9911796707
TMI Blog2019 (3) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... The Applicant No. 1 had relied on two invoices issued by the Respondent, Invoice No. 627 dated 28.09.2017 (Pre-rate revision) and the other Invoice No. 943 dated 27.12.2017 (Post-rate revision), as per the details furnished in the Table-A given below. The Applicant No. 1 had also claimed that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the Central Goods & Services Tax (CGST) Act, 2017 and hence appropriate action should be taken against him. Table-A Name of the Product Pre GST rate revision on 15.11.2017 Post GST rate revision on 15.11.2017 Invoice No. & Date Tax Rate Discounted Base Price (in Rs.) Invoice No. & Date Tax Rate Discounted Base Price (in Rs.) Matchless Plus TTWG Grinder (HSN Code 85094010) 627 28.09.2017 28% 4,728.90 943 27.12.2017 12% 4,774.59 2. The Standing Committee vide the minutes of its meeting dated 02.07.2018, after prima facie satisfying itself that there was profiteering had forwarded the complaint to the Director General of Anti-Profiteering (DGAP) to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and to determine whether the benefit of reduction in the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the recipients by commensurate reduction in the price. The Respondent has also submitted the GSTR-1 and GSTR-3B returns for the period July, 2017 to July, 2018, price lists of product pre & post 15.11.2017 along with the copy of the invoices of the product for the period 01.07.2017 to 31.07.2018. 5. The DGAP has further stated that the issues for determination were whether the rate of tax applicable to the product was reduced w.e.f. 15.11.2017 and if so, whether the benefit of such reduction in the rate of tax was passed on by the Respondent to his recipients in terms of Section 171 of the CGST Act, 2017. The DGAP has further informed that the Central Government on the recommendations of the CST Council had reduced the GST rate on the above product from 28% to 12% w.e.f. 15.11.2017 vide Notification No. 41/2017-central Tax (Rate) dated 14.11.2017, in consequence of which the Respondent was required to sell the above goods on the base price which was being charged by him before 15.11.2017 and levy GST @12% so that the benefit of reduction in the rate of tax could be passed on to the customers. The DGAP has further informed that Section 171(1) of the CGST Act, 2017, stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profiteering and submitted that he did not pocket any excess benefit that was intended for the consumers. He has also stated that this case had emanated from a reference made by the Applicant No. 1, on account of the allegations of profiteering made against the manufacturer which were based on the pre revision and the post revision prices and he was not the manufacturer but only a distributor and this fact was ignored by the DGAP while submitting his Report. The Respondent has further stated that the Report of the DGAP was merely an investigation Report in terms of Rule 129 (6) of the CGST Rules, 2017, and the same could not be relied upon without independent evidence. The Respondent has also claimed that in the instant case, the allegation against him was that he had sold the product at the base price of Rs. 4,728.90 With GST@ 28% prior to 15.11.2017 and when the GST rate on the said product was reduced from 28% to 12% w.e.f. 15.11.2017, he had increased the base price to Rs. 4774.59 thereby not passing on the benefit Of the reduction in the tax rate by way of commensurate reduction in the base price of the product, however, this allegation could not be sustained against him as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which concluded that the Respondent had indulged in profiteering. He has further intimated that the increase in the base price was an act of the manufacturer and not of the Respondent and he could not be proceeded against. He has also urged that he could not have increased the base price as per the agreement and he was also not empowered to reduce the price fixed by the manufacturer. This aspect was also not considered in the DGAP Report and therefore there was no allegation in the notice or finding in the Report that the Respondent had sold the product at a selling price higher than the purchase price, he has contended. He has also submitted the details of his profit margin as under:- WITH GST 28% Purchase Price (Rs) Base Selling Price (Rs.) Total Selling Price (Rs.) Profit of the Respondent No. I (a) (b) (c) (d)=b-a 4291.06 4728.90 6053.00 437.84=10.20% WITH GST 12 % Purchase Price (Rs.) Base Selling Price (Rs.) Total Selling Price (Rs.) Profit of the Respondent No.1 (Rs.) (a) (b) (c) (d)=b-a 4352.50 4774.59 5347.54 422.09=9.700/0 4352.5 Assuming 4728.90 5296.37 11.40=8.65% 11. He has further claimed from the details given above that even when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/nos 6. 321000 1014 28-07-2018 24 Nos 12% 4810.65/nos 115455 60 0 115455.60 4810.65/nos 119 Nos 13. He has also pleaded that the notice dated 19.11.2018 proposed penal action against the Respondent under different Sections Of the CGST Act, 2017 and CGST Rules, 2017 however, he was not liable for any penal action in as much as he did not violate Section 171 of the CGST Act, 2017, read with the CGST Rules, 2017 and penal provisions could be invoked only when any contumacious act was carried out by him. He as a bonafide distributor had sold the product as per the price list of the manufacturer and if he had retained the base price when the GST rate was 28% without following the price list of the manufacturer, he would not only be violating the terms of the agreement with the manufacturer but also indulging in unfair trade practices for which he could be investigated by the Competition Commission of India. The Respondent has further pleaded to drop the proceedings on the following grounds:- a) Section 29 read with Rule 21 of the CGST Rules could not be invoked in as much as the Respondent had not com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on record and it is revealed that the Central Govt. vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 28% to 12% on the product in question with effect from 1511.2017, the benefit of which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the CGST Act, 2017. 16. From the perusal of the tax invoices dated 28.09.2017 and 27.12.2017, issued by the Respondent it is observed that the base price of the product had increased from Rs. 4728.90, which he was charging before the rate reduction till 14.11.2017 to Rs. 4,774.59 w.e.f. 15.11.2017 i.e. it was increased by Rs. 45.69 per item. Therefore, there is no doubt that the Respondent had increased the base price of the above product w.e.f. 15.11.2017 in spite of GST rate reduction from 28% to 12%, when he was legally bound to charge the reduced prices so as to pass on the benefit of reduced tax rate to his recipients. 17. The Respondent's claim that the base price was increased because the purchase price of the product was increased by the manufacturer and that there was no question of profiteering by him is not legally tenab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s Report it is clear that the Respondent had increased the base price of the product from Rs. 4728.90 to Rs. 4774.59 when the rate of tax was reduced from 28% to 12% and further increased the base price from Rs. 4774.59 to Rs. 5277.67, as is evident from the invoices issued during the period 23.05.2018 to 31.07.2018. Therefore, it is apparent from the above Annexure that the Respondent had increased the base prices of the product which was supplied by him during the period between 15.11.2017 to 31.07.2018. 21. The DGAP vide his Report 21.12.2018, has submitted that the profiteered amount of Rs. 1,20, 194/- was wrongly calculated and the correct amount of profiteering was Rs. 32,926.36 on account of increase in the base price of the product as has been shown in the Table-C above. As per the revised calculation provided by the DGAP vide Annexure-7A of his Report dated 21.12.2018 it is clear that keeping the base price same as Rs. 4728.90 prior to GST rate reduction the selling price of the product should have been Rs. 5296.37. However, the Respondent had sold the product at Rs. 5629/- thus denying benefit of Rs. 332.63 to the recipients. Thus, for the entire period from 15.11.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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