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TMI Blog2019 (3) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer and that there was no question of profiteering by him is not legally tenable because he as a dealer registered under the GST is legally bound to pass on the benefit of rate reduction. Section 171 of the CGST Act, 2017, read with the rules made under it clearly mandates that every registered person has to pass on the benefit of reduction in the rate of tax on any supply of goods and services to the recipients by way of commensurate reduction in prices. Moreover his claim that his profit margin had reduced also does not hold good as this Authority is not concerned with his profit margin or loss because Section 171 of the CGST Act, 2017, read with relevant COST Rules, 2017, is clear and unambiguous to the effect that the benefit of rate reduction has to be passed on by every registered person to his recipients. The Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax to his recipients by commensurate reduction in the prices. Accordingly, the amount of profiteering is determined as ₹ 32,926.36 as per the provisions of Rule 133 (1) of the CGST Rules, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision 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 of tax on the above product had been passed on by the Respondent to his recipients or not? 3. The DGAP after concluding his investigation has submitted his Report on 13.11.2018, under Rule 129 (6) of the CGST Rules, 2017. It is revealed from the Report that the DGAP had issued notice dated 05.09.2018 under Rule 129 of the CGST Rules, 2017, calling upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther 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 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. Thus, the legal requirement was abundantly clear that in the event of benefit of input tax credit or reduction in the rate of tax, there m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 ₹ 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 ₹ 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 he was only a distributor of the product under the brand name Butterfly the price of which was fixed by the manufacturer and all his products were sold only to the retailers and not to the end customers, i.e. majority of his transactions were only B to B transactions. 9. The Respondent has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged per unit in invoice w.e.f. 15-11-2017 (in 1. 320000 4697 30-11-2017 16 Nos 12% 4581.57/nos 73305.12 3665.25 69639.87 4352.49nos 2. 320000 6163 17-01-2018 20 Nos 12% 4581.57/nos 91613.40 4581.57 87049.83 4352.49/nos 3. 320000 7059 15-02-2018 30 Nos 12% 4581.57/nos 137447.10 6872.35 130574.75 4352.49/nos 4. 321000 0219 09-05-2018 20 Nos 12% 4810.65/nos 96213.00 0 96213.00 4810.65/nos 5. 321000 0711 04-07-2018 9 Nos 12% 481 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Committee had referred a case against the Respondent alleging that the benefit of reduction of GST rate w.e.f 15.11.2017 was not passed on by way of commensurate reduction in price which was examined by the Standing Committee and it was prima facie held that there was evidence to show that the supplier had not passed on the benefit of reduction in the rate of tax by way of commensurate reduction in price and hence, the matter was referred to him for a detailed investigation. The DGAP has also submitted that the allegation was against the Respondent who was a distributor hence the scope of investigation was limited to the Respondent. With reference to the quantification of profiteering the DGAP has admitted that he had inadvertently calculated the profiteered amount at ₹ 1,20,194/- but on re-examination the amount of profiteering came to be ₹ 32,927/- as could be seen from the table given below:- Table-C Amount in Rs. Particulars Calculation of profiteering as per original DGAP Report Revised Calculation of profiteering amount Base price prior to 15.11.2017 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipients by way of commensurate reduction in prices. Moreover his claim that his profit margin had reduced also does not hold good as this Authority is not concerned with his profit margin or loss because Section 171 of the CGST Act, 2017, read with relevant COST Rules, 2017, is clear and unambiguous to the effect that the benefit of rate reduction has to be passed on by every registered person to his recipients. 18. The claim of the Respondent that the DGAP is only an investigating Authority and has not relied on any evidence is not sustainable in as much as the DGAP in his Report has relied on all the documents submitted by him and accordingly has arrived at the profiteered amount. The Respondent on the one hand has claimed that the price of the product was reduced from ₹ 6053/- to ₹ 5629/- by the manufacturer but at the same time has claimed that his purchase price had increased from ₹ 4291.06 to ₹ 4581.57 due to which he had increased his base price and his selling price after discount was only ₹ 4352.50. From the recipients point of view it is very clear that even though the manufacturer had reduced the price, the Respondent has admittedly sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of reduction in the rate of tax to his recipients by commensurate reduction in the prices. Accordingly, the amount of profiteering is determined as ₹ 32,926.36 as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the price of the above product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of ₹ 32,926.36 along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients in this case are not identifiable, the Respondent is directed to deposit the amount of profiteering of ₹ 16463.18 in the Central Consumer Welfare Fund (CWF) and ₹ 16463.18 in the Kerala State CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. The above amount shall be deposited within a period of 3 months from the date of receipt of this order failing which the same shall be recovered by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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