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TMI Blog2020 (3) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 14/- including the GST which the Respondent has profiteered in respect of the Applicant No.1 and ₹ 3,90,258/- in respect of the other recipients which also includes the GST on the said profiteered amount, as per the provisions of Rule 133 (1) of the CGST Rules, 2017. Accordingly, the Respondent is directed to reduce the sale prices of his admission tickets immediately commensurate to the reduction in the rates of tax as were notified on 31.12.2018 and pass on the benefit of reduction in the rates of tax to his customers. Penalty - HELD THAT:- It is evident from the above that the Respondent has denied the benefit of rate reductions in the GST to his customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is apparently liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - Therefore, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him. - Case No. 15/2020 - - - Dated:- 12-3-2020 - DR. B.N. SHARMA, CHAIRMAN SH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce under Rule 129 (3) of the above Rules was issued by him, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in the GST rates w.e.f. 01.01.2019 had not been passed on to the recipients by way of commensurate reduction in prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply. The Respondent was afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the above Notice, during the period from 16.04.2019 to 18.04.2019. However, the Respondent did not avail of the opportunity. The period covered by the current investigation is from 01.01.2019 to 31.03.2019. 5. The DGAP has further stated that as the Applicant No. 1 had made a complaint which was specific to the Theatre/Screen being operated by the Respondent in the District of Hapur in the State of Uttar Pradesh, Notice for Initiation of investigation was issued for the same only. The Respondent had also provided the detailed outwards supplies and pricing data for the theatre in Hapur only. Hence, the scope of this investigation was limited to the Theatre located in Hapur. 6. The time limit to complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 to March, 2019. b. Copies of GSTR-3B Returns for the period from December, 2018 to March, 2019. c. Copies of sample invoices pre and post 01.01.2019. d. A brief summary of total revenue from all the screens located in the state of Uttar Pradesh and its reconciliation with the GSTR-1 Returns for the month of January, 2019. e. A summary of the price list along with taxes collected and paid by the Respondent for the month of January, 2019 in the state of Uttar Pradesh. f. Monthly Summary of tickets for the period from December, 2018 to March, 2019. 9. The DGAP has also submitted that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees from 28% to 18% and Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018. He has further submitted that the legal requirement of Section 171 of the CGST Act, 2017 was abundant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices in each category for the period from 01.12.2018 to 31.12.2018 showed that the pricing pattern of the movie tickets during the period of pre-rate reduction was as follows:- Table A (Price in Rs.) Time-period Class Gold Platinum Premium Morning show on all days 100 118 200 Weekdays- other than morning show 118 150 250 Weekends- other than morning show 118 180 300 12. The DGAP has also submitted that from the Table A, it was evident that the Respondent was involved in providing services in two categories for the purpose of taxation i.e. Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees where GST rate was reduced from 28% to 18% and Services by way of admission to exhibition of cinematograph films where price of admission ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st rate reduction w.e.f. 01.01.2019 and the actual selling prices has been given in Table C by the DGAP as under:- Commensurate Price post 01.01.2019 Actual Price post 01.01.2019 Class Class Time-period Gold Platinum Premium Gold Platinum Premium Morning show on all days 94.9 112 184.3 100 110* 200 Weekdays- other than morning show 112 138.27 230.4 110* 150 250 Weekends- other than morning show 112 165.9 276.5 110* 180 300 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in the GST rates on Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees from 28% to 18% and on Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less from 18% to 12%, w.e.f. 01.01.2019 stood established against the Respondent. On this account, the Respondent has realized an excess amount to the tune of 14/- from the Applicant No. 1 which included both the profiteered amount and the GST on the profiteered amount. The DGAP has also claimed that the investigation has revealed that the Respondent has realized an excess amount of 4,01,5061- from the other recipients and the Applicant No. 1 which included both the profiteered amount and the GST on the profiteered amount. These other recipients except Applicant No. 1 were not identifiable as no details of these customers could be ascertained; therefore this Authority may consider ordering deposit of the balance amount of ₹ 4,01,506/- in the respective Consumer Welfare Funds (CWF). He has also intimated that the Respondent has supplied the above service in the States of Panjab, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Authority, hence the present proceedings were not maintainable. IV. In the case of Kiran Chimirala v. M/s Jubilant Food Works Limited 2019-VIL 183-DEL = 2019 (2) TMI 295 - NATIONAL ANTI-PROFITEERING AUTHORITY the Hon'ble High Court of Delhi had stayed the operation of the order passed by this Authority on the ground that no methodology had been prescribed for determining profiteering. V. The supply of services by admission to exhibition of cinematograph films for the movies exhibited after the rate change did not have a price valuation in the past which could be compared for the purpose of profiteering and hence no profiteering could be alleged. VI. For the purpose of profiteering there must be a comparison of the same supply of goods/services before and after the reduction in the rate of tax. Thus, the entire exercise of computation of profiteering was incorrect and deserved to be not accepted. VII. It was for the Respondent to decide to change the prices upwards or downwards of the movies according to the demand of a movie. VIII. The price to be charged to a customer was solely based on the demand and supply [market forces] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur and hence the details of other multiplexes could not be asked from the Respondent. 19. The above submission of the Respondent were sent to the DGAP for filing clarifications who vide his Report dated 22.02.2020 has submitted that the Respondent has cited the case of K. Damodarasamy Naidu Bros. v. State of Tamil Nadu and another (2000) 117 STC 1(SC) = 1999 (10) TMI 598 - SUPREME COURT , wherein the Hon'ble Supreme Court had observed that in the absence of the rules made by the State Governments to ascertain the amount relating to the supply of goods and Services out of the composite charges collected, it was impossible in practical terms, for the sales tax authorities to make assessments on the basis of the facts relevant to each individual customer in each individual hotel and hence, the State had to promulgate rules to indicate how to treat the composite charges for lodging and boarding so as to eliminate substantial difference in approach of the sale tax officers and resultant arbitrariness. In the present case, Section 171 and the Rules framed under the said section did not provide for any mechanism or any guidelines for the purpose of determination of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pared only for the films that were being screened at the time of rate reductions and subsequently for other films there shall be no impact of rate reductions. However, this logic was against the spirit of law, as the nature of services supplied had remained the same and the impact of rate reductions would be applicable on the services being supplied irrespective of the film being screened. 20. The DGAP has also argued that the Respondent has claimed that the rates of admission charged on the films screened post rate reduction on 18.01.2019 could not be compared with the rates of admission charged for the film shown on 28.12.2018 during the pre rate reduction period on the ground that no price valuation for comparison was available and it was the prerogative of the Respondent to increase prices as per his discretion and to recover the recurring costs. On the above claims the DGAP has stated that the price pattern has remained the same during the pre and the post reduction period. The changes made in the prices were on account of rate reductions as was evident from the pricing of tickets for the Platinum Class morning shows on all days, Gold Class other than morning shows on weeke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GAP has further submitted that due to some error in calculation, few shows of 3D movie were included in the amount of profiteering totalling up to 11,2481- which may be reduced from the total amount of profiteering. He has also submitted that in the case of M/s Jubilant Food Works Ltd., further proceeding were stayed by the Hon'ble High Court of Delhi subject to the petitioner depositing an amount of Rs. 20 Crore in the Consumer Welfare Fund and no prima facie grounds were mentioned by the Hon'ble Court. The impugned case has not yet been decided and there was no stay on the legality of the Anti-profiteering provisions. In the case of M/s Abbott Healthcare Pvt. Ltd. = 2019 (5) TMI 563 - DELHI HIGH COURT , the Hon'ble High Court of Delhi in para 7 of its Order dated 24.04.2019, has referred to one of the grounds of relief raised by the petitioner and has not given any direction with regard to admissibility and merits of the ground. The same could not be applied in the case of the Respondent. Further, the impugned case was still not decided and there was only interim stay on further proceedings. He has also submitted that although the Respondent has cited the Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 01.01.2019, as per Notification No. 11/2017- Central Tax (Rate) dated 27.06.2017. Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees had GST rate of 28%, and Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less were having GST rate of 18%. Therefore, it is evident that the services provided by the Respondent were impacted by the rate reductions allowed vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018 and hence the Respondent was liable to pass on the benefit of both the above tax reductions. 28. It is also revealed from Table A of the Report that the Respondent was having three Classes for the exhibition of movies viz. Gold, Platinum and Premium and was charging different prices for admission in respect of each class for morning shows and shows on the weekdays and the weekends, which have been mentioned in the above Table. It is further revealed from the Report that the cum-tax price of the admission tickets across all categories and days, for the month of December, 2018 was inclusive of applicable GST. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit of ITC has to be passed on by a supplier to his recipients since such reduction has been given by sacrificing the tax revenue by the Central and the State Governments. It also means that the above benefits have to be passed on each Stock Keeping Unit (SKU) or unit of construction or service to each buyer and in case they are not passed on, the profiteered amount has to be calculated. These benefits also have to be passed on to each recipient at each SKU/unit/service level. Further, the above Section mentions any supply which means that the above benefits have to be passed on each taxable supply made to each buyer and a registered person cannot pass more benefit to one customer at the cost of another customer. Each buyer is entitled to receive the benefit of tax reduction or ITC on each SKU or unit or service purchased by him. The word commensurate denotes the extent of benefit to be passed on by way of reduction in the price on each SKU or unit or service based on the tax reduction or the benefit of additional ITC. The computation of commensurate reduction in prices is purely a mathematical computation which is dependent upon the various factors and hence it would vary fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court had ruled that the State Government was required to frame rules to determine how the sales and services were to be assessed. In this connection it would be appropriate to mention that no tax has been levied under Section 171 of the above Act and hence the above Section cannot be termed as the charging section for levy of tax and its assessment. This Section only provides for passing on the benefit of tax reduction or ITC by commensurate reduction in prices. As has been explained in para supra the methodology to compute the profiteered amount has been mentioned in the above Section itself and hence, there is no requirement of framing separate rules for determining how the benefits are to be passed and hence, the law settled in the above case cannot be relied upon. 31. The Respondent has also cited the case of M/s Abbott Healthcare Private Limited Anr v. Union of India Ors. = 2019 (5) TMI 563 - DELHI HIGH COURT pending in the Hon'ble High Court of Delhi in which constitutional validity of Section 171 and Chapter 15 of the CGST Rules, 2017 has been challenged. Since, the Hon'ble High Court has not pronounced its judgement on the above issues the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the demand and supply was not correct as the pricing pattern adopted by the Respondent was similar in respect of all the films and he had not charged different prices for admission for different movies keeping in view their demand. Perusal of the above Report also shows that the Respondent while fixing his prices had not used his discretion. It was also not established from the data supplied by him to the DGAP that he had taken in to account the fixed costs or the reduced demand of a movie after second week while fixing his prices. The DGAP has already taken in to account those movies where there was tax exemption or extra charges were levied on 3D movies, while computing the profiteered amount. Therefore, the above contentions of the Respondent are frivolous and hence, they cannot be accepted. 35. The Respondent has also contended that the supply of services of admission to exhibition of cinematograph films could not be compared with the Fast Moving Consumer Goods (FMCG) which were subject to MRP and hence no profiteering could be computed on them. In this regard it would be appropriate to state that although there is no MRP on the services supplied by the Respondent however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been considered as weekends for the purpose of pricing of tickets for different movies. However, if the movie was released on a Thursday, the weekend should be considered from Thursday onwards. The DGAP has examined the above contention of the Respondent and stated that it had no impact on the profiteered amount when the data for the pre and post rate reduction periods was compared by him. He has further stated that release of movies on Thursdays was an exception which could not be considered as a common trend and specific instances had been treated individually by him. The above explanation given by the DGAP is reasonable and hence the contentions of the Respondent made in this regard are not correct and hence they cannot be accepted. 40. The Respondent has also submitted that this Authority could not expand the scope of investigation and call for the details of the other multiplexes which are being operated by the Respondent and hence the details of other multiplexes could not be asked from him. In this connection it would be relevant to mention the provisions of Section 171 (2) of the CGST Act. 2017 which state as under:- (2). The Central Government may, on recommendat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... = 2013 (4) TMI 373 - SUPREME COURT in his support stating that the charging section was required to be provided for computation of profiteering. In this connection it is respectfully submitted that no tax has been levied under the anti-profiteering measures mentioned in the CGST/SGST Acts, 2017 and hence, no charging section is required to be incorporated in them and hence, the law settled in the above cases is not being relied upon. 42. The Respondent has further contended that the DGAP has wrongly calculated profiteering amounting of ₹ 11,248/- for some of the shows of the 3D movie 'Captain Marvel' despite providing an exception on account of extra charges being levied for the 3D glasses. The DGAP vide his Supplementary Report dated 22.01.2020 has accepted this contention of the Respondent and has admitted that due to some error in calculation, few shows of the above 3D movie were included in the amount of profiteering and an amount of 11248/- was wrongly included in the profiteered amount. Accordingly, the above amount is ordered to be reduced from the profiteered amount. 43. It is clear from the narration of the facts mentioned above that the Respondent h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Respondent is further directed to refund an amount of ₹ 14/- to the Applicant No. 1 along with interest to be calculated @ 18% from the date when the said amount was collected by him from the above Applicant till the above amount is paid. Since, the rest of the recipients in this case are not identifiable, the Respondent is directed to deposit the balance amount of profiteering of ₹ 1,95,129/- in the Central CWF and ₹ 1,95,129/- (Total ₹ 3,90,258) in the Uttar Pradesh State CWF as per the provisions of Rule 133 (3) (C) of the CGST Rules, 2017, along with 18% interest, as all the supplies were made in the District of Hapur in the State of Uttar Pradesh. The above amount shall be deposited within a period of 3 months from the date of receipt of this order failing which the same shall be recovered by the concerned Commissioners CGST/SGST as per the provisions of the CGST/SGST Act, 2017. 45. It is evident from the above that the Respondent has denied the benefit of rate reductions in the GST to his customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus profiteered as per the explanation attached to Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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