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TMI Blog2020 (5) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... Heidelberg Offset Press SM 74-5 +LX, Mfg. Year 1997 with complete tools and accessories" from the Respondent for which the Respondent had quoted price of Rs. 1,40,00,000/-(plus local Sales Tax, if applicable) as per the proforma Invoice No. Press/DA/PMS/060517 dated 06.05.2017. He was, however, billed for an amount of Rs. 1,65,20,000/- as per tax invoice No. 01 dated 29.07.2017, which included GST @ 18% on Rs. 1,40,00,000/-. The above Applicant also alleged that after the implementation of the GST, various existing taxes like VAT, CST, CVD, SAD etc. had been subsumed in the GST but the Respondent charged 18% GST on Rs. 1,40,00,000/- which was the quoted price inclusive of erstwhile taxes like CVD and SPL CVD etc. and did not pass on the benefit of ITC to him by way of commensurate reduction in price in terms of Section 171 of the CGST Act, 2017. 3. The DGAP Submitted that the aforesaid application was examined by the Standing Committee in its meeting held on 11.04.2019, the minutes of which were received in the office of the DGAP on 02.05.2019, whereby it was decided to refer the same, to conduct a detailed investigation in the matter, in terms of Rule 129 of the Rules. 4. The DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (other than by local bodies) Excise Duty levied under Medicinal & Toilet Preparations Act Entry Tax/ Octroi (all forms) Additional Duties of Customs (commonly known as CVD) Purchase Tax Special Additional Duties of Customs (SAD) Taxes on lottery, betting & gambling Service Tax Luxury Tax Central Surcharges and Cesses State Surcharges and Cesses Out of the above taxes, the ITC of some taxes was not being allowed in the erstwhile tax regime. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST with effect from 01.07.2017, all these taxes got subsumed in the GST and the ITC of GST was available in respect of all the goods and services unless specifically denied. Thus, the additional benefit of ITC in the GST regime would be limited to those input taxes, the credit of which was not allowed in the pre-GST regime but was allowed in the GST regime. This additional benefit of ITC in the GST regime was required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2017, i.e., after implementation of GST, when the CVD and SAD were replaced by IGST and the full amount of IGST@ 18% paid at the time of actual import was available as ITC to the Respondent. 12. The DGAP further contended that in the light of the aforementioned legal position regarding the duties payable and the credits available (or not available) both at the time, the quotation was given and when the actual import took place after the introduction of GST, the finding was that the Respondent should have reduced the base price to the extent of the CVD that was no longer to be paid as well as to the extent of the IGST the credit of which was now available. However, the invoice that was raised on 29.07.2017 for the transaction and on which IGST@18% was charged showed that the base price of the product remained the same, i.e., Rs. 1,40,00,0001- as per the quotation dated 06.05.2017. Thus, the base price was not reduced to the extent of CVD that was not payable in the post-GST period. 13. The DGAP also submitted that regarding the allegation of profiteering, perusal of the Bill of Entry No. 2432766 dated 13.07.2017 revealed that the taxable value of the product "Used Heidelberg Spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of ITC had not been passed on to the Applicant No. 1, the provisions of Section 171 (1) of the CGST Act, 2017 have been contravened and the amount of profiteering by the Respondent was Rs. 6,71,121/-(inclusive of GST(c)18% amounting to Rs. 1,02,374/- charged on the excess base price). 16. The above Report was considered by the Authority in its meeting held on 01.11.2019 and it was decided to hear the Applicants and the Respondent on 19.11.2019. Notice dated 01.11.2019 was also issued to the Respondent to explain why the Report furnished by the DGAP should not be accepted and his liability for having violated the provisions of Section 171 of the CGST Act, 2017 should not be fixed. The hearing fixed on 25.03.2019 was postponed to 09.04.2019 on the request of the Respondent. On 09.04.2019, Applicant No. 1 was present in person while Shri Deepak Agarwal, proprietor appeared on behalf of the Respondent. Further hearings were held on 29.04.2019, 27.05.2019 and 12.06.2019, whereas another hearing scheduled for 17.05.2019 was adjourned. 17. The Applicant No. 1 vide his submissions dated 18.11.2019 submitted that the Central Excise, Education Cess and Higher Education Cess were subsum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons made by Applicant No. 1, whereby the DGAP submitted that since the product, i.e Printing Machine, had been imported by the Respondent, it was not a case of levy of Central Excise Duty and hence also not a case where Central Excise Duty Education Cess and Secondary & Higher Education Cess were leviable; that in the case of import, Countervailing Duty (CVD) was leviable (instead of Central Excise Duty) along with Education Cess (@1% of CVD) and Secondary & Higher Education Cess(@ 2% of CVD till February 2015, before the Government of India issued Notification No.14/2015-Central Excise dated 01.03.2015 and 15/2015-Central Excise dated 01.03.2015, exempting the import of the impugned product from the levy of Education Cess and Secondary & Higher Education Cess, respectively. Therefore at the time of the import of the impugned product and at the time of the raising of the subject quotation by the Respondent to the Applicant No. 1 in the year 2017, the cesses, namely Education cess and Secondary & Higher Education Cess, were not leviable, hence, the said Cesses have not been considered while calculating profiteering. 21. The DGAP has further reported that the contention of Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso reported that the contention of the Respondent that he had passed on the benefit to the Applicant No. 1 by providing additional accessories, in place of passing on the benefit derived on account of profiteering, was not acceptable because Section 171(1) of the CGST Act, 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," did not provide any other means of passage of such benefit except by way of commensurate reduction in price; that thus the legal requirement of Section 171 of the Act, ibid, was that in the event of benefit of input tax credit or reduction in the rate of tax, there must be a commensurate reduction in the price of the goods or services; that any such reduction could only be in absolute terms so that the final price payable by a consumer got reduced commensurately. Further, the DGAP has reported that the Respondent has not submitted any documentary evidence in support of his above claim, hence, the said contention of the Respondent fell flat. 26. We have carefully heard both the parties and have also gone through the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the invoice that was raised on 29.07.2017 for the transaction and on which IGST@18% was charged shows that the base price of the product remained the same. 28. We also observe that Applicant No. 1, vide his submissions dated 18.11.2019, has argued that due to typographical error in the DGAP Report, the billed price of Machine was wrongly mentioned as Rs. 1,65,00,000 instead of Rs. 1,65,20,000/-. This contention of Applicant No. 1 has been accepted by the DGAP vide supplementary Report dated 18.12.2019 and accordingly the profiteered amount has been increased to Rs. 6,91,121/- by the DGAP. Hence we find that this contention of Applicant No. 1 is justified and hence the profiteered amount stands increased to Rs. 6,91,121/-. 29. We further observe that during the hearings, Applicant No. 1 has contended that the Education Cess and the Higher Education cess were not considered by the DGAP and that a calculation of the profiteered amount has also been submitted by Applicant No.1 as per his own understanding. In this context, the DGAP has submitted that since the product, i.e the Printing Machine, had been imported by the Respondent, it was not a case of levy of Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of profiteering, which has been done as per provisions of Section 171 of the GST Act 2017. We agree with the view of DGAP on this issue. We also find it pertinent to mention that profiteering, as defined under Section 171 of the Act, ibid, has no connection with the terms 'profit' and 'margin' retained by a supplier, Since the computation of profiteering has been done in line with provisions of Section 171 of the CGST Act 2017, we do not find any merit in this contention of Applicant No. 1. 32. Further, Respondent's contention, made vide his submissions dated 5.12.2019, that he had passed on the benefit to Applicant No. 1 in the form of supply of additional accessories, is not tenable and unacceptable since Section 171 (1) of the CGST Act does not provide for any other means of passage of the benefit except by way of commensurate reduction in the price of the goods/ services supplied and since there is no evidence on record to demonstrate that the above provisions have been complied with. 33. Further, during the course of hearings before this Authority, the Respondent has conveyed his agreement with the report of the DGAP and has also submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of profiteering is determined as Rs. 6,91,121/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. 37. Accordingly, the Respondent liability to refund the profiteered amount of Rs. 6,91,121/-, along with the interest to be calculated at 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited/refunded, is established. Further, since the Respondent has already refunded the profiteered amount of Rs. 6,91,121/- to Applicant No. 1 through RTGS dated 12.12.2019 and since the receipt thereof has also been acknowledged by the Applicant No. 1, vide submissions of Applicant No. 1 dated 10.01.2020, we direct the Respondent to pay the interest to be calculated @ 18% from the date when the profiteered amount was collected by him from the Applicant No. 1 till the above amount is paid within a period of 3 months from the date of receipt of this order failing which the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017. 38. It is evident from the case records that the Respondent has denied the benefit of rate reductions/additional ITC in the GST to the Applicant No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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