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TMI Blog2019 (10) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore the argument of the Respondents that there is no prejudice, also cannot be accepted. The issues that come up before the Anti-Profiteering Authority are complex. The Act and Rules provide no appeal. The Authority can impose a penalty and can cancel the registration. The term profiteering, under the Act and Rules, is used in a pejorative sense. Such a finding can severely dent the business reputation. The Authority is newly established. Therefore, as a guidance to this Authority, highlighting the importance of fair decision-making is necessary. The impugned order passed by the National Anti-Profiteering Authority is set aside - the proceedings before the National Anti-Profiteering Authority Respondent No.2. stand restored. - WRIT PETITION NO. 3492 OF 2018 - - - Dated:- 1-10-2019 - M.S. SANKLECHA NITIN JAMDAR, JJ. Mr. Rohan Shah a/w. Divya Jeswant, Mayank Jain i/b. Khaitan Co. for the Petitioners Mr. Zoheb Hossain with J.B. Mishra for the Respondents. Judgment Per (Nitin Jamdar, J.) :- Rule. Rule is made returnable forthwith. Respondents waives service. Taken up for final disposal. 2. The Goods and Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner. The applicants did not attend nor participated any further. The Petitioner filed a reply on 5 January 2018 and denied the allegations. 5. The Director-General analyzed the material placed before it by the Petitioner. The Director-General noted that the Petitioner was selling 1844 types of products and after comparing the price list published before and after 15 November 2017, opined that the Petitioner had increased the base price of 1774 products, which constituted 96.20% of its total products. Though the Petitioner had charged GST at 5% on or after 15 November 2017, due to the increase in the base price, the customers had to pay the same price charged before 15 November 2017. The Director-General, after setting out the reasons, concluded that the profiteering amount was of ₹ 7.49 crores. The Director-General submitted a report accordingly to the Authority. 6. The Anti-Profiteering Authority considered the report of the Director-General in its sitting held on 5 July 2018. It was decided to give hearing to the interested parties and to fix schedule of hearings. The Director-General was represented through the Officers. The Petitioner was represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he prices of its products and to deposit an amount of ₹ 7.49 crores to the Consumer Welfare Fund along with 18% interest. The Director General was directed to continue investigation till the Petitioners reduced the prices commensurate to the reduction in tax and to submit a report. Directions were also issued to initiate penalty proceedings. 8. The Authority passed the order on 16 November 2018. Mr. Amand Shah, Technical Member, who had joined on 7 September 2018 ,after the hearings, also signed the order along with three others who had heard the parties. 9. The Authority issued a show-cause notice to the Petitioner on 20 November 2018 as to why penalty should not be imposed. The Petitioner thereafter filed this Writ Petition on 3 December 2018 on the ground that there is no appeal against the order passed by the Anti Profiteering Authority under the CGST Act or the Rules. 10. The Petition came up before the Division Bench of this Court on 17 November 2018 when it was adjourned at the request of the Respondents. By an ad-interim order the Division Bench stayed the directions for investigation into the quantum and initiation of the penalty proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contend that GST Act, Rules and Procedure framed supply adequate guidance and there is no arbitrariness in the decision making. The Respondents contend that the Director-General on its own motion can look into the matter and its jurisdiction is not restricted to the product for which complaint has been received. On the ground of breach of principles of natural justice, the Respondents contend that as per the Rules, no act or proceedings of the Authority shall be invalid merely on the ground of any irregularity in the procedure followed by the Authority not affecting merits. The Respondents contend that the Rules provides for a quorum of three members, signing the order by four member is superfluous. The basic ground put-forth by the Respondents is that there was no illegality and at the most a mere irregularity and no prejudice has been demonstrated by the Petitioners. The Respondents also contend that the Rules do not mandate oral hearing and the entire record was before the Authority to take a decision. 14. We take up the ground of breach of principles of naturaljustice first. There is no dispute about the factual position. The Petitioners received notice for oral hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. 1 (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub- section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered: Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. Explanation .- For the purposes of this section, the expression profiteered shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensurate reduction in prices; (ii) to identify the registered person who has not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices; (iii) to order, (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Fund referred to in section 57; (c) imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act. (iv) to furnish a performance report to the Council by the tenth day of the close of each quarter. The Authority is to identify the registered person who has not passed on the benefit of reduction. The Authority is empowered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofiteering shall conduct investigation and collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices. (3) The Director General of Anti-profiteering shall, before initiation of the investigation, issue a notice to the interested parties containing, inter alia, information on the following, namely:- (a) the description of the goods or services in respect of which the proceedings have been initiated; (b) summary of the statement of facts on which the allegations are based; and (c) the time limit allowed to the interested parties and other persons who may have information related to the proceedings for furnishing their reply. (4) The Director General of Anti-profiteering may also issue notices to such other persons as deemed fit for a fair enquiry into the matter. (5) The Director General of Anti-profiteering shall make available the evidence presented to it by one interested party to the other interested parties , participating in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d below :- (1) The Authority shall, within a period of six months from the date of the receipt of the report from the Director General of Anti-profiteering determine whether a registered person has passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices. (2) An opportunity of hearing shall be granted to the interested parties by the Authority where any request is received in writing from such interested parties. (2A) The Authority may seek the clarification, if any, from the Director General of Anti Profiteering on the report submitted under sub-rule (6) of rule 129 during the process of determination under sub-rule (1). (3) Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order - (a) reduction in prices; (b) return to the recipient, an amount equivalent to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry under clause (a) shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry. This Rule demonstrates the impact of the order of the Authority. It also shows that oral hearing is contemplated. The Authority is also empowered in certain circumstances to order further investigation or an enquiry. 20. The decision of the Authority is to be taken as provided under Rule 134, which reads as under :- (1) A minimum of three members of the Authority shall constitute quorum at its meetings. (2) If the Members of the Authority differ in their opinion on any point, the point shall be decided according to the opinion of the majority of the members present and voting, and in the event of equality of votes, the Chairman shall have the second or casting vote. Three members constitute the quorum. If the members differ in their opinion on any point, the point is to be decided by voting and if equality of votes occurs, the Chairman would have a casting vote. Rule 134(2) clearly contemplate deliberations within the members before deciding. 21. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion of the majority of the members present and voting, and in the event of equality of votes, the Chairman shall have the second or casting vote, Rule 134 (2). Clauses 10 and 11 reiterate the provisions of the Rule regarding quorum. Clause 13 lays down the procedure for receipt of the report from the Director General. Clauses 14 and 15 read as under :- (14) In case the report filed by the Director General of Anti-profiteering recommends that there is no violation of the provisions of section 171 of the above Act, the Authority may send a copy of the report to the complaint interested party and invite objections from it and after hearing the above party may either close the matter or pass any order it may deem just and proper or under Rule 133 (4) direct the Director General of Antiprofiteering to further investigate the matter as the case may be. (15) After registration of the report a notice shall be issued to the interested parties or their agents or their counsels intimating the date, time and place fixed for hearing and a copy of the report shall also be supplied to such parties along with the notice. These clauses refer to hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the Procedure demonstrate that the principles of natural justice are statutorily ingrained. There is a deliberation amongst the members. Therefore, the presence of a member of the Authority during the hearing is not a formality. Multi-member panels are constituted so a decision through discussion and exchange of opinions takes place. The litigant is entitled to be heard by all members who are the ultimate decision-makers so the litigant can try to convince each member of the adjudicating Authority. Therefore oral hearing is clearly contemplated and the argument of the Respondent that since all the record was before the Authority, there is no illegality in the fourth member in signing the order, is not correct. If the scheme itself provides for hearing by all members, not giving hearing itself will cause prejudice. Therefore the argument of the Respondents that there is no prejudice, also cannot be accepted. 23. We now turn to the case law relied upon by the parties. 24. In the case of Emperor v Dasrath Rai and Ors. of the Privy Council (1933) LVI ILR 599 = 1933 (11) TMI 24 - ALLAHABAD HIGH COURT , relied upon by the Petitioner, the issue arose from Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EME COURT , the case was where the issue before the Supreme Court was whether the proceedings of Enquiry Committee constituted to enquire into the charges of misappropriation against the Respondents therein were vitiated by violation of principles of natural justice. Here the Enquiry Committee was constituted and in the proceedings of Enquiry Committee which had gone on for some time, one member of the Enquiry Committee was transferred and in his place other member had stepped in. The High Court had taken a view that the persons who decided the matter finally did not hear the witnesses. It is in this context that the Supreme Court found that the change in the Enquiry Committee, which was not a final authority to impose punishment would not be fatal to the final order passed. In this case, therefore, the change in composition was at the stage of the enquiry authority and not the final Authority. In Indore Textiles Ltd. vs. Union of India (1983) MPLJ 41 the issue before the Division Bench of Madhya Pradesh High Court was regarding the management of a textile mill taken over by the Madhya Pradesh State Textile Corporation under the orders of the Central Government. Breach of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This decision is different on facts. The position was converse to the one at hand. When three members hear, and the fourth member joins subsequently and all sign the order, the roles cannot be severed because they get merged in the collective decision. Situation could be different when some members hear the matter, one is transferred or not available, and others are constituting the quorum sign the order. In such a case, it may be argued that the role of the member who left was automatically severed and the decision of the quorum could be tested independently. The contention of the Respondents that if the role of the fourth member is removed, then the remaining three constitute a quorum and the order can be sustained, thus is not correct. 27. The Respondents, based on the decision of the Supreme Court is Ossein and Gelatine Manufacturers Association vs. Modi Alkalies and Chemicals Ltd. (1989) 4 SCC 264, sought to invoke the concept of institutional hearing. In this case, the appeal had come up to the Supreme Court under the Monopolies and Restrictive Trade Practices Act, 1969. The Central Government had granted an application for permission to establish an undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n violation of the principles of natural justice and fairness, and is liable to be set aside. 30. There is one more facet, that is of the perception of the litigants. This was underscored by the Division Bench of the Delhi High Court in the case of M/s. Kwality Restaurant and Ice-Cream Co. v/s. The Commissioner of VAT, Trade and Tax Department and Ors. ( 2012) SCC OnLine Del 4993 = 2012 (9) TMI 853 - DELHI HIGH COURT . In this case, a challenge was raised to the continuation of hearing before the VAT Appellate Tribunal wherein two members had heard the case substantially in the absence of the third member who had proceeded on leave, and after the hearing was closed, the third member sought to join the bench. The Court did not permit the same. The Court referred to the importance of public confidence in the decision making by the courts and the tribunals. The Court observed that any practice which even remotely suggest a sense of unfairness must be eschewed. It held that our legal system mandates that no one can suffer an adverse order after being subjected to an unfair procedure. The Court observed that procedural safeguards against executive excesses or apathy app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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