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TMI Blog2019 (6) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent 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 ₹ 54,67,149/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 - The Respondent is therefore directed to reduce the prices of his products 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 ₹ 54,67,149/- 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. The Respondent is further directed to refund an amount of ₹ 75/- (750* 1.28 = 960 -750*1.1.8 = 885) to Applicant No. 1. along with the interest @ 18% - Since rest of the recipients in this case are not identifiable, the Respondent is directed to deposit the amount of profiteering of ₹ 27,33,537/- in the Central Consumer Welfare Fund (CWF) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2017. The Applicant No. 1 had also claimed that since the Respondent had increased the MRP of the product after the rate of tax was reduced on it, he 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 regard, Uttar Pradesh State Screening Committee had relied on two invoices issued by the Respondent, one dated 06.11.2017 (Pre rate revision) and the other dated 09.12.2017 (Post rate revision), as has been discussed in table given below:- Table Sr.No. Name of the Product Supplied Pre GST rate revision on 15.11.2017 Post GST rate revision on 15.11.2017 Invoice No. Date Tax Rate Base price (in Rs.) Invoice No. Date Tax Rate Base price (in Rs.) 1. Vitrified Tiles (HSN Code 6901) 1649 06.11.2017 28% 750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between 30.11.2018 to 03.12.2018. However, the Applicant No. 1 did not inspect the record. 4. The DGAP requested this Authority for grant of extension in time to complete the investigation up to 09.12.2018 which was allowed by this Authority under Rule 129 (6) of the CGST Rules, vide its order dated 21 08.2018. The present investigation pertains to the period between 15.11.2017 to 30 06.2018. 5. The DGAP, in his Report, has stated that the Respondent submitted his replies to the DGAP, vide letters dated 23.07.2018, 02.09.2018, 23.09.2018, 08.10.2018, 22.10.2018, 01.11.2018 and 15.11.2018. Vide his replies, the Respondent submitted that he is a retailer of tiles and his business was not based on MRP or fixed prices but at prices lower than MRP. He added that, no sale was made on MRP since his customers bargained the price based on the volume of requirement of tile boxes and finalized the deal at competitive prices. He further added that the Applicant No. 1 had offered to purchase vitrified tiles at a net price of ₹ 960/- per box, even though the MRP was ₹ 1300/- per box and that he had to accept the above price offered by the above Applicant due to comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of goods after arriving at the base prices of the tiles, pre 15.11.2017 and post 15.11.2017. The DGAP has also intimated that from the invoices available, it was clear that the Respondent has increased the base prices of the tiles when the rate of tax was reduced from 28% to 18% and did not pass on the commensurate benefit of rate reduction to his customers. It was the Respondent s statutory responsibility and obligation to pass on the benefit of reduction in the GST rate to his customers. However, it was evident from the invoices submitted by the above Applicant, that by increasing the base price of the product from ₹ 750/- to ₹ 814/-, the benefit of the GST rate reduction was not passed on to him. 8. The DGAP has also analysed the outward sales data for the period 01.11.2017 to 30.06.2018 of the tiles supplied by the Respondent and stated that the prices of the same even before reduction in the tax rate w.e.f. 15.11.2017 used to vary across different invoices for the same period. For example, prior to GST rate reduction w.e.f. 15.11.2017, the Respondent had sold the tiles (size 2 X1 ) in the price range between ₹ 234 to ₹ 525. Therefore, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 and 06.03.2019. Vide his submissions, he has stated that profiteering was not defined in the CGST Act, 2017 and he further furnished the definition of the profiteering as per various dictionaries. He has further stated that the Anti-profiteering provision was made to gain the confidence and to bring sense of security among the consumers towards the Act. However, in absence of any notified/specified rules for the proceedings under the anti-profiteering provision, there was lack of clarity regarding factors to be considered for profiteering or methods for determination of profiteering. 14. The Respondent further pointed out certain major lapses in the calculation sheet of profiteered amount. He submitted that the DGAP had taken the base prices for all the categories of products for the period prior to 15th November 2017 arbitrarily as the average of all discounted prices at which he had sold the goods (tiles) during the period of 1st November 2017 to 14th November 2017, in place of the MRP based standard prices. Further, the DGAP had taken a single price/rate as base price for all the qualities of the product in a particular size category; whereas, there was much price va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d another Vs. M/s. Asian Paints Ltd. in Case No. 29/2018 decided on 27.12.2018 = 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY by the Authority according to which reduction in discount did not amount to profiteering. He has also mentioned that Section 171 of CGST Act, 2017 was intended to safeguard the interest of the consumers and deal with the violators who did not pass on the benefits to be passed on to the consumers, through anti-profiteering measures and there was no intention of the legislature to regulate the competitive prices and corresponding rebates and discounts and a dealer could not be forced to grant a certain amount of rebate or discount or to maintain the uniformity in rebates and discounts and allowing of rebate or discount was completely a discretionary subject for the dealers, which could not be regulated through the legislation. 17. He has further submitted that even if the contention of the Applicant No. 1 be taken according to his own viewpoint, the said transactions could be described as under:- TABLE Sl.No. Particulars Before chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rebate/Discount/(Profiteering) J = (H-I) 320.31 226.56 256.31 162.56 Note: (#) : Ideal MRP after 14/11/2017 is calculated by charging GST at revised rate over the ideal Price taken as base price. (@) : Base Price/Ideal Price for the period from 15/11/2017 onwards has been taken equal to the Base Price before and up to 14/11/2017 18. He has also submitted that the negotiation of price with the customers was always at cum-tax rate and not ex-tax rate and the buyers were interested only in the total price which they were liable to pay against the goods purchased and the ultimate user of the goods had to bear the burden of tax according to the fundamental principles of Indirect Taxation. 19. The Respondent, vide his written submissions dated 06.03.2019, has also enclosed copies of bills, sales details of the products sold by him, a table showing details of the products along with their price per box which is given below:- Post Revision 15.11.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PRE. S/S Kajaria) 1578 05-11-2017 563.00 1939 08-12-2017 515.00 - 48.00 9 Tile Size 32X32 (PVT. COM. SP. COLO. Kajaria) 1640 06-11-2017 966.40 1950 09-12-2017 814.00 -152.40 10 Tile Size 32X32 (PVT. STD SO LI PLUS Kajaria) 1313 11-10-2017 1000.00 2506 23-01-2018 994.06 -5.94 11 Tile Size 4 8X48 (ETER. COM . H.D. WOOD Kajaria) 1690 11-11-2017 542.00 1835 23-11-2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Kajaria) 571 13-08-2017 620.00 1955 03-12-2018 513.00 -113.00 20 Tile Size 6X24 (CRM UTY DIGITAL Kajaria) 1668 08-11-2017 375.00 2013 10-12-2017 271.19 -103.81 21 Tile Size 12X12 (CRM Pre Digital Kajaria) 1616 02-11-2017 430.00 1750 11-12-2017 424.00 -06.00 20. The Respondent has also contended that the DGAP s computation of profiteered amount of ₹ 54,67,149/- was based on imaginary calculations, conjectures and surmises He has further contended that the DGAP had wrongly taken a single price/rate as base price for all the qualities of tile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andard or law /norms and nothing can be calculated correctly by this method. He has advanced his argument as below:- Table Amount (in Rs.) A B C TOTAL (A+B+C) Quantity Sold 100 300 600 1000 Sales Rates before 15.11.2017 per unit 234 400 525 Sales Rates after 15.11.2017 per unit 230 390 520 Actual Profiteering after 15.11.2017 0 0 0 0 Profiteering if Average Rate taken ₹ 386.33 AS the DGAP had done (230-386.33)X100=0 (390-386.33)X300=1101 (520-386.33)X600+=80202 81303.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. The Respondent has also cited the judgements of Hon ble Supreme Court in the cases of:- (i) K.P. Varghese Vs. The Income Tax Officer 1981 AIR 1922 = 1981 (9) TMI 1 - SUPREME COURT which stated that It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue. To throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him (ii) Commissioner of Income Tax, Guwahati Vs. M/s. Sati Oil Udyog Ltd. ANR (2015) 56 taxmann.com 285 (SC) = 2015 (3) TMI 854 - SUPREME COURT which stated that The burden of proving that the assessee has so attempted to evade tax is on the revenue which may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it. (iii) Government of Andhra Pradesh Vs. Guntur Tobaccos Ltd 1965 AIR 1396 = 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 has submitted that Section 15(1) of the Central Goods and Services Tax, Act, 2017 reads as: - The value of a supply of goods and/or services shall be the transaction value, that is the price actually paid or payable for the said supply of goods and/or services where the Supplier and the recipient of the supply are not related and the price is the sole consideration for the supply Thus, the relevant value for calculating profiteering was the transaction value and not the MRP. The DGAP has further submitted that the calculation sheet submitted by the Respondent was not acceptable since the MRPs had been considered for calculating profiteering instead of the transaction value. The DGAP has further submitted that all the other issues raised by the Respondent and also by the Applicant No. 1 had already been incorporated in his Report dated 05.12.2018. 30. The DGAP vide his report dated 28.03.2019 has stated that all these issues had already been covered in his Report dated 05.12.2018. 31. The Respondent filed his last submissions on 23.04.2019. Vide his above submissions, the Respondent has stated that the DGAP, vide his report dated 28.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for profiteering, process or method for determination of profiteering etc. This averment of the Respondent also has no substance and rather incorrect, since the rules for the proceedings under the anti-profiteering provision has already been given as per Rule 126 of the CGST Rules, 2017, which states that:- The Authority may determine the methodology and procedure for determination as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices. (iii) He has pointed out major errors in the DGAP s report. The first was that the method of calculation was arbitrary as average of all discounted prices was taken in place of MRPs based standard prices. Secondly, selection of single base price (rate) for different qualities of tiles whereas there was much variation among the various qualities of tiles in any size category and third one, that the element of Tax (GST) was also included in profiteering. Since the Respondent had not made supplies on the basis of MRPs but has done so on discounted prices, there ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quality of goods supplied by the Respondent and hence no correlation can be made or deciphered in absence of any method of correlating supply invoices and MRPs. Also the relevant value for calculating profiteering has to be the transaction value and not the MRPs as DGAP has rightly quoted Section 15(1) of the CGST Act, 2017. Contention of the Respondent that Section 15 was relevant for calculation of tax (GST) and was not applicable in the calculation of profiteering is not tenable, as in this case where MRP was of no relevance as the product was being sold at much lower price than the MRP. Also his contention that he had been selling his goods at much lower prices than the MRPs and terming this act as passing on the benefit was also not correct and cannot be accepted. (v) As regards his submission that the period selected for calculation of profiteering was from 15th Nov 2017 to 30th June 2018 which seemed to be excessive, having regard to the stock holding period of the Respondent as well as periodicity of price revision by the manufacturer, since no documentary evidence to this effect was produced by the Respondent, hence this contention cannot be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ze is mentioned in these invoices showing that price was reduced from ₹ 422 on 25.11 2017 to ₹ 404 on 29.12.2017. Therefore, we find that absolutely no inference from these documents can be drawn to conclude that in both these invoices the goods sold were of same quality. Producing invoices having merely description of same size of tiles sold does not establish that the price was actually reduced. (x) Submission of the Respondent that the DGAP has made imaginary calculations and that their report is based on conjectures and surmises also does not hold good in the absence of details and comparable invoices provide by the Respondent. His contention that the quality was not considered does not hold good as the invoices produced by him do not carry details about quality, texture etc. and it is these parameters that are relevant here. Therefore, the DGAP has correctly based his calculations on averaging which is acceptable in the facts and circumstances of the present case. (xi) Also, the contention of the Respondent that the period selected for calculation of profiteering from 15.11.2017 to 30.06.2018 was excessive is also not acceptable as no proper g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve mentioned case are distinct from the instant case. It is also pertinent to mention here that while the Screening Committee conducts a mere prima-facie scrutiny of any complaint/application and verifies the evidence, if any, it is the DGAP which conducts thorough investigation into any matter related to Anti-Profiteering provisions. Therefore, the said contentions of the Respondent are not accepted (xvi) It is respectfully submitted that the case laws referred to in Para 25 which the Respondent has submitted cannot be relied upon since the present proceedings are under Section 171 of the CGST Act, 2017 which aims at protection of consumers and not about collection of taxes. (xvii) The contention of the Respondent regarding the DGAP not properly investigating the instant case is also incorrect since the DGAP has properly investigated in line with the general principles adopted by this Authority. (xviii) The contention of the Respondent regarding no restriction on accepting the profit according to Article 19 (g) of the constitution of India does not hold since the profit/loss etc. has no relevance in any proceedings under Section 171 of the CGST Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017, under the supervision of the DGAP. 36. It is also established from the above facts that the Respondent had issued incorrect invoices while selling the above product to his recipients as he had incorrectly shown the base prices and had also compelled them to pay additional GST on the increased prices through the incorrect tax invoices which would have otherwise resulted in further benefit to the recipients. It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act and hence he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017. Since he has not submitted his reply on the issue of penalty, therefore, in the interest of natural justice before imposition of penalty a notice is issued to him asking him to explain why penalty should not be imposed on him. 37. A copy of this order is sent to the Applicants, Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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