and the change in the prices whether increase or decrease in respect of some of the SKUs was based on market conditions, consumer behaviour and competition in the market. He has further stated that it was his usual business practice to increase the prices of his products at different rates and historically also he had made different price increases for different SKU s. The Respondent has also claimed that the DGAP had wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost due to non-availability of the ITC which was available earlier. He has admitted that the differential price revision for the year 2017 was made w.e.f. from 15.11.2017 as a business decision and it did not in any way prove that that he had any intention to profiteer due to reduction in the rate of tax and he normally used to increase the prices 2-3 times in a year generally in July-Sept to account for the normal inflation however, during the year 2017-18, he had decided to postpone the increase in sale prices from July, in view of the implementation of the GST and after its coming in to force had assessed the normal inflation and raised the sale prices of his products. He has also stated that the price charged by the Respondent was exclusive of tax and w.e.f. 15.11.2017 he had been charging 5% GST and even after the revision of prices, the total amount charged from the recipients was less than the total amount received for such services from the recipients prior to the reduction in the tax rate. The Respondent has also cited the case of Kumar Gandharv v. KRBL Ltd. 2018-VlL-02-NAA = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY decided by this Authority in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider the impact of increased sales and reduced fixed expenses per unit or percentage to the sale and thus, the conclusion drawn by him was factually incorrect and was not liable to be considered. The Respondent has also placed Exhibit-8 on record to support his claim 25. The Respondent has further claimed that the DGAP has wrongly computed the amount of eligible increase due to non-availability of ITC as 5.59% which should be 7% as he has not taken in to account the ITC for the period w.e.f. 01.11.2017 to 14.11.2017. The Respondent has contested the claim made by the DGAP for not considering the above ITC by stating that reversal of ITC of ₹ 7.73 Crore on the closing stock of the inputs and the capital goods had been duly mentioned in the GSTR-3B return. He has also submitted that the DGAP had allowed him to provide SKU wise details of the sales instead of invoice wise details due to large number of invoices. He has further stated that the discrepancies pointed out by the DGAP in respect of the invoices issued by M/s. Neel Kamal and M/S Contract Advertising (India) Pvt. Ltd. were incorrect as the invoices were received by him before 15.11.2017, the date from which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate reduction with the average net realization from 15.11.2017 to 31.5.2018, subsequent to the rate reduction instead of the menu prices provided by the Respondent and while calculating the net realization the impact of operational and promotional discounts which were not part of the price was not considered which had adversely affected the calculation of the profiteered amount. The Respondent has further stated that if the comparison was made for the period between 01.10.2017- 14.11.2017 of 45 days with the period between 01.11.2017- 14.11.2017 of 14 days, the profiteered amount of ₹ 41.42 Crore would be reduced to ₹ 29.53 Crore. He has also cited the case of Rishi Gupta 2018 (7) TMI 1490 - NATIONAL ANTI-PROFITEERING AUTHORITY in this regard. He has also argued that since the menu prices were constant throughout the country the same should have been taken it to account instead of net sale realization which differed from case to case and such menu prices pre and post rate reduction should have been compared. The Respondent has further argued that he had changed his discount policy w.e.f. 01.11 2017 as he proposed to do away with many type of discounts which showed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 17,38,58,14,330/- and as per the invoice wise analysis done by him the amount had come to ₹ 17,37,79,81,881/-, as he could not complete the invoice wise analysis of the sales value of ₹ 78,32,449/- due to paucity of time. He has also stated that this data should be treated as final. 28. Vide his further detailed submissions dated 17.09.2018 the Respondent has stated that the provisions of Section 171 of the above Act could not be invoked in his case as he had reduced the rate of GST from 18% to 5% w.e.f. 15.11.2017. He has further stated that in the order dated 7.9.2018 passed by this Authority in the case of Pawan Sharma v. M/s. Sharma Trading Company, Case No. 6/2018 = 2018 (9) TMI 625 - THE NATIONAL ANTI-PROFITEERING AUTHORITY , it had been held that where the tax rate was reduced from 28% to 18%, the Respondent should have reduced the price by the same amount by mathematical calculation from the MRP at which the goods were sold before such reduction. Therefore, the Respondent has asserted that by following the ratio laid down in the above case the Respondent had also duly discharged his responsibility by reducing the rate of tax from 18% to 5%. He h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that present proceedings had been launched in violation of the principles of natural justice as no show cause notice had been issued to him intimating what action was contemplated against him. He has further submitted that under Rule 133 of the CGST Rules, 2017 this Authority was competent to pass any order mentioned in the above Rule against the offenders who violate Section 171. He has also stated that the order passed under Section 171 would determine the rights and liabilities of the registered person which will entail civil and penal consequences, however, Rule 133 did not stipulate issuance of a show cause notice to the violators of Section 171 before passing of an order under the above Rule and hence it was violative of the principle of audi alteram partem as the person against whom any action is proposed to be taken must be informed in writing of such action. He has also claimed that the Authority has treated the Report of the DGAP as the show cause notice which was not correct and he should have been served with a detailed show cause notice otherwise he could not defend himself. He has also cited the cases of Canara Bank others v. Debasis Das others (2003) 4 SCC 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had referred any such discrepancies to the jurisdictional authorities, whereas the availing of TRAN-I credit was held to be correct by such authorities. 31. The Respondent vide his additional submissions dated 05.10.2018 and 22.10.2018 has pleaded that the findings given in the case of Jijrushu N. Bhattacharya v. M/s. NP Foods by this Authority on 27.09.2018 = 2018 (10) TMI 1338 - NATIONAL ANTI-PROFITEERING AUTHORITY were squarely applicable in the present case, hence the Respondent has requested for dropping the current proceedings, by stating that the increase in the basic prices was commensurate with the loss of ITC. The claim made by the Respondent is tabulated as below:- S.No. Particulars NP Foods Order Paragraph of NP Foods Order Present case of Respondent 1. Service Restaurant Service Para-1 Restaurant Service 2. Business Model Franchisee of Subway Systems India Pvt Ltd. Para-5 Franchisee of Dominos Pizza Overs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in response to the submissions made by the Respondent has stated that the claim of the Respondent that Applicant No. 1 had filed complaint for Medium Veg Pizza only and there was error in referring the matter by the Standing Committee on Anti-profiteering to the DGAP by comparing two different types of Medium Veg Pizzas was not sustainable as the above applicant had filed application w.r.t. restaurant service in which certain products (here Medium Veg Pizza, Garlic Bread Coke) were bought by him post reduction in the GST rate. 33. The DGAP has also stated that Section 171 (1) which reads as Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. (Emphasis supplied) required that in the event of benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of any supply of goods or services. The DGAP has further stated that during the investigation, it had come to his notice that apart from the products mentioned in the application, the Respondent had supplied other products also on which there was benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y excess amount collected from the recipients amounted to profiteering which must be returned to the recipients, and in case the recipients were not identifiable, the same was required to be deposited in the CWF. He has further claimed that the anti-profiteering law did not offer a supplier of goods and services, flexibility to pass on the benefit of ITC or reduction in the rate of tax on one product, say X by reducing the prices of any other product, say Y . The DGAP has also intimated that the Respondent vide his letter dated 07.02.2018 had submitted that he was engaged in the business of operating quick service restaurants under the brand name Domino s Pizza and had a pan-India presence with 1,128 outlets across 31 States and the Union Territories in which they were registered under the GST and he was maintaining consistency across all the outlets in everything right from the taste to overall experience and the prices of all the products as displayed in the menus, were exclusive of all taxes/GST (except in Maharashtra prior to 01.07.2017), therefore, the product-wise prices of the Respondent were same across the country. He has further intimated that although he had asked f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .44% Total Variable Cost (Material + Vari. Exp.) D=(B+C) 1,27,712 50.16% 1,44,997 48.65% Contribution E=(A-D) 1,26,895 49.84% 1,53,047 51.35% Fixed Expenses including Depreciation F 1,17,351 46.09% 1,23,995 41.60% Profit before Other Income, exception items tax G=(E-F) 9,544 3.75% 29,051 9.75% Add: Other Income H 1,448 0.57% 2,272 0.76% Profit Before Tax I=(G+H) 10,992 4.32% 31,324 10.51% Therefore, the DGAP has claimed that the Total Variable cost (D) had reduced from 50.16% in FY 2016-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the loss of ITC in the increase in prices and did not consider inflation in the cost of inputs while determining the revised base prices and, therefore, faced a decline in his profit margins. 40. The DGAP has also stated that the day wise pattern of ITC availed by the Respondent during the period w.e.f. 1-14 November 2017 was as under:- Date Total ITC Availed % of Total ITC Availed ITC Reversed Net ITC Availed % to Total Net ITC Availed A B C (% of B) D E=B+D F (% of E) 1-Nov-17 31,39,376 0.90% (52,281) 30 87,095 1.23% 2-Nov-17 60,50,031 1.74% (1,56,024) 58,94,007 2.34% 3-Nov-17 58,21,864 1.68% (2,03,476) 56,18,388 2.23% 4-Nov-17 38,14,92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry action. The DGAP has also claimed that the Respondent has availed Transitional ITC of ₹ 1,84,27,561/- in the TRAN-1 statement as has been given in the table below:- GSTIN State Nature of Credit Amount 07AABCD1821C1ZD Delhi SGST TRAN-1 Credit 22,56,681 09AABCD1821C1Z9 Uttar Pradesh CGST TRAN-1 Credit 126,66,601 09AABCD1821C19 Uttar Pradesh SGST TRAN-1 Credit 4,62,043 27AABCD1821C1ZB Maharashtra SGST TRAN-1 Credit 29,56,105 33AABCD1821C1Zl Tamil Nadu SGST TRAN-1 Credit 86,131 Total 1,84,27,561 The DGAP has further claimed that the Respondent had also availed Transitional Credit of Rs. in GSTR-3B as the extract of ITC Registrar as given below showed: Account Code Invoice Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. and Section 15 (3) (a) of the above Act provided that the value of the supply would not include any discount which had been given before or at the time of the supply if such discount had been duly recorded in the invoice issued in respect of such supply, therefore, the GST was chargeable on actual transaction value after excluding any discount both conditional as well as unconditional and therefore, for the purpose of computation of profiteering menu price or MRP couldn t be considered whereas actual transaction value was the correct amount which had been considered for such computation, as the menu price was the maximum price at which an item might be sold but it was not the actual sale price. The DGAP has also argued that the SKU wise net realization from 01.10.2017 to 14.11.2017 (45 days) period was compared with post rate reduction sale from 15.11.2017 to 31.05.2018 to consider the magnitude of the various discounts offered by the Respondent both prior to the GST rate reduction and post GST rate reduction. He has further argued that vide e-mail dated 11.07.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 171 of the CGST Act, 2017. It is also been revealed that the Applicant No. 1 had alleged through his complaint dated 29.11.2017 that he had purchased two items from the Respondent on 20.10.2017 before the rate of tax was reduced and again on 19.11.2017 when the rate had been reduced however, the Respondent had increased the base prices of both these items and had charged the same prices which he was charging before the tax reduction and hence he had been denied the benefit of tax reduction. The Respondent has alleged that the Pizza ordered by the Applicant No. 1 vide invoice dated20.10.2017 (prior to reduction in GST rate) was Medium Veg Extravaganza Pizza Normal Crust Hand Tossed (Type A), whereas the Pizza ordered by the above Applicant vide invoice dated 19.11.2017 (post reduction in GST rate) was Medium Veg Extravaganza Pizza Pan Crust (Type B), therefore, the complaint was made by the above Applicant in respect of two distinct and incomparable products and hence he could not be held accountable for profiteering as their prices could not be compared. However, it is revealed from the record that the Respondent had himself admitted before the DGAP, as has been mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t(s). The facts of the cases of M/s. Dinesh Mohan Bhardwaj Proprietor U. P. Sales Services v. M/s. Vrandavaneshwree Automotive Private Limited 2018-VIL-01-NAA = 2018 (4) TMI 1377 - THE NATIONAL ANTI-PROFITEERING AUTHORITY and Rishi Gupta v. M/S Flipkart Internet Pvt. Ltd. 2018-VlL-04-NAA = 2018 (7) TMI 1490 - NATIONAL ANTI-PROFITEERING AUTHORITY quoted by the Respondent in his support are entirely different than the facts of the present case as in the former case the benefit of tax reduction was given to the applicant and in the latter case M/S Flipkart was not the supplier and there was no evidence to investigate rest of the products being sold by them and hence both these cases do not help the Respondent. 44. It is also revealed from the record that the Respondent had been selling 393 products while supplying restaurant services before and after 15.11.2017 and he had increased the base prices after the reduction in the rate of tax w.e.f. 15.11.2017, in respect of 314 items which constituted 79.90% of 393 items as is apparent from Annexure-21 attached with the Report. It is further revealed that the GST rate of 5% had been charged on the increased base prices of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed, exhaustive and meticulous calculations made vide Annexure-23 of the Report by the DGAP. This amount was inclusive of ₹ 5.65/- which had been profiteered by the Respondent from the Applicant No. 1 47. The Respondent has alleged that no methodology has been prescribed for determination and calculation of profiteering. In this connection it would be relevant to point out that this Authority has already notified the Procedure and the Methodology vide its Notification dated 28.03.2018 under the provisions of Rule 126 of the CGST Rules, 2017 which is available on its website. As far as the method of calculation of profiteered amount is concerned no fixed method can be prescribed as the various parameters which are required to be taken in to account while making such computation vary from industry to industry and from one product to another. The factors which need to be considered while determining profiteering in the case of a real estate builder cannot be applied in the case of a consumer goods industry and hence the computation varies from sector to sector and from product to product. Within various products also the products which are sold on MRP and the products w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence both the above contentions of the Respondent cannot be accepted being factually incorrect. The Respondent has also claimed that he used to raise prices 2-3 times in a year usually in July-September however, he has produced no evidence to prove his contention. There was no reason for him not to increase his price between July-September as implementation of the GST had no connection with the price rise on the basis of inflation. The Respondent was well aware of the inflation which he had encountered during the FY 2016-17 and therefore, he should have increased his prices anytime from April to October 2017 and had no reason to increase them from the midnight of 14/15th November, 2017 coinciding with the reduction in the rate of tax which shows that his action was malafide and illegal. Therefore, there is no doubt that he had raised the prices w.e.f. 15.11.2017 only with the intention of appropriating the benefit of tax reduction by denying the same to his customers. Mere charging of tax @ 5% after the tax reduction cannot be taken to mean that he had passed on the benefit of such reduction when he had increased the base prices to negate the impact of tax reduction. The Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 15.11.2017, the date from which the Respondent was not eligible to claim ITC. It is also apparent from the perusal of the details supplied by the DGAP mentioned in Para 39 supra that the Respondent had claimed ITC of ₹ 1.84 Crore twice as per TRAN-I Statement as well as GSTR-3B return and hence the same has been rightly not taken in to account. There is also difference in the amount of ITC as per the ITC register and the GSTR-3B return and the Respondent has availed excess ITC of ₹ 89,75,175/- in the month of November, 2017. The Respondent has also availed ITC of ₹ 25,16,12,839/- on a single day on 14.11.2017 which does not appear to be correct as has been shown in Para 39 supra. The DGAP has considered the ITC on the basis of the record submitted by the Respondent himself and hence there appears to be no mistake in calculating the same. Therefore, the claim made by the Respondent that he was entitled to increase his prices by 7% instead of 5.59% due to denial of ITC is completely exaggerated and hence it cannot be accepted. The Respondent has also claimed that he had calculated the above ratio of 7% on the basis of P L method adopted by the Malaysian Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent and hence there was no ground to make such comparison between the period of 01.10.2017- 14.11.2017 of 45 days with the period between 01.11.2017- 14.11.2017 of 14 days. The comparison made by the DGAP is based on the data supplied by the Respondent himself and it does not discriminate him as the DGAP has taken average selling price of the products in to his account and hence the same cannot be rejected. He has also cited the case of Rishi Gupta supra in this regard in which the facts as narrated above were different which cannot help his case. 53. Perusal of the submissions made by the Respondent shows that he is labouring under the utterly wrong impression that the central focus of Section 171 of the Act was he and his products whereas the central focus is the recipient or the customer who is required to be given both the above benefits commensurately when he buys even a single product. Denial of these benefits would be hit by Article 14 of the Constitution if he is not given them on the ground that the Respondent had passed on the benefit on a particular product in place of another product which he may not buy. Each and every customer is entitled to receive both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Eternit Everest Ltd. v. Union Of India 1997 (89) ELT 28 (Mad.) = 1996 (6) TMI 90 - MADRAS HIGH COURT pertained to Section 11 (D) of the Central Excise and Salt Act, 1944 in which the Hon ble Supreme Court had held that We find and notice a conspicuous omission in Section 11 (D) of the Act of any provision whatsoever to initiate any proceedings or entertain and adjudicate upon any dispute with reference to the liability to pay any amount set to have been collected by a person ..;however in the instant case Section 171 of the CGST Act, 2017 read with the CGST Rules makes it very clear that once a complaint is filed the same is prime-facie examined by the Screening Committee/ Standing Committee and then forwarded to the DGAP for detailed investigation. On submission of the investigation report by the DGAP this Authority following the principles of natural justice determines whether any profiteering as alleged by the complainant has been established. Hence full-fledged mechanism is in place as far as the anti-profiteering provisions are concerned; therefore the above case does not advance the case of the Respondent. 54. The allegation of the Respondent that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit due to a customer cannot be denied to him on the claim that the same has been passed on to another customer on another product. There is no justification in the claim of the Respondent that the DGAP should also have taken in to account those SKUs in the case of which the price increase was within the permissible limit of 5.59%, since there was no profiteering in their case they were not required to be considered. Even if each restaurant owned by the Respondent was assessed separately for profiteering the conclusion would have been the same as the Respondent was charging the same prices in each of his outlets and was also centrally fixing the prices and hence he has been rightly assessed for profiteering collectively. There is also no justification for netting off the increases and the decreases in the prices of the various products as the benefit is required to be passed on each SKU and profiteering is required to be computed only in respect of those SKUs where prices have been increased more than 5.59%. 56. The Respondent has admitted that the word commensurate as per its dictionary meaning meant appropriate, adequate and proportionate therefore, it is clear that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customer on every supply. Therefore, the denial of benefit has to be calculated product wise. The Respondent has also failed to explain how the benefit would be passed to a customer if he had bought a single product on which the price had been increased. The contention of the Respondent that the products mentioned in an invoice generally included both type of products on which rate had been increased and reduced and the benefit has been passed as the reduction is more than the increase is completely farfetched and has no basis whatsoever and the hence the same is rejected as no such netting off can result in passing of the above benefits. 58 The Respondent has also stated that the provisions of Section 171 of the above Act could not be invoked in his case however, the contention of the Respondent is not tenable as mere charging of 5% GST after the rate reduction does not amount to compliance of the above Section as he was required not to increase the prices more than the quantum of denial of ITC whereas he had exceed the above limit. The case of Pawan Sharma v. M/s. Sharma Trading Company, Case No. 6/2018 = 2018 (9) TMI 625 - THE NATIONAL ANTI-PROFITEERING AUTHORITY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant No. 1 which was investigated by the DGAP and The DGAP had submitted his Report on 16.07.2018 in which he had held the Respondent guilty of violation of the provisions of Section 171 as he had denied the benefit of tax reduction to his recipients. A copy of the Report was also supplied to the Respondent along with all the Annexures attached with the Report. The Respondent was also informed that the Report filed by the DGAP had been duly considered by the Authority and it had been decided to give him opportunity to file submissions on the findings of the DGAP. A copy of the complaint made by the Applicant No. 1 was also supplied to him by the DGAP and a notice for investigation was also issued to him by the DGAP on 25.01.2018 asking him whether he admitted that he had passed on the benefit of tax reduction or not. Therefore, it is apparent that the Respondent was fully aware of the allegations which had been levelled against him as well as the findings of the DGAP in which he had been alleged to have resorted to profiteering. The Respondent had also filed detailed submissions to the Report on 13.08.2018, 21.08.2018 and 1 1.09.2018 and at no stage he had raised the issue of non-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% i.e. by 0.34% which was commensurate with the denial of ITC whereas in the case of the Respondent the prices were increased by the Respondent anywhere between 5.75% to 84.55%, against the denial of benefit of ITC to the tune of 5.59% which cannot be compared with the price rise made by the NP Foods. This Authority in the case of M/s. Hardcastle Restaurants Pvt. Ltd. decided on 16.11.2018 = 2018 (11) TMI 1073 - NATIONAL ANTI-PROFITEERING AUTHORITY , the facts of which are similar to the facts of this case, has clearly held that based on the denial of ITC, the above Company could increase its prices only to the extent of denial and any increase made over and above the denial of ITC would amount to denial of benefit of tax reduction resulting in infringement of the provisions of Section 171 of the Act. Accordingly, in the present case the benefit of denial of ITC works out to be 5.59% and as has been discussed in Para 10 above, the Respondent could have increased his prices to the extent of 5.59%. However, as is apparent from Annexure-23 of the DGAP s Report the prices of the products have been increased by the Respondent from 5.75% to 84.55%. The DGAP has therefore, considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Daman Diu 1 51,819 9 Delhi 2,39,88,346 10 Goa 21,14,117 11 12 Gujarat 1,04,94,079 Haryana 1,23,35,538 13 Himachal Pradesh 13,58,342.50 14 Jammu Kashmir 12,93,382 15 Jharkhand 15,80,017 16 Karnataka 2,53,24,454.675 17 Kerala 22 97 540.50 18 Madhya Pradesh 49,34 225 19 Maharashtra 3,95,74,886.50 20 Meghalaya 2,64,126 21 Nagaland 1,41,545.50 22 Odisha 15 68,858 23 Pondi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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