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TMI Blog2020 (3) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... o explain why the penalty should not be imposed. Further, this Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is deposited in the CWFs of the Central and the State Governments as per the details given above. A Report in compliance of this order shall be submitted to this Authority by the concerned Commissioner within a period of 4 months from the date of receipt of this order. - Case No. 13/2020 - - - Dated:- 6-3-2020 - SH. B.N. SHARMA , CHAIRMAN, SH. J.C. CHAUHAN , TECHNICAL MEMBER, SH. AMAND SHAH, TECHNICAL MEMBER Present:- None for the Applicants. Sh. Tarun Gulati , Senior Advocate, Sh. Kumar Visalaksh , Advocate, Sh. Rajat Chabra , Advocate, Sh, Rahul Khurana , Advocate, Sh. Saurabh Dugar , Chartered Accountant and Sh. S. K. Taparia , Whole Time Director for the Respondent. ORDER 1. The present Report dated 04.09.2019 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-confidential evidence/information furnished by the. Applicant No. 1 during the period from 15.04.2019 to 17.04.2019. However, the Respondent did not avail of the said opportunity. 4. The DGAP in his above Report has stated that the period covered by the current investigation was from 15.11.2017 to 31.03.2019. The time limit to complete the investigation was extended upto 26.09.2019 by this Authority vide its Order dated 19.06.2019 (Annexure-3) in terms of Rule 129 (6) of the CGST Rules, 2017. 5. The DGAP has also stated that in response to the notice dated 08 04.2019 the Respondent has submitted replies vide letters/e-mails dated 1;8.04.2019 (Annexure-4), 24.04.2019 (Annexure-5), 10.05.2019 (Annexure-6), 17.05.2019 (Annexure-7), 14.06.2019 (Annexure-8), 01.08.2019 (Annexure-9), and 08.08.2019 (Annexure-10) and has stated that:- a. He had reduced the prices of his products post rate reduction in GST vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and the same had been duly communicated to all the channel partners. The said reduction was done w.e.f. 28.11.201 7 due to the reason that till that da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, .2017 which governed the anti-profiteering provisions under the CGST Act, 2017 which reads as 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 DGAP has claimed that the legal requirement was abundantly clear that in the event of benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services supplied. Such reduction in price could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of ITC. He has further claimed that this was the only legally prescribed mechanism to pass on the benefit of ITC or reduction in the rate of tax under the GST regime and there was no other method which a supplier could adopt to pass on such benefits. 10. The DGAP has also reported that the Respondent had claimed that he had reduced the prices of all his products post rate reduction of GST vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and the same was communicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the next issue was to determine and quantify the profiteering made by the Respondent on account of not passing on the benefit of the reduction in the rate of GST on the goods supplied to the recipients, in terms of Section 171 of the CGST Act, 2017. As per the invoices submitted by the Respondent, the DGAP has observed that the Respondent had increased the base prices of the goods when the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017 and the commensurate benefit of GST rate reduction was not passed on to the recipients. On the basis of aforesaid pre and post-reduction GST rates and the details of the outward taxable supplies (other than zero rated, nil rated and exempted supplies) of all the products supplied during the period from 15.11.2017 to 31.03.2019, as furnished by the Respondent, the amount of net higher sales realization due to increase in the base prices of the impacted goods, despite the reduction in the GST rate from 28% to 18% or in other words, the profiteered has been computed as ₹ 21,94,96,828/- by the DGAP. The details of the computation have been given by him vide Annexure-12 attached to his Report. The DGAP has arrived at the above profite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15353546 9. Uttar Pradesh 9 22273117 1996219 0 24269336 10. Bihar 10 5698092 621167 0 6319259 11. Sikkim 11 319134 0 0 319134 12. Arunachal Pradesh 12 194462 0 0 194462 13. Nagaland 13 811158 0 0 811158 14. Manipur 14 382678 0 0 382678 15. Mizoram 15 232524 0 0 232524 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88797 0 0 88797 31. Telangana 36 4063323 2506843 0 6570166 32. Andhra Pradesh 37 5229373 1134903 0 6364276 Total 18,85,04,799 2,92,42,335 17,49,694 21,94,96,828 14. The DGAP in his Report has contended that in the present case, the base prices of the goods under investigation had indeed been increased post GST rate reduction w.e.f. 15.11.2017 and thus, by increasing the base prices of the goods consequent to the reduction in the GST rate, the commensurate benefit of reduction in the GST rate from 28% to 18%, was not passed on to the recipients by the Respondent. The total amount of profiteering covering the period from 15.11.2017 to 31.03.2019 has been worked out to be ₹ 21,94,96,828/-. Hence, in view of aforementioned findings, it has been cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint was filed:- Rishi Gupta v. M/s. Flipkart Internet Pvt. Ltd. = 2018 (7) TMI 1490 - NATIONAL ANTI-PROFITEERING AUTHORITY Ankur Jain v. M/s Kunj Lub Marketing Pvt. Ltd. = 2018 (10) TMI 510 - NATIONAL ANTI-PROFITEERING AUTHORITY Sandeep Puri v. M/s. Glenmark Pharmaceuticals Ltd. = 2019 (10) TMI 934 - NATIONAL ANTI-PROFITEERING AUTHORITY d. That it was a settled principle in law that if the manner of doing a particular act was prescribed under any statute, that act must be done in the manner so prescribed or should not be done at all. Reliance in this regard has been placed on the case of State of Uttar Pradesh v. Singhara Singh = 1963 (8) TMI 43 - SUPREME COURT wherein it was held that:- 8. The rule adopted in Taylor v. Taylor [(1875) 1 Ch D 426, 431] is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed. The principle behind the rule is that if this were not so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial Corporation v. ITO = 1975 (1) TMI 26 - MADRAS HIGH COURT wherein the Hon ble Madras High Court while dealing with an amendment that expanded the jurisdiction of income Tax Officer, had held that such an amendment must be prospective and could not have a retrospective effect. The relevant extract of Para 6 of the judgment has been quoted below:- Even so, the learned counsel for the revenue contended that section 274 (2) and the amendment made by Act 42 of 1970 are procedural in nature and, therefore, the amendment would apply to all cases of infringements whether committed before or after the amendment. In other words, the amendment was retrospective and would apply to even a case where the return was filed prior to; the amendment. The learned counsel, in this connection, also relied on the marginal note saying procedure . We are unable to agree with this contention of the learned counsel. The provision relates to the jurisdiction of the Income-tax Officer to deal with penalty proceedings. Before the amendment the Income-tax Officer could deal with cases falling under section 271 (1) (c) only if the minimum penalty imposable did not exceed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense with penal consequences that even extended to cancellation of registration. Hence, the authorities (DGAP, NAA) ought to be circumspect while exercising their powers while undertaking investigation and issuing rulings. k. That it was also settled rule of law that when a statute was penal in character, it must be strictly followed. In the case of State of Jharkhand v. Ambay Cements = 2004 (11) TMI 319 - SUPREME COURT , the Hon ble Supreme Court has held as under:- it is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein l. That in the case of Reckitt Benckiser India Pvt. Ltd. v. Union of India = 2019 (7) TMI 1135 - DELHI HIGH CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. It was well settled that where there was an absence of jurisdiction, even by the consent of parties, the jurisdiction could not be expanded. Reliance in this regard was placed on the case of CIT v. Dalipur Construction Pvt. Ltd. = 2017 (1) TMI 1709 - ALLAHABAD HIGH COURT decided by the Hon ble Allahabad High Court wherein the Department inter-alia argued that once objection regarding jurisdiction was riot taken before the Assessing Officer, the order could not be challenged. However, the Hon ble Court while rejecting the argument of the Department observed that lack of jurisdiction was not a mere irregularity but nullity in the eyes of law and if an authority had no jurisdiction, same could not be conferred even by the con Sent of the parties. p. That the Hon ble Court while passing its decision in the case of Dalipur Construction (supra) inter-alia relied on the following decisions to enunciate that jurisdiction could not be conferred by consent or acquiescence:- Judgements Relevant Text United Commercial Bank Limited V. Their Workmen = 1951 (4) TMI 25 - SUPREME CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period provided under the statute. The period up to which the prayer for condonation can be accepted is statutorily provided. It was submitted that the logic of Section 5 of the Limitation Act, 1963 (in short the Limitation Act ) can be availed for condonation of delay. The first proviso to Section 35 makes the position clear that the appeal has to be preferred within three months from the date of communication to him of the decision or order. However, if the Commissioner is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of 60 days, he can allow it to be presented within a further period of 30 days. In other words, this clearly shows that the appeal has to be filed within 60 days but in terms of the proviso further 30 days time can be granted by the appellate authority to entertain the appeal. The proviso to sub-section (1) of Section 35 makes the position crystal clear that the appellate authority has no power to allow the appeal to be presented beyond the period of 30 days.. The language used makes the position clear that the legislature intended the appellate authority to entertain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. That after the lapse of time period of two months, the Standing Committee was not vested with the right to examine the matter any longer. To the best of the knowledge of the Respondent, no reasons for expansion of this period were ever recorded and none were supplied to the Respondent or formed part of the record. Even otherwise, as stated earlier, the extended period had also lapsed and the Standing Committee had lost its jurisdiction to proceed further in the matter. On expiry of the limitation period, the right of the Standing Committee to examine the matter was extinguished and a very valuable right had come to vest in the Respondent that the investigation could not be proceeded further. In this regard, reference was made to the judgment of Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and others = 2015 (1) TMI 1053 - SUPREME COURT , wherein the Hon ble Supreme Court has considered. the respective rights of the parties upon expiry of limitation period as under:- 26 The law of limitation is a substantive law and has definite consequences on the right and obligation of a party to arise. These principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Thirumalai Chemicals V. Union of India = 2011 (4) TMI 489 - SUPREME COURT . y. That the Hon ble Madras High Court in the case of A. M. Ahamed Co. v. Commissioner of Customs. (Imports) = 2014 (9) TMI 237 - MADRAS HIGH COURT , Chennai wherein the proceeding s initiated after the legally prescribed time limit Were set aside on the ground that the notice issued by the Department was time barred. The relevant extract of the ruling in the case of A.M. Ahamed (supra) has been quoted herein below:- 25. In the case on hand, it is not the contention of the respondents that the time limit prescribed in Regulation 22(1) is only directory and not mandatory. It is not even the contention of the respondents that the time limit prescribed in Regulation 22(1) need not be strictly adhered to. On the, question that the first respondent is duty bound to initiate proceedings within 90 days from the date of receipt of offence report, there are no two opinions, at least before me. Therefore, the decision of the Division Bench of the Delhi High Court is of no assistance to the respondents. Hence the first contention is to be up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be done invoice-wise, product-wise, business vertical-wise or state-wise etc. The statutory provisions, the CGST Rules and even the methodology prescribed was completely silent on the computation provision according to which it could be concluded that a supplier has indulged in profiteering. The Respondent was left to the subjective discretion of the DGAP without any guiding factors/instructions or safeguards. In the absence of any guidelines in the statute or rules, the power given to this Authority to determine methodology was a case of excessive delegation of powers. cc. That the same issue was also raised by the Advisor to the Chief Minister, Punjab as well as the Chief Economic Advisor in the 17th GST Council Meeting held on 18.06.2017. dd. That this Authority in the case of M/s Jubilant Foodworks Ltd. = 2019 (2) TMI 295 - NATIONAL ANTI-PROFITEERING AUTHORITY has itself admitted in. Para 47 that no methodology of calculation of profiteered amount could be fixed as parameters required to be taken into account would vary from industry to industry. The stance of this Authority that no methodology/guidelines could be prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - SUPREME COURT , was placed wherein the Directorate General of Anti-dumping and Allied Duties (DGAD) had passed an order without granting personal hearing to the parties and the order was quashed as it was found to be in violation of principles of natural justice. The relevant extract from the judgment is quoted herein below:- 83 The procedure prescribed in the 1995 Rules imposes a duty on the DA to afford to all the parties, who have filed objections and adduced evidence, a personal hearing before taking a final decision in the matter. Even written arguments are no substitute for an oral hearing. A personal hearing enables the authority concerned to watch the demeanour of the witnesses, etc. and also clear up his doubts during the course of the arguments. Moreover, it was also observed in Gullapalli [AIR 1959 SC 308 = 1958 (11) TMI 28 - SUPREME COURT] , if one person hears and other decides, then personal hearing becomes an empty formality. gg That the. DGAP could not be given a free pass to compute profiteering in a random manner without paying any heed to the commercial/business realities or mathematical principles. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was intended to be remedied. Similarly, in the case of Indian Aluminium Company v. Kerala State Electricity Board = 1975 (7) TMI 158 - SUPREME COURT the Hon ble Supreme Court had held that marginal notes could be relied to show what the section was dealing with. kk. That meaning of the terms Profiteering was provided as under:- Profiteering taking advantage of unusual or exceptional circumstances to make excessive profits Black s Law Dictionary Make or seek to make an excessive profit Shorter Oxford English Dictionary To seek or obtain excessive profits, one who is given to making excessive profits Law Lexicon ll. That the aforesaid definitions suggested that profiteering was only when a person made excessive, unreasonable of exorbitant profits. The act of earning profits per se was not profiteering. in the present, case, the Respondent had not made any exorbitant or unreasonable profits in an unlawful manner. Accordingly, it could not be said that the Respondent had profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction in the VAT rates. The CAG was solely concerned by the fact that even after reduction in the VAT rates, the MRP or the price actually borne by the consumer had not been reduced by sellers. rr. That in the case of Sh. Sandeep Puri v. M/s. Johnson Johnson = 2019 (11) TMI 1084 - NATIONAL ANTI-PROFITEERING AUTHORITY , this Authority has itself stated in Para 44 that the intention of anti-profiteering legislation was to protect the interest of the consumers. ss. That the Respondent has also relied upon the case of Pawan Sharma v. M/s Sharma Trading Company = 2018 (9) TMI 625 - THE NATIONAL ANTI-PROFITEERING AUTHORITY , wherein this Authority has stated that where the tax rate was reduced from 28% to 18%, the Respondent should have reduced the same amount (10%) by a mathematical calculation from the MRP at which goods were sold. Application of the said ratio to the present case clearly demonstrated that the Respondent had fulfilled this requirement by reducing the rate of tax charged from 28% to 18%. tt. That he had passed on the entire benefit of reduction in the tax rate by way of reduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excuse him. xx. That the duty of reduction in the prices commensurate to the reduction in the rate of GST could not be forced upon him from the very next day and there must be an element of reasonableness. In the absence of any specific time period to reduce prices, a reasonable time had to be provided and hence the time period from 15.11.2017 to 27.11.2017 should be considered as a reasonable time required by the Respondent to reduce the MRPs of his products. yy. That there were numerous other products in respect of which the MRPs were reduced pursuant to the GST rate reduction. The details have been furnished as under:- Product Name MRP as on Pre GST reduction Post GST reduction Wild Stone Deo Chrome BX 120 ml (Subject Goods) 250 230 Wild Stone Ultra Sensual 40 ml 65 60 Wild Stone Ultra Sensual 150 ml 195 180 Wild Stone Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority in the case of Kumar Gandharv v. KRBL Ltd. = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY wherein this Authority had accepted that the price of Basmati rice was increased on account of various market factors including rise in purchase price of paddy and thus, there was no element of profiteering. ii. Response to Pricing Strategy of Competitors:- a. That he was dealing in lifestyle products where the perception of the consumers towards the brand was of utmost importance. The brand s equity was influenced by everything from the type of consumers who will buy the product, to how much they were willing to pay for the product. In case the prices of the products were lower than that of the competitors, at times, such lower pricing was perceived to denote inferior quality of the product thereby affecting the brand equity in the market. Therefore, in order to maintain the brand equity, at times, it did become a necessity to respond to market forces including the pricing adopted by the competitors. b. That it was necessary to respond to the pricing strategies of the competitors and as a fit busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f summers (Feb-March) or the onset of winters (October-November). The Respondent when felt need to increase the prices, had accordingly increased the MRPs of the goods from 15.03.2018 i.e. before the start of net peak season. An illustration has been furnished by the Respondent in the Table given below which showed that even before the GST regime whenever there was a revision in prices, it had happened generally before the change in the seasons:- Product Change in MRP Effective Month Wild Stone Hydra Energy Deo 75 ml From ₹ 95 to ₹ 99 February 2016 Wild Stone Ultra Sensual 75ml From ₹ 85 to ₹ 95 March 2014 Ultra Sensual After Shave Lotion From ₹ 90 to ₹ 105 March 2014 Ultra Sensual Shaving Cream 30 gms From ₹ 27 to ₹ 30 October 2015 b. That the sample circulars communicating the revised MRPs to the channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal course of business. It was an attempt by the DGAP to indirectly put a cap on the sale prices of the products being sold by the Respondent which violated his right to carry on trade as per Article 19 (1) (g) of the Constitution. By considering the price increase w.e.f. 15.03.2018 for computing profiteering, the DGAP had tried to step into the shoes of a price regulator and such an action implied that the Respondent could never increase the prices of his products pursuant to a GST reduction. h.. That the anti-profiteering provisions as well as the constitution of the DGAP were part of the taxing statute. The unfettered way in which the period of investigation had been stretched by the DGAP had brought the entire exercise into, the realm of price regulation act. Without any explicit authority under the law passed by the Parliament or the State Legislature, the DGAP could not force a blanket mandate to keep the prices in check as the same was violative of freedom of trade and commerce. Reliance was placed on the case of Petroleum and Natural Gas Regulatory Board v. lndraprastha Gas Limited Ors. = 2015 (7) TMI 1130 - SUPREME COURT wherein it had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the GST rate. fff. That it was nobody s case that Section 171 of the CGST Act restricted a supplier to revise the base price of the products pursuant to a GST rate reduction. The law nowhere provided for doing a base price comparison and it appeared that this practice of base price comparison had been evolved suo-motu by the DGAP, The Respondent was well within his right to revise the base price of the product till such revision did not take away the benefit of GST rate reduction from the customers. It was only to be seen if the benefit of reduction in the tax rate had resulted in commensurate reduction in prices of the goods paid by the consumers. The findings of the DGAP that the base prices of the product had not been reduced was of no consequence when the benefit had been passed on to the ultimate consumers by way of reduction in MRPs. Reliance has been placed on the decision given in the case of the Kerala State Screening Committee on Anti-Profiteering v. Asian Paint Ltd. = 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY wherein this Authority had held that increase in the base price on account of reduction in discount offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Post GST rate reduction Depot Depot Avg. Base Price (A) India Avg. Base Price as per DGAP (B) Actual Base Price post GST rate reduction (C) National Profiteering as per DGAP (D=C-B) Actual Profiteering (E=C-A) Patna 120 100 120 20 Nil Hisar 80 100 80 -20* Nil Thane 100 100 100 0 Nil Total 20 Nil *Negative values have been set to 0 by the DGAP. c. That upon perusal of the illustration above, it was evident that in case of Patna depot the actual average base price of Product X was ₹ 120/-. whereas when the base price was averaged for all the three depots (as per the methodology adopted by the. DGAP) the average base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Modern Trade, the alleged profiteering amount would be reduced by ₹ 13,22,335/-. The working of the same has been attached as Annexure-12. iii. The DGAP has ignored the negative values and resorted to zeroing to yield higher profiteering:- a. That the DGAP while calculating the amount of alleged profiteering has ignored the transactions where the prices were effectively reduced. in essence, it meant that where tax benefit had been passed on to the customers by the Respondent (w.r.t. specific products) in excess of the required amount, the DGAP has conveniently chosen to ignore such instances. This effectively meant that the DGAP did not offset positive profiteering (₹ 20) against the negative profiteering (-₹ 20) (treating these as zero for the purpose of profiteering) and had arrived at an inflated and arbitrary figure of profiteering. b. That the DGAP could not on one hand consider the average for determining the base prices before GST rate reduction and ignore all the negatives after its comparison with post GST sale prices, as it would lead to artificially inflated alleged p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiteering provisions was taking completely opposite position when it came to the calculation of the so called profiteering . Hence, it was requested to accept the method of netting off . This was because the methodology adopted by the DGAP was contrary to the stand taken by the Government of India. In case netting off was adopted by the DGAP in his working, the alleged profiteering amount shall be reduced by ₹ 2,52,84,303/-. The workings of the same have been attached as Annexure-13. iv. Wrong Inclusion of Sales Made from 15.03.2018:- a. That the DGAP had arbitrarily stretched the scope of the investigation till March 2019 and had formed an opinion that there could be no subsequent rise in prices of goods consequent to the reduction of tax rate w.e.f. 15.11.2017. At the cost of repetition, such revision in prices from 15 03.2018 had happened due to various commercial factors such as rise in costs, response to the price moves by competitors and change in the seasons. b. That the period from 15.03.2018 (or at most 31.03.2018) should not be considered by the DGAP in his computations and the amount of alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be construed effectively without reference to their context. The setting colours the sense of the word. The spirit of the provision lends force to the construction that collected means collected and kept as his by the trader. d. That the amount of GST collected from the customers was a liability of tax (reflected under the head of Liabilities in the Balance Sheet) which was subsequently deposited with the Government. The accounting treatment accorded to account for the applicable GST was as has been depicted below:- Transaction Journal Entry Amount (Rs.) Amount (Rs.) Outward Sales - Creation of GST Liability Customer A/c . Dr. 118 To Sales Outward Cr 100 To IGST Tax Payable Dr. 18 Payment of GST Liability to Government IGST Tax Payable Dr. 18 To Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effectively amount to supply of goods. Therefore, such transactions and (deemed) margins made thereon would not fall under the ambit of Section 171 of the CGST Act. Further, the Respondent had not received any money for such sales which were returned and there was no question of making any profiteering. b. That in the case of Grasim Industries Ltd. v. State of Kerala, the Hon ble High Court of Kerala = 1994 (5) TMI 256 - KERALA HIGH COURT had held that sales returned meant a return of the very goods purchased by the buyer in whole or in part and it was a reversal of the sale, as if the sale had not taken place in respect of the returned goods. viii. Exclusion of Supplies to KCHP Technologies as they are Un-comparable:- a. That the goods sold to one of the buyers i.e. M/s KCHP Technologies Private Limited ( KCHP ) could not be considered by the DGAP while computing, the amount of profiteering. There were apparent differences between the terms of trade with KCHP and the other distributors. A comparison of KCHP with the other e-commerce distributors should be akin to comparing apples and oranges. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tner only from FY 2018-19 and there were no transactions with KCHP in the FY 201 7=18. Given this, there were no pre-GST rate reduction prices that could be compared with the post GST rate reduction prices for KCHP. The sales made to KCHP should not be considered by the DGAP in his computations and in such a scenario, the alleged profiteering amount should stand reduced by ₹ 17,46,234/. ix Inclusion of Commercial Credit Notes and Freebies:- a. That the base price comparison could not be adopted for computing or determining profiteering in terms of Section 171 of the CGST Act. Even if the base price was taken for the computations, the discounts given through credit notes and freebies should be reduced from the alleged profiteering amount. The DGAP had ignored such credit notes and freebies provided by the Respondent while arriving at the alleged profiteering amount. b. That it was a known practice that discounts could also be given by way of credit notes and free items. It could not be said that only the discount which was shown at the invoice level should be allowed as a deduction and the discount whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the DGAP while computing the alleged profiteering amount was principally inaccurate in as much as it did not take into account relevant accounting/costing principles and critical factors such as (a) adjustments for value of sales return, rise in cost of goods sold and credit notes etc. (b) depot-wise comparison of pre and post GST rate reduction prices instead of pan-India average base prices and (c) a reasonable investigation period at the most till 14.03.2018. jjj. That if all the above said irregularities were corrected, there was no profiteering whatsoever that could be attributed to the Respondent. The same has been demonstrated by the Respondent with the help of detailed working captured in the Tables given below.- a. Scenario-1:- Considering the period from 15.11.2017 to 31.03.2019:- Particulars (Depot-wise) Amount (Rs.) Period from 15.11.17 to 27.11.17 4,050,634 Period from 28,11.17 to 14.03.18 18,899,180 Period from 15.03.18 to 31.03.18 7,532,280 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 was to ensure that the benefit of reduction in the rate of tax or benefit of ITC has been passed on to the recipient and not retained by the supplier. The issue involved was that the Respondent did not pass on the benefit of reduction in the tax rate by not reducing the prices of the products commensurately to the recipients. If the investigation was restricted to the alleged product then the recipients/customers of the other impacted products who had not made any complaint against the Respondent, would never get the commensurate benefit from the Respondent. Further, the law did not stipulate to restrict the investigation only to the alleged product or to the complainant/applicant. He has given an example of the product Affair (BS) 150 ml to show how the profiteering was arrived at in the instant case. ii. That the DGAP, under the provisions of Section 171 of the CGST Act, 2017 read with Rule 129 of the CGST Rules, 2017, has to conduct investigation as per the directions of the Standing Committee on Anti-profiteering and to submit Report of his findings to this Authority under Rule 129 (6) of CGST Rules, 2017. Therefore, the investigation was conducted w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CGST Act, 2017 and Rules made thereunder. vi. That as per Rule 126 of the CGST Rules, 2017, this Authority has been empowered to determine the Methodology and Procedure for determination as to whether the reduction in the rate of tax or the benefit of ITC had been passed on by the registered person to the recipients by way of commensurate reduction in prices. The said. Rule nowhere stipulated that this Authority shall prescribe Methodology and Procedure to quantify the amount of profiteering. Thus, the extent of profiteering has to be arrived at on a case to case basis, by adopting suitable method based on the facts and circumstances of each case as well as the nature of goods or services supplied. Any uniform methodology for determination of the quantum of benefit to be passed on could not be adopted As per Rule 126 of the Rules, the word used was determine and not prescribe . This Authority had already notified the Methodology and Procedure under Rule 126 on 28.03.2018. Hence, the Methodology and Procedure for determination of profiteering might vary from case to case, depending on the facts and circumstances of the case as well as the nature of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. That vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, the Central Government has reduced the tax rate from 28% to 18% on various consumer goods which was effective from 15.11.2017. Based on the facts and circumstances of the case, the investigation was carried out covering the period from 15.11.2017 to 31.03.2019, which was a reasonable period of time. xi. That the act of profiteering has got nothing to do with the profit making or the loss making status of the supplier, Even a supplier having overall loss in his business could have profiteered by denying the benefit which ought to be passed on to the recipients. Even a loss making entity or supplier could indulge in profiteering and conversely, a profit making entity could pass on the due benefit to the recipients, in terms of Section 171 of the CGST Act, 2017. In the instant case, the issue involved was that the Respondent did not pass on to the recipients the benefit of reduction in the tax rate by not reducing the prices of the products commensurately. xii. That the legislative intent behind Section 171 of the CGST Act, 2017, was to pass on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xv. That the legal requirement as per the law was that in the event of benefit of ITC or reduction in the rate of tax, there must be commensurate reduction in prices of the goods or services. The price would include both basic price and the tax charged on it. Therefore, any excess amount collected from the recipients, even in the form of tax, must be returned to the recipient. In case, the recipients were not identifiable, the said amount was required to be deposited in the Consumer Welfare. Fund (CWF). The Respondent, by way of increasing his prices, has forced his customers/recipients to pay extra tax which they were not liable to pay. Therefore, it was clear that the amount of extra tax (GST) on the increased base prices was an amount paid by the customers/recipients which they were not supposed to pay. If any supplier has charged more tax from the recipients, the aforesaid statutory provisions would require that such amount be refunded to the eligible recipients or alternatively deposited in the Consumer Welfare Fund, regardless of whether such extra tax collected from the recipient had been deposited in the Government account or not. xvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. He has further stated that in the case of Shilpi Enterprises v. CCE Allahabad = 2016 (12) TMI 1263 - CESTAT ALLAHABAD , it has been held that when factual information was not properly disclosed in the show cause notice, then such notice was vague and proceedings arising out of such notice were not sustainable in the eyes of law. ii. He has also pleaded that the Hon ble High Court of Calcutta in the case of Delta International Limited v. Commissioner of Customs = 2012 (9) TMI 144 - CALCUTTA HIGH COURT has held that missing ingredients in show cause notice could not be incorporated even by High Courts and a notice had to be adjudged the way it was issued. In para 17 of the decision pronounced in the above case it had been stated as under:- 17. The court in its appellate jurisdiction should not, on the basis of submissions made in the affidavit or in the notes of submission or from the bar, allow to incorporate the missing ingredients in the show cause notice. That is plainly impermissible. The show cause notice has to be adjudged the way it is issued. iii. He has further placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in revised Annexure-12 The place (State or Union Territory) of supply-wise break-up of the total profiteered amount of ₹ 21,84,79,790/- has been furnished by the DGAP in the below Table:- S.No. Row Labels State Code General trade Modern Trade E-Commerce trade Final Profiteering 1. Andhra Pradesh 37 5227562 1121697 0 6349258 2. Arunachal Pradesh 12 194462 0 0 194462 3. Assam 18 7138419 636054 0 7774474 4. Bihar 10 5692599 621167 0 6313766 5. Chandigarh 4 5738 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 457750 20. Mizoram 15 232524 0 0 232524 21. Nagaland 13 800496 0 0 800496 22. Odisha 21 11652717 1162048 0 12814765 23. Puducherry 34 88797 0 0 88797 24. Punjab 3 5719747 1315455 0 7035203 25. Rajasthan 8 13760615 1539037 0 15299652 26. Sikkim 11 319134 0 0 319134 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -profiteering. Para 18 to 25. The. issue of time period has also been addressed by reply to Para 2.3.10 to 2.3.15 of his reply dated 18.12.2019 reproduced below: Para 2.3.10 to 2.3.15 The Government, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, reduced the tax rate from 28% to 18% on various consumer goods which was effective from 15.11.2017. application dated 30.07.2018 was filed before the Standing Committee on Anti-Profiteering under Rule 128 of the CGST Rules, 2017. The said application was returned back to the Applicant for the want of proper invoices. The complaint was again received by the Standing Committee on Anti-profiteering in the month of February, 2019. The Standing Committee on Anti-Profiteering in its meeting held on 11.03.2019, decided to refer the matter to DGAP for a detailed investigation. This decision was received in DGAP s office on 27.03.2019 and accordingly a Notice under Rule 129 of the CGST Rules, 2017 was issued to the Noticee on 08.04.2019. Based on the facts and circumstances of the case, the investigation was carried out covering the period 15.11.2017 to 31.03.2019, which is a reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssified these 10 buyers mentioned in table of Para 3.4.7. under the General Trade Category and accordingly profiteering has been calculated. Para 37 to 39 The Respondent s averment is incorrect. In competitive market conditions every supplier is giving incentives and freebies to promote and increase his sales. These incentives and freebies were not given by the Respondent in lieu of the GST rate reduction. Now, claiming these incentives and freebies as passing on the benefit of rate reduction appears to be incorrect at this point of time. 20. The Respondent vide his submissions dated 03.03.2020 has stated that:- a. Despite taking several extensions from this Authority, the DGAP has miserably failed to rebut his submissions. In fact, in the latest reply dated 27.02.2020, the DGAP has mostly reiterated and quoted paragraphs in verbatim from his earlier b. Despite availing of repeated extensions, most of his submissions that were made at the time of oral hearings and/or by way of written submissions have been left unaddressed by DGAP, let alone being considered. Such submissions inter-alia incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich provide as under:- (1) Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether ITC 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. (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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. DEL/GTI-729 29/11/2017 Delhi Delhi Affair (BS) 150ml 40 120.91 6. DEL/GTI-730 29/11/2017 Delhi Delhi Affair (BS) 150ml 80 120.91 7. DEL/GTI-779 09/12/2017 Delhi Delhi Affair (BS) 150ml 80 120.91 25. it is evident from the Table-A that the base price of the above product was ₹ 115.72 per unit on 14.11 2017 before the tax reduction and it was increased to ₹ 127.81 per unit on 24.11,2017 after the rate reduction. The base price was reduced to ₹ 120.91 per unit on 29.11.2017 and was maintained as ₹ 120.91 per unit on 09 12.2017. But still the base price of ₹ 120.91 was higher than the base price of ₹ 115.72 which was prevalent before 15.11.201 7 and which was required to be maintained by the Respondent post rate reduction. Therefore, it is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2019 and it was found by him that the Respondent had charged more base prices than what were prevalent during the pre rate reduction period. The DGAP has computed the profiteered amount separately for the supplies made by the Respondent to the CSD Canteens, E-commerce Platforms, General Trade and Modern Trade as the Respondent had charged different base prices to each of them. 28. The DGAP has compared the average pre rate reduction base prices with the actual post rate reduction prices due to the reasons that (i) it was not possible to compare the average base prices pre and post rate reduction as the post rate reduction the benefit has to be legally passed to each buyer on the actual transaction value received by the Respondent from each of such buyer (ii) it was also not possible to compare the actual to actual base prices pre and post rate reduction as the same buyer may have not purchased the same product during both the above periods and some of the buyers may have purchased some products during the post rate reduction period and not during the pre rate reduction period or vice versa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by commensurate reduction in prices on each supply to every recipient by commensurate reduction in the prices and this Authority is empowered to examine whether these benefits have been passed on or not. To assist this Authority an investigating agency designated as the DGAP has been created under Rule 129 of the CGST Rules, 2017 to conduct detailed investigation and submit Report to this Authority under Rule 129 (6) to determine whether the above benefits have been passed or not in terms of Section 171 (1) and Rule 133 (1) of the above Rules. Under Rule 129 (2) the DGAP has mandate to conduct investigation and collect necessary evidence to determine whether these benefits have been passed on. Further, the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs vide its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a) Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablish that the Respondent had not reduced the base prices after the rate reduction w.e.f. 15.11.2017. The DGAP has also investigated the Deodorant Wild Stone Deo Chrome BX 120 ml and therefore, the above contention of the. Respondent is incorrect. 33.The Respondent has also claimed that as per Rule 129 (3) of the above Rules, the DGAP had not mentioned the description of the other goods or services other than Wild Stone. Deo Chrome BX 120 ml Deodorant in his notice and hence he could not have investigated the other products. Perusal of the notice dated 08.04.2019 issued by the DGAP for initiating investigation shows that it no where stipulates that the investigation would be restricted to the above Deodorant only. Para 2 of the above notice clearly states that the Respondent was required to furnish his reply stating whether he admitted that the benefit of reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017 has not been passed on to the recipients by way of commensurate reduction in price and he should also sou moto determine the quantum of benefit not passed on. Vide para 4 of the notice the Respondent was also asked to furnish invoice wis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 171 (2) quoted above this Authority had inherent power to examine all the products in respect of which benefit of tax reduction or ITC is to be passed on in terms of Section 171 (1) even before the amendment dated 28.06.2019 was brought. The above amendment only explains the provisions of Section 171 (2) further to make them more explicit. As mentioned above the DGAP as investigating arm of this Authority has mandate to investigate all infringements of the above Section as per the provisions of Rule 129 as well as the Office Order dated 12.06.2018 Therefore, the DGAP is bound to investigate all the products on which the rate of tax has been reduced and therefore, there is no question of his expanding the investigation suo moto. Hence, the above argument of the Respondent is not tenable. 37. The Respondent has also cited the judgements passed in the cases of Continental Commercial Corporation v. ITO (1975) 100 ITR 170 = 1975 (1) TMI 26 - MADRAS HIGH COURT and Purbanchal Cables and Conductors Pvt. Ltd. v. Assam State Electricity Board (2012) 7 SCC 462 = 2013 (3) TMI 518 - SUPREME COURT in his support. In this connection it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation that the benefit of tax reduction has not been passed on. Hence, the law settled in the above case is not being relied upon. 39. The Respondent has also submitted that he has fully co-operated during the investigation and his this act should not be considered as acquiescence of the fact that the DGAP had jurisdictional power to investigate him in respect of all the products. In this connection it would be pertinent to mention that as has been mentioned above the DGAP has full legal sanction to investigate all the products being supplied by the Respondent on which rate of tax was reduced and the Respondent was duly aware of this fact due to which he has voluntarily submitted himself to such investigation. It is only as an afterthought that he is raising objections on his jurisdiction when the DGAP has found him liable for violation of the provisions of Section 171. The Respondent cannot extricate himself from the consequences of the above violation once he has voluntarily submitted to the investigation by the DGAP. 40. The Respondent has also cited the judgements passed in the cases of CIT v. Dalipur Construction Pvt. Ltd. Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same MRP of the product despite reduction in GST from 28% to 18%. The above complaint is received from a member of Local Circles. Local Circles is India s leading Community Social Media Platform . A copy of the complaint received from Sh. Anil Mehta, a member of the Local Circles mentioned above, was also attached with the email which stated as under:- Complaint against Deodorant manufacturers I have received information from a friend at Big Bazaar that suggests that Deodorant manufacturers (Vini Cosmetics -maker of FOGG, Raymonds - maker of Park Avenue and Monroe maker of Wild Stone) have engaged in profiteering by not reducing MRPs. Here is the evidence: Vini Cosmetics shipped Fogg Deo Fougere BX 150 ml to Big Bazaar Inderlok on 9/11/17 under PO number 8114996814 with MRP 299, after GST rate reduction on Nov 15, 17 Vini Cosmetics shipped the same deo to Big Bazaar Inderlok under PO No. 8115259654 on 8/12117 with MRP 299. Again on May 8, 2018 Vini Cosmetics shipped the same product to Big Bazaar Inderlok under PO Number 4517361778 with MRP 299, so basically Vini Cosmetics did not change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The complaint made against the Respondent was mentioned at Sr. No. 3 of the attached Annexure. Meanwhile the Standing Committee had been reconstituted by the. GST Council vide. its OM dated 21.02.2019 under Rule 123 (1) of the CGST Rules, 2017. The above communication made by the Applicant No. 1 was discussed in detail by the Standing Committee comprising of S/Sh. H. Rajesh Prasad Commissioner, Department of Trade Taxes, Govt. of NCT of Delhi, Amit Kumar Aggarwal, Excise Taxation Commissioner, Govt. Of Haryana, Sanjay Mangal, Commissioner Central Tax (Audit) and Pranesh Pathak, Commissioner Central Tax in its meeting held on 11.03.2019 and vide Sr. No. 26 of minutes of the meeting recorded in respect of the above complaint which was mentioned. in Annexure-1C, it was decided to forward the same to the DGAP for investigation. It is also apparent from the perusal of the minutes that the above complaint was treated to have been received in the month of February, 2019. 44. It is apparent from the above facts that the complaint made by the Applicant No. 1 vide his email dated 30.07.2018 had been returned by the Standing Committee to the Applicant No. 1 as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to laxity of the Standing Committee on Anti-Profiteering. The provision of recording reasons for granting extension of 1 month to the above Committee by this Authority has also been made keeping in view the above facts so that the Committee does not seek extension in routine and is also not granted such extension in routine. The above period of limitation can also not be, mandatory as no consequences have been provided for not adhering to it in Rule 128 Therefore, the above contentions o the Respondent are untenable and therefore, the investigation conducted by the DGAP is legally correct and the present proceedings are not void. 47. In this regard, the Respondent has made reference to the judgments passed in the cases of Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and others (2013) 12 SCC 649 = 2015 (1) TMI 1053 - SUPREME COURT , State of Punjab v. Shreyans Industries Ltd. (2016) 4 SCC 769 = 2016 (3) TMI 331 - SUPREME COURT , Bharat Heavy Electricals Limited v. CCT (2006) 143 STC 10 (Kar} , Thirumalai Chemicals v. Union of India (2011) 6 SCC 739 = 2011 (4) TMI 489 - SUPREME COURT and A.M. Ahamed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of each SKU or unit based on the tax reduction as well as the existing base price of the SKU or the additional ITC available. The computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from SKU to SKU or unit to unit and hence no fixed methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a recipient or for computation of the profiteered amount. However, to give further elaborate upon this legislative intent behind the law, this Authority has been empowered to determine the Procedure and Methodology which has been done by this Authority vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed formula which fits all the cases of profiteering can be set while determining such Methodology and Procedure as the facts of each case are different. In one real estate project, date of start and completion of the project, price of the house/commercial unit, mode of payment of price, stage of completion of the project, rates of taxes, amount of ITC availed, total saleable area, area sold and the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50. The Respondent has further alleged that till date this Authority has failed to determine any Methodology and Procedure under Rule 126. However, as has been mentioned supra the Methodology Procedure to determine profiteered amount has already been provided in Section 171 (1) and hence, no Methodology Procedure is required to be determined by this Authority separately. This Authority has already notified the Procedure and Methodology vide its. Notification dated 28.03.2018 under Rule 126 and not on 19.07.2018 as has been claimed by the Respondent which is available on its website. As discussed above computation of profiteering has to be done SKU and unit of construction wise and not invoice-wise, product-wise, business vertical-wise or state-wise etc. as every buyer has fundamental right to get the benefit which is due to him. It is also clear from the Explanation attached to Section 171 what is to be construed as the profiteered amount and hence the Respondent should have no difficulty in computing and passing on the benefit of tax reduction. 51. The Respondent has also pleaded that in the absence of any guidelines in the statute or rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey cannot be considered. 53. The Respondent has also cited the cases of Commissioner of Central Excise and Customs Kerala v. Larsen and Toubro Limited (2016) 1 SCC 170 = 2015 (8) TMI 749 - SUPREME COURT and Commissioner of Income Tax Bangalore. v. B. C. Srinivasa Shetty (1981) 2 SCC 460 = 1981 (2) TMI 1 - SUPREME COURT and stated that there was no machinery provision in the anti-profiteering measures and hence they could not be enforced. On this aspect it is to be noted that no tax has been imposed under the above measures and hence the law settled in the. above cases is not applicable. However, it would be relevant to mention here that Section 171 (2) of the CGST Act, 2017 and Rule 122, 123 , 129 and 136 of the CGST Rules, 2017 have provided an elaborate machinery in the form of this Authority, the Standing and Screening Committees, the DGAP and a large number of field officers of the Central and the State Taxes to implement the anti-profiteering provisions. Therefore, the Respondent cannot allege that no machinery has been provided to implement the above measures. 54. The Respondent has also claimed that during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SUPREME COURT Kunnathat Thathunni Moopil Nair etc. v. State of Kerala and another AIR 1961 SC 552 = 1960 (12) TMI 76 - SUPREME COURT cannot be relied upon. 56. The Respondent has also contended that in the absence of any prescribed mechanism to compute the profiteering coupled with inexplicable prolonged investigation of over 16.5 months when many other investigations were between 2 to 4.5 months, clearly manifested arbitrariness. It would be relevant to mention here that in the cases bearing No. 20/2018, 02/2019 59/2019, 46/2019, 14/2018 and 08/2018, decided by this Authority, in which the investigation was conducted for the period ranging between 2 months to 4.5 months, the period of investigation was limited to the period, when the complaint was received, as has been done in the present case. Had the Respondent passed on the benefit before 31.03.2019 he would have been investigated only till that date. No supplier can be investigated for the benefit which he is required to pass on in the future. Hence, the above contention of the Respondent is not tenable. 57. The respondent has further contended that earning profits thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther stated that he had reduced the MRP of the, complained Deodorant from ₹ 250/- to Rs. 230/- per unit which was precisely in line with the reduction in the tax rate. However, the above claim of the Respondent is not borne out from the computation of the profiteered amount done in the case of the above product and hence the claim made by the Respondent is incorrect. The Respondent has also mentioned the Report released by the Comptroller and Auditor General of India in June; 2010 in this regard. In this connection. it would be relevant to mention that the contents of the Report are absolutely Correct as it has been repeatedly found that the suppliers have not passed- on the benefit of tax reduction in a large number of cases. The Respondent has also correctly cited the flier released by the Central Board of Indirect Taxes Customs and the case of Sandeep Puri v. M/s Johnson Johnson 2019 (11) TMI 1084 , which make it abundantly clear that the objective of the anti-profiteering provisions is to protect the interests of the consumers therefore, it is responsibility of the anti-profiteering mechanism to ensure that the benefits of tax reduction and ITC are passed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the CGST Rules, 2017 as has been done by several suppliers. However, the Respondent instead of maintaining the same base prices which were prevalent on 14.11.2017 had increased them during the intervening: night of 14/15.11.2017. This uncanny increase in the base prices was made with the sole intention of denying the benefit of tax reduction to the buyers. Hence, the above contention of the Respondent is frivolous and which cannot be accepted. 63. The Respondent has also averred that in terms of the legal maxim of Lex Non Cogit Ad Impossibilia applied by the Hon ble Apex Court in the case of State of MP v. Narmada Bachao Andalan (2011) 7 SCC 639 = 2011 (5) TMI 914 - SUPREME COURT he could not be forced to perform an impossible act. However, keeping in view the observations made in the para above the above case does not cone to the rescue of the Respondent as the Respondent was not required to do an impossible act. 64. The Respondent has further averred that he had reduced the MRPs of 5 other SKUs, sample invoices of which were attached. by him as Annexure-6, Perusal of these invoices shows: that they do not reflect the commens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent has further submitted that the provisions of Section 171 of the CGST Act could not restrict the right of the Respondent to increase prices. In this connection it would be pertinent to mention that the above Section does not provide for price regulation. The DGAP has only computed the profiteered amount the benefit of which the Respondent has not passed on to his customers. The DGAP has also not acted as a price regulator. He has neither examined the process of price fixation adopted by the Respondent nor asked him to fix his prices as per his directions and hence, there has been no infringement of fundamental right of the Respondent to decide his selling prices. 69. The Respondent has also contended that there were no guidelines regarding the period during which prices could not be revised. In this regard it is to be noted that the Respondent can fix his prices as per his own strategy however, he has not produced any evidence during the course of the present investigation which can prove that he has passed on the benefit of tax reduction till 31.03.2019 and therefore, any increase made in the prices by the Respondent amounts to profiteering. The Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit. Therefore, the comparison of the base prices made by the DGAP is correct. The present investigation shows that the Respondent had increased his base prides and therefore, any reduction in the MRPs which was not commensurate with the rate reduction does not amount to passing on of the benefit of such reduction. Hence, the contention of the Respondent made in this regard is not correct. He has also Placed reliance on the decision of this Authority given in the case of the Kerala-State Screening Committee on Anti-Profiteering v. Asian Paint Ltd, 2019 (20) GSTL 391 NAPA = 2019 (3) TMI 751 - THE NATIONAL ANTI-PROFITEERING AUTHORITY wherein this Authority had held that increase in the base price on account of reduction in discount offered from dealer s margin did not amount to profiteering; However, there is no evidence to the effect in this case that the Respondent has increased his base prices due to withdrawal of the discount and hence the above case does not further the cause of the Respondent. Realignment of margins cannot be compared with the discounts as no dealer was bound to offer discounts from his margins and hence the profiteered amount cannot be reduced by ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts of Cotton-Type Bed Linen from India , the stand of the Indian Government was accepted and it was held that the practice of netting off should be applied and hence the above methodology was binding on the DGAP while calculating profiteering . The above contention of the. Respondent is not correct as no netting off can be applied in the cases of profiteering, as the benefit, has to be. passed on to each customer which has to be computed on each SKU. Netting off implies that the amount of benefit not passed on certain SKUs will be subtracted from the amount of benefit passed on other SKUs and the resultant amount shall be determined as the profiteered amount. if this methodology is applied the Respondent shall be entitled to subtract the amount of benefit which he has not passed on from the amount of benefit which he has claimed to have passed, which will result in complete denial of benefit to the customers who were entitled to receive it. Every recipient of goods or services is entitled to the benefit of tax rate reduction by way of reduced prices and Section 171 does not offer the Respondent to suo moto decide on any other modality to pass on the benefit of reduction in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to pay due to the reduction in the rate of tax but he has also compelled them to pay additional GST on these excess base prices which they should not have paid. By doing so the Respondent has defeated the very objective of both the Central as well as the State Governments which aimed to provide the benefit of rate reduction to the general public. The .Respondent was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of tax reduction to his customers by charging excess GST. Had he not charged the excess GST the customers would have paid less price while purchasing goods from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent. The above amount can also not be paid to the eligible buyers from the Consumer Welfare Funds as the Respondent has not deposited it in the above Fund. Therefore, the above contention of the Respondent is untenable and hence it cannot be accepted. Accordingly, an amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profiteered amount, however, the terms of trade with the KCHP were different than the other distributors. However, perusal of DGAP s Supplementary Report dated 27.02.2020 has revealed that during the investigation period, the Respondent had not made any such submissions in respect of M/s KCHP. Further, since the Respondent has supplied goods and services to M/s KCHP in the post-rate reduction regime as is evident from Annexure-17, without reducing his base prices, profiteering in this case has to be computed. Further, the above firm is not substantially different than the other distributors of the Respondent except that it i8 also doing online promotion of the Respondent. Therefore, the above claim of the Respondent cannot be accepted. 80. The Respondent has further contended that the DGAP, while computing the profiteered amount, has ignored the discounts and freebies given to the recipients and the same should be reduced from the profiteered amount: The above contention of the Respondent is not correct because the investigation carried out by the DGAP reveals that the profiteering has been computed on the transaction value as per the provisions of Section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received in the month of February 2019, The above fact was not mentioned by the DGAP in his notice or the Report and hence the present proceedings were not maintainable. However, perusal of the Notice dated 08.04.2019 issued by the DGAP to the Respondent under Rule 129 (3) of the CGST Rules, 2017 shows that the Respondent was duly informed that he was being investigated for not passing on the benefit of tax reduction which was announced vide Notification dated 14.11.2017 on the products being sold by him. He was also asked to submit the record of taxable supplies w.e.f. 01.11,2017 to 31.03.2019, price lists, sample copies of invoices and GSTR-1 and 3B Returns for the period from October, 2017 to March, 2019. Therefore, he was fully aware of the allegations levelled against him. There was no legal obligation on the. DGAP to provide details of the proceedings which had taken place before the Standing Committee on Anti-Profiteering nor they were required to be mentioned in the above Notice or the Report furnished by the DGAP. The Respondent has been given full opportunity of defending himself during the course of the present proceedings on: the allegations levelled against him and hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. has not passed on the benefit of tax reduction is correct or not which the. Respondent has miserably failed to rebut and hence, above contention of the Respondent is farfetched which cannot be accepted. 85. Based on the above facts the profiteered amount is determined as ₹ 21,84,79,790/- in terms of Rule 133 (1) of the CGST Rules, 2017, during the period from 15.11.2017 to 31,03.2019, as has been computed vide revised Annexure-12 by the DGAP. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce his prices commensurately in terms of the above Rule. The Respondent is also directed to deposit an amount of ₹ 21,84,79,790/- in the CWF of the Central and the concerned State. Government, as the recipients are not identifiable, as per the provisions of Rule 133 (3) (c) of the above Rules alongwith 18% interest payable from the dates from which the above amount was realised by him from his recipients till the date of its deposit. The above amount shall be deposited within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned Commissioners CGST/SG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Jharkhand 20 4515539 688505 0 5204044 14. Karnataka 29 5796479 1536896 0 7333376 15. Kerala 32 1208947 456132 0 1665079 16. Madhya Pradesh 23 24634011 516543 0 25150554 17. Maharashtra 27 19899548 7193605 1799 2709452 18. Manipur 14 382678 0 0 382678 19. Meghalaya 17 457750 0 0 457750 20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, the Respondent is apparently liable for the imposition of penalty under Section 171 (3A) of the. CGST Act, 2017. Therefore, a show cause notice be issued directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him. 87. Further, this Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is deposited in the CWFs of the Central and the State Governments as per the details given above. A Report in compliance of this order shall be submitted to this Authority by the concerned Commissioner within a period of 4 months from the date of receipt of this order. 88.A copy each of this order be supplied to the Applicants, the Respondent and all the concerned Commissioners CGST /SGST for necessary action. File be consig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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