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TMI Blog2019 (10) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... t Sanitary Napkin in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering, which is an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he will be apparently liable for imposition of penalty under the provisions of the above Section - Accordingly, a Show Cause Notice will be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off. - Case No. 50/2019 - - - Dated:- 21-10-2019 - SH. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, MS. R. BHAGYADEVI, TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Present: - None for the Applicant No. 1. Sh. Shivender Pandey, Superintendent, DGAP for the Applicant No. 2. Sh. Virender Sharma, VP-Taxation, Sh. Pratik Jain, Sh. Jatin Arora, and Sh. Gaurav Shah, Authorised Representatives for the Respondent. ORDER 1. The brief facts of the case are that under Rule 128 of the Central Goods and Services Tax (CGST) Rules, 2017, an Application was filed before the Standing Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 26.07.2018, regarding reduction in GST rate from 12% to Nil on the product by reducing the MRPs of said goods, appeared to be correct but based on the Applicant No. 1's field inspection, it was noticed that the old stocks were being sold at the same MRP prevailing prior to the reduction of GST rate. The Report also stated that neither the GST rate nor the price was indicated on the invoice except the MRP of the product. This MRP also did not indicate that there was commensurate reduction in price charged from the ultimate consumers. 7. The DGAP further stated that the rate of tax was reduced from 12% to Nil w.e.f 27.07.2018, vide Notification No. 19/2018-Central Tax (Rate) dated 26.07.2018 with denial of the benefit of Input Tax Credit (ITC). Accordingly ITC pertaining to the product that had accrued to the Respondent during the period from July, 2017 to 26.07.2018 was calculated as ₹ 1,27,11,749/- and the reversal of ITC on the closing stock as on 26.07.2018, was ₹ 42,56,338/-. The Report stated that in order to estimate the ratio of ITC in respect of the products as a percentage of the taxable turnover supplied during the period w.e.f. July, 2017 to 26.07.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of denial of ITC. The profiteered amount thus has been calculated by the DGAP by comparing the said commensurate selling price with the actual invoice-wise selling prices during the period 27.07.2018 to 30.11.2018. 10. Further the DGAP has stated that from the outward supplies made from 27.07.2018 to 30.11.2018, it was found that the Respondent had sold 13 products and out of these 13 only 12 products were sold by him prior to 27.07.2018. Therefore the profiteered amount has been arrived at by the DGAP by comparing the commensurate prices of these 12 products (by increasing the pre GST rate reduction prices by 8.39%), with the actual selling prices charged during the period 27.07.2018 to 30.11.2018. Accordingly the DGAP vide Annexure 27 of his Report has computed the profiteered amount as ₹ 42,52,370/- 11. On perusal of the DGAP's Report, the Authority in its meeting held on 25.04.2019 decided to hear the Applicants and the Respondent on 09.05.2019 and accordingly notice was issued to them. On the request of the Respondent the hearing was adjourned to 28.05.2019 and final hearing was held on 11.06.2019. On behalf of the Applicant No. 1 none appeared, the DGAP was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent also referred to the Authority vide Order No. 3/2018 dated 04.05.2018 in the case of Kumar Gandharv- [email protected] vs. KRBL Limited = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY by the Authority where the Authority had accepted that the price on Basmati Rice was increased on account of various market factors and hence there was no profiteering. 16. The Respondent further claimed that he had sent a communication to all his distributors vide letter dated 27.07.2018 that the MRPs had been reduced and had also enclosed the new reduced price list for each SKU. He further claimed that the profit percentage for the period from April 2018 to June 2018 was 57.46% and for the subsequent period of August 2018 to October 2018 was 49.48% as given in the Table below:- Particulars Apr-18-Jun-18 Aug-18-Oct-18 Gross Sales (@NRV) 0.41 11.64 Credit Notes - GST related - 0.95 Net Sales (@NRV) 0.41 10.68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Director General of Anti-profiteering shall make available the evidence presented to it by one interested party to the other interested party, participating in the proceedings . Based on this he claimed that the evidences relied on by the Applicant No. 1 should have been made available to him. He further submitted that in the case of Shiva Sahu vs. Union of India 2018 (362) ELT 439 (Cal.) = 2018 (6) TMI 1026 - CALCUTTA HIGH COURT it was held that it was the right of the person against whom the evidence was adduced to cross examine the witnesses. In view of this the Respondent submitted that in line with the principles of natural justice he should have been provided with the evidence that was relied upon and by not doing so it amounted to gross injustice. He further claimed that though a letter dated 29.11.2018 was issued permitting him to inspect the evidence but he was not allowed to inspect the evidence. 20. The Respondent also stated that Rule 126 of the CGST Rules, 2017 empowered the NAA to determine the methodology and procedure for computing the extent of profiteering but, no precise computation methodology or principles had been formulated by the Authority. He al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossibilia is an age old maxim meaning that the law does not compel a man to do which he cannot possibly perform. Requiring the assessee to file a proper and complete return by including the income under the head 'Capital gain' would be impossible for the assessee, in cases of the nature referred above 23. The Respondent in his further written submissions dated 11.06.2019 stated that the DGAP had computed the profiteered amount on promo packs which were launched in the post-GST rate exemption period. The DGAP has adopted the pre GST rate exemption price of normal packs to arrive at the alleged profiteering amount on promo packs, which was incorrect since the normal packs and promo packs were two different products. He also claimed that the procurement cost of the promo packs was 30% more than the normal packs as has been shown in the Table given below:- Amount in Rs. Particulars Normal Packs Promo Packs Sales for the period 01.08.2018 to 31.10.2018 ₹ 7,84,70,500/- ₹ 3,80,70,223/- Corresponding purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd attracted NIL rate of GST. However prior to 27.07.2018 this product attracted 12% GST with the benefit of ITC on the inputs and input services which was denied from 27.07.2018 as the product was exempted from levy of tax. The GST paid on the inputs and on input service post rate reduction was a cost to the supplier, hence the base prices of the products would increase to the extent of denial of ITC. Accordingly the DGAP based on the turnover and the ITC available to the Respondent had rightly estimated the ratio of ITC to the taxable turnover as 8.39% which has not been disputed by the Respondent. The DGAP vide Annexure 27 of his Report has arrived at the base prices after taking into account the average price of the product for the period w.e.f. 01.07.2018 to 26.07.2018 i.e. prior to GST rate reduction. These base prices have been loaded with 8.39% as discussed above and accordingly recalibrated base prices per unit have been arrived at. These recalibrated base prices have been compared with the actual selling prices after the product was exempted and wherever the selling price of the product were more than the recalibrated base prices, it proved that the benefit of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed as facts of the present case are entirely different. 30. The DGAP has compared pre rate reduction average price with post rate reduction invoice wise price in respect of a particular SKU, as can be seen in the annexure-27 of the DGAP Report, the Respondent has strongly opposed this and has given his own calculations of average to average comparison, pre and post rate reduction when its done per product and per customer. Since the place of supply is only in Madhya Pradesh, the contention of the Respondent cannot be accepted because it is difficult to identify the customer with the purchase during the pre rate reduction period and the post rate reduction period. Therefore, we are of the opinion that since the actual prices are available for the post rate reduction, the DGAP has correctly followed this methodology and arrived at the profiteering amount. 31. In view of the above discussion the quantum of profiteering illegally obtained by the Respondent is determined as ₹ 42,52,370/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 as the Respondent has failed to passed on the benefit of rate reduction to his customers. Accordingly, the Respondent is direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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