9911796707
TMI Blog2020 (11) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... the recipients. The Respondent is also directed to deposit the profiteered amount mentioned above along with the interest to be calculated @18% from the date from which the above amount was collected by him from the recipients till the above amount is deposited, in terms of the Rule 133 (3) (b) of the CGST Rules, 2017. Since, the recipients in this case are not identifiable, the Respondent is directed to deposit the above amount of profiteering along with interest in the Consumer Welfare Funds (CWFs) of the Central and the above State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 in the ratio of 50:50 along with interest @ 18%, till the same is deposited as per the details mentioned - The above amount shall further be deposited within a period of 3 months by the Respondent, from the date of this order, failing which the same shall be recovered by the concerned Commissioners of the Central and the State GST, as per the provisions of the CGST/SGST Acts, 2017 under the supervision of the DGAP and shall be deposited as has been directed vide this order. A detailed Report shall also be filed by the concerned Commissioners of the Central and the State GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of her allegation, the above Applicant had submitted copies of tax invoices dated 11.11.2017 and 15.11.2017 vide which she had purchased Short Capuccino from the Respondent. 2. The application was examined by the Standing Committee on Antiprofiteering in its meeting held on 02.07.2018 and as per the minutes of the meeting it was decided to refer the matter to the Director General of Anti-Profiteering (DGAP) to investigate and collect necessary evidence to determine whether the benefit of reduction in the rate of tax on the restaurant service had been passed on by the Respondent to his recipients as per the provisions of Rule 129 (1) of the above Rules. 3. The DGAP had sought extension to complete the investigation, which was extended upto 31.12.2018 by this Authority vide its orders dated 09.10.2018 and 15.11.2018 in terms of Rule 129 (6) of the CGST Rules, 2017. After completing the investigation the DGAP had submitted his Report under Rule 129 (6) of the CGST Rules, 2017 on 27.12.2018. The period of investigation was from 15 11.2017 to 30.06.2018. 4. The DGAP in his Report had stated that a notice under Rule 129 (3) of the CGST Rules, 2017 was issued on 27.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ITC which was to the extent of 10-11% and which was more than the increase in the base prices. The Report had also mentioned that the Respondent had claimed that in the month of October 2017, he had completed 5 years and had opened his 100th store and to celebrate the occasion he had offered all short/tall size handcrafted beverages at ₹ 100 (inclusive of all taxes) and this offer was only for one day i.e. on 28.11.2017 and was valid at his all stores in India, except 6 office stores which did not operate on weekends. 7. The Report had further mentioned that the Respondent had claimed that total sales made by him on an all India basis on 28.11.2017 were 2.35 lakh drinks which was 7 times more than his usual sales and he had received an amount of ₹ 2.32 Crore, which was 2.3 times more than his usual sales on a Saturday. 8. The DGAP had also submitted that while determining the ITC as a percentage of the total taxable turnover of the Respondent, the ITC for the period from July, 2017 to 14th November, 2017, as furnished in the GSTR-3B Returns, had been adjusted by excluding the amount of ITC on inter-unit branch transfers (as per ITC Register) and while determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss: Inter unit branch transfers as per ITC Register (E) 2,29,55,267 1,94,19,499 1,52,05,541 1,29,94,299 42,95,612 7,48,70,218 Net Outward Taxable Turnover for the period from 01.07.2017 to 14.11.2017 (F)=(D-E) 29,63,81,819 27,76,84,113 28,69,10,654 31,79,21,792 14,56,03,021 1,32,45,01,399 Ratio of Input Tax Credit to Net Outward Taxable Turnover G = (C/F) 10.83% 9. The DGAP in his Report had further submitted that the invoices issued by the Respondent clearly showed that the Respondent had increased the base price of the product Short Cappuccino from ₹ 155/- to ₹ 170/- when the rate of GST was reduced from 18% to 5%. Based on the reduction in the rate of tax and after taking into account the impact of denial of ITC, the outward supplies (other than zero rated, nil rated and exempted supplies) during the period from 15.11.2017 to 30.06.2018, the DGAP had estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase prices were increased on the products to recover the increased cost due to loss of ITC but the selling price of the complained product was reduced as has been shown in the Table-3 below:- Table -3 (Amount in Rs.) Product Short Cappuccino On 14.11.2017 On 15.11.2017 Base Price 155 170 GST (@18% /@ 5%) 28 9 Price After Tax 183 179 Reduction in price to the customer 4 13. The Respondent had also submitted that the ratio of ITC to sales calculated by the DGAP had been computed without considering the appropriate value of sales as the Report had taken the total value of outward taxable turnover from GSTR-I Returns but the value of interunit branch transfers for each State was taken from the ITC Registers, as against the Sales Registers which had resulted in higher net taxable outward turnover than the actual sales made in a particular State. He had further claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Average price Average price 18,26,576/- Average to Average comparison 3. Average to Average PAN India Average price Average price 25,44,662/- Method applied in Jubilant Food Works 4. Average to Transaction Formation wise Average price Transaction level price 43,50,565/- This is a variation to the method followed by the DGAP with format to format comparison 5. Average to Transaction PAN India Average price Transaction level price 1,51,36,248/- This is the method followed by the DGAP 16. He had also contended that the old stores and the new stores were considered by the DGAP on the same footing. However the new stores which were launched after 15.11.2017 could not have comparable prices for the products sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss of ITC, required immediate adjustment in prices and these adjustments were done only to recover the increased cost due to denial of ITC. It was his submission that instead of increasing the prices of the products to recover other incremental costs he had increased the prices only to the extent of denial of ITC with an intention of not causing displacement to the market and had borne such incremental cost in the interest of consumers. To substantiate his claim he has referred to the case of Kumar Gandharv v. KRBL Ltd. (2018) (13) GSTL 412 (NAPA) = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY decided by this Authority wherein the increase in the price of paddy was considered to declare that there was no profiteering. 21 He had also maintained that Section 171 of the CGST Act, 2017 required only to pass on the reduction in the rate of tax to the recipient but the DGAP had considered all the products sold not only to the Applicant No. 1 but also to all other recipients, which was beyond the scope of his investigation. It was also submitted that in terms of Rule 129 (3) of the CGST Rules, 2017 the DGAP was to issue notice to all the interested parties containin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax cost on account of denial of ITC. 25. The Respondent had also stated that the notice issued to him sought to levy penal action under Section 29, 122, 123, 124, 125, 126 and 127 of the CGST Act, 2017 read with Rule 21 and 133 of the CGST Rules, 2017. However, the notice nowhere specified the reasons why any penal action needed to be initiated and simply stated that in case this Authority confirmed the allegation of profiteering against the Respondent, he would be liable to penal action in terms of the aforesaid referred provisions. In this regard, he had submitted that it was settled law that where any penal action was proposed to be taken, then the authorities must be clear in their mind as to why the action was to be initiated especially when there was no allegation of malafide intention on the part of the Respondent. He had placed reliance on the cases of B. Lakshmichand v. Government of India 1983 (12) E.L.T. 322 (Mad.) = 1981 (9) TMI 128 - MADRAS HIGH COURT and Commissioner of Central Excise, Bombay-III v. Bhikhlal Dwarkadas 1998 (99) E.L.T. 438 (Tribunal)] = 1997 (12) TMI 268 - CEGAT, NEW DELHI in this regard. He had further submitted that it was a settled princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I 1337 - NATIONAL ANTI-PROFITEERING AUTHORITY . He had also submitted that in the above case this Authority had held that the stock holding period and periodicity of price revision could be important criteria in determining the period of investigation. Further, this Authority had also held that since no documentary evidence to this effect was produced by the Respondent his contention could not be considered. The Respondent quoting the above case, in the present case, had stated that he had provided the relevant evidence and satisfactorily established the trend followed by him with regard to periodic price revisions. 28. In response to the submissions of the Respondent, the DGAP in his reply dated 15.04.2019 had admitted certain factual errors as had been mentioned by the Respondent in his various submissions. The errors admitted by the DGAP were as follows:- a. that the B2B taxable turnover for the month of September, 2017 was inadvertently taken as ₹ 1,87,06,258/- instead of ₹ 56,11,365/- in Annexure-30 of his original Report dated 27.12.2018. b. the quantity pertaining to the credit notes had been inadvertently included in the total quantity and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being excluded. The contention of the Respondent that duplicate sale entries had been considered in the working for November, 2017 in respect of the supplies made in the State of Maharashtra had also been examined by the DGAP and vide his Report dated 26.12.2018 he had modified his calculations and therefore the profiteered amount was reduced from ₹ 4,51,29,600/- to ₹ 2,42,82,996/- as has been given in the Table-7 below:- Table -7 S. No. State Code (Place of Supply) Profiteering (Rs.) 1 Delhi (07) 86,34,890 2 Haryana (06) 10,41,014 3 Karnataka (29) 12,17,384 4 Maharashtra (27) 1,16,64,413 5 Tamil Nadu (33) 4, 66,846 6 Telangana (36) 7,22,196 7 Uttar Pradesh (09) 3,50,141 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me but the prices for the same products varied at the Airport Stores. For instance the price for the beverage Tall Latte at the Airport Stores was ₹ 220/- while it was ₹ 205/- in Tier-1 and 2 City Stores. Similarly for the Carrot Cake with Cream Cheese it was ₹ 240/- at the Airport Stores while it was ₹ 235/- in the other Tier-1 and 2 City Stores. The following Table submitted by the Respondent also reflected that the prices were same for the Tier-I and 2 channels while there was variation in prices for the same product sold in the Airport channel. Considering the fact that the price variation was almost ₹ 15/- or there was almost 7.3% difference in prices, it appeared from the contention of the Respondent that while comparing the City Stores prices of the product with the Airport Stores prices the DGAP should have adopted a different methodology:- Article Description Airport Stores Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Nov-17 Apr-18 Tall La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that based on the pre and post reduction GST rates, considering the impact of denial of input tax credit and the details of invoice-wise outward supplies (other than zero rated, nil rated and exempted supplies) during the period from 15.11.2017 to 30.06.2018, as per the product-wise sales registers reconciled with the GSTR-1 and GSTR 3B Returns, the amount of net higher sale realization due to increase in the base prices of the goods, despite the reduction in GST rate from 18% to 5% (with denial of input tax credit), had been worked out. The DGAP had also stated that 571 items were sold during the period from 01.11.2017 to 14.11.2017 and 51 more items were sold during the month of October 2017. Accordingly the profiteered amount had been computed by comparing the revised average base prices with the actual base prices of the said items sold during the period from 15.11.2017 to 30.06.2018. The revised profiteered amount was calculated as ₹ 2,42,82,996/- as per the Revised Annexure-31 and this profiteered amount had been calculated only in respect of those supplies where the base prices post 15.11.2017, were increased by more than 11.79% (impact of denial of ITC). But the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the price increase depended on the company. In the case of the Respondent, he had been adopting a consistent pricing policy of increasing prices twice a year (rounded off to the nearest INR 5/- or INR 10/-, depending upon the price of the product). The factors due to which the Respondent had been increasing prices were as under:- Inflationary trends relating to cost of raw material, consumables and capital expenditure; Variable expenses such as royalty, rent, marketing expenses, etc., Fuel and Power cost; Purchasing power of the customer; Competitive pricing; Regional pricing. (b)The Respondent has also submitted before the DGAP the trend of price increase made by him since 2014-15 as is given in the Table below:- Table Period Average percentage of price increase for food and beverages April-14 4.73% July-14 to December-14 3.90% April-15 6.54% October-15 4.67% April-16 2.33% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of fresh information/documents submitted by the Respondent. 40. The DGAP has further submitted that the various replies of the Respondent and the documents/evidence on record has been examined by him in detail. The issue for investigation was whether the rate of GST on the restaurant services provided by the Respondent was reduced w.e.f. 15.11.2017 and if so, whether the Respondent had passed on the benefit of such reduction in tax rate to the recipients in terms of Section 171 of the CGST Act, 2017. 41. The DGAP has also stated that it was important to examine Section 171 of CGST Act, 2017 which governed the anti-profiteering provisions under the GST which reads as 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. Thus, the legal requirement was abundantly clear that in the event of a benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in prices of the goods or services. Such reduction could obviously only be in absolute terms such that the final price payable by a consumer must get reduced. This was the legall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4760 1,28,01,560 Net ITC available for the period 01.07.2017 to 14.11.2017 (A-B) 7884266 20447381 23919315 37156245 53970768 14,33,77,975 Total Outward Taxable Turnover as per GSTR-1 Returns (D) 319337086 297103612 289021303 330916091 149898633 1,38,62,76,725 Less : Inter unit branch transfers included in B2B sales as per GSTR-1 Returns (E) 45560740 31224231 28723245 44952105 20079253 17,05,39,574 Net Outward Taxable Turnover for the period 01.07.2017 to 14.11.2017 (F)=(D-E) 273776346 265879381 260298058 285963986 129819380 1,21,57,37,151 Ratio of ITC to Net Outward Taxable Turnover (G) = (C/F) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce (post Rate reduction) I=H*1.05 266.15 10. Invoice No. J 5200940041 11. Invoice Date K 21.11.2017 12. Total quantity (above invoice) L 1 13. Total Invoice Value M 267.76 14. Actual Selling price (post rate reduction N=M/L 267.76 15. Difference (Profiteering) O=N-I 1.61 44. The DGAP has further contended from the above Table that the Respondent had not reduced the selling price of the Tier 2105246 product, commensurately when the GST rate was reduced from 18% to 5% (with denial of ITC @11.79%) w.e.f. 15.11.2017, vide Notification No. 46/2017 Central Tax (Rate) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts also included the GST charged on the increased base prices. 46. The DGAP has also stated that the third issue in the Interim Order was to investigate on the basis of the evidence whether the increase in the prices made by the Respondent w.e.f. 18.04.2018 was justified. The DGAP has observed from the submissions of the Respondent that he has been increasing the prices of his items two times in a year mostly in the month of April and October. The DGAP has stated that this Authority might take a view on this contention as it contained a legal point which pertained to the price revision. 47. The DGAP has also stated that the place of supply (State or Union Territory) wise break-up of the total profiteered amount of ₹ 1,04,70,664/- was as under:- Table Sr. No. State Code (Place of Supply) Profiteering (Rs.) 1 Delhi (07) 23,55,097 2 Haryana (06) 6,74,336 3 Karnataka (29) 8,63,611 4 Maharash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority had directed the DGAP to investigate on the basis of evidence whether increase in the prices made by the Respondent w.e.f. 08.04 2018 was justified. It was further submitted that the DGAP in his Report dated 05.02.2020 has considered the details provided by the Respondent which established the price increase made by the Respondent. The DGAP has investigated, verified and observed that the Respondent has increased the prices of his products two times in a year mostly in the months of April and October. While the DGAP has confirmed that the Respondent has a trend of increasing prices of his products two times a year, he has requested this Authority to take a final view on the same. However, he has stated that the DGAP has not considered the price increases made post rate reduction in his Report dated 05.02.2020. 51. The Respondent has also submitted that he has been adopting a consistent pricing policy of increasing prices twice a year rounded off to nearest ₹ 5/- or 10/-, due to the following factors:- i. Inflationary trends relating to cost of raw material, consumables and capital expenditure; ii. Expenses such as royalty, rent, marketing expenses, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195 195 April 2018 220 205 205 The Respondent has also undertaken a similar analysis for another product viz. Tall Java Chip Frappuccino as is given below:- Month Base Price in INR Airport store Tier 1 city store Tier 2 city store April 2015 200 185 185 October 2015 205 190 190 April 2016 210 195 195 October 2016 215 200 200 April 2017 225 210 210 November 2017 245 230 230 April 2018 255 240 240 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .S.T.L. 412 (N.A.P.A.) = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY , this Authority has held that due to increase in the price of paddy (which was one of the raw materials) and increase in rate of GST, no benefit has been derived by the Respondent. Considering this, in the present case also where price was increased due to business considerations, the impact of such change should be ignored in the profiteering calculations. 56. The Respondent has also claimed that even if it was assumed that the Respondent has benefitted to the tune of the alleged quantified amount, considering that there has been a substantial increase in cost, the same should be made available as an offset against the alleged profiteering. If such offset was not granted, it would lead to grave injustice to the Respondent. 57. The Respondent has further claimed that the investigation ought to have been restricted to the product in respect of which the complaint was made. He has also added that the present investigation has been initiated in response to the complaint filed by the Applicant No. 1 in respect of Short Capuccino purchased by her at one of the Respondent s outlets on two dates vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n complete disregard of the facts. 59. It was further contended that the average prices computed for the period upto 14.11.2017 should be compared only with the average prices for the products sold from 15.11.2017. It was also submitted that vide his submissions dated 31.01.2020 and 07.05.2020, he has stated that the DGAP s approach to compare the average prices with the actual prices at a later date was incorrect. He has further submitted that if the DGAP intended to compute the average prices to neutralize the impact of differential pricing and spot discount schemes offered by the Respondent on a case to case basis, the DGAP ought to have computed the average prices for the period post 15.11.2017 so as to similarly neutralize the impact of differential pricing and spot discount schemes offered by the Respondent on a case to case basis. 60. The Respondent has also argued that in the absence of any prescribed methodology, arbitrary approach has been followed by the DGAP. He has further argued that Rule 126 of the CGST Rules empowered this Authority to determine the methodology and procedure for computing the extent of profiteering. However, no precise computation methodology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit. It was also submitted that the DGAP, while determining the alleged quantum of profiteering has travelled beyond the scope of Section 171 of the CGST Act and by seeking to exercise control over the prices of the goods and/or services supplied by the Respondent. This form of price control was in violation of Article 19(1)(g) of the Constitution of India. 63. We have carefully considered the Reports of the DGAP, the submissions of the Respondent and the documents placed on record and it is revealed that the Respondent is engaged in the business of operating and maintaining restaurants under the name of Starbucks-A Tata Alliance or Starbucks Coffee-A Tata Alliance where he sells Coffee, Tea, Iced Beverages and food items. The Respondent is selling his products through the Airport Stores situated in Mumbai and Delhi, Tier-I City Stores located in Mumbai, Delhi, Gurugram, NOIDA, Chandigarh, Mohali and Kolkata and Tier-2 City Stores located in Bangalore, Chennai, Hyderabad, Pune, Ahmedabad, Surat and Vadodra. Presently he has 132 stores in the country situated in 11 States/UTs. It is also revealed that the rate of tax on the products being sold by the Respondent was reduced f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % and not 10.83% as had been calculated by the DGAP. The DGAP, vide his clarifications dated 15.04.2019, had accepted the contention of the Respondent and revised the impact of denial of ITC from 10.83% to 11.79%. Accordingly, the DGAP had re-computed the profiteered amount as ₹ 2,42,82,996/-. Further, the Respondent had contended that the average pre rate reduction average base prices should have been computed separately for the Tier-1 and Tier-2 City Stores as he was charging similar prices for both of them but different prices for the Airport Stores. This Authority, after carefully considering the above submission of the Respondent had directed the DGAP to re-compute the base prices and the profiteered amount separately for the above stores under Rule 133 (4) of the CGST Rules, 2017 vide its Interim Order No. 18/2019 dated 05.12.2019. The DGAP was further directed to find out whether the increase in the prices made by the Respondent w.e.f. 18.04.2018 was justified or not. Accordingly, the DGAP has submitted his investigation Report dated 05.02.2020 to this Authority as per the directions passed in the above order. The DGAP has recomputed the ratio of ITC to the Net Outward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved by this Authority in all such cases of rate reduction where the benefit of ITC has been denied and hence, it can be safely relied upon to determine whether the benefit of tax reduction has been passed on or not. 67. It has been submitted by the Respondent that his pricing policy under which he has been increasing his prices in the months of April and October every year due to increase in his costs, inflation and competition has been verified by the DGAP and therefore, it should be considered for the purpose of computing the amount of profiteering. 68. In this regard para 17 of the Report dated 05.02.2020 submitted by the DGAP has recorded the following findings while verifying the claim of the Respondent regarding regular increases in his prices twice in a year:- 17. As regards the third issue to investigate on the basis of the evidence whether the increase in the price made by the Noticee w.e.f. 18.04.2018 was justified. It is observed from the submission of the Noticee that they increase the price of his items two times in a year mostly in the month of April and October. Section 171(1) reads as Any reduction in rate of tax on any supply of goods or services or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the year 2014, 2017 and 2019, cannot claim that he has been normally and consistently increasing his prices during the months of April and October every year. Therefore, the above claim of the Respondent is untenable. 70. It is also revealed that the Respondent has not produced even a single comparative chart of the price increases made by him from April, 2014 to April, 2019 which could establish his claim that he has increased his prices twice every year. He has haphazardly without following any sequence annexed Price Lists of the products sold by him, during the month of April, 2018 (page 143-150 of his submissions dated 13.08.2020), as on 15.11.2017 (page 151-157), April, 2017 (page 158-164), October, 2016 (page 165-169), April, 2016 (page 170-174), October, 2015 (page 175-178) and April, 2015 ( Page 179-182) however, from these Price Lists it cannot be concluded that he has increased his prices twice in a year as the details supplied by him are incomplete, unsystematic, incomprehensible and do not included all the Price Lists w.e.f. April, 2014 to April, 2019 as per the claim made by him, hence they cannot be relied upon. 71. It is also established from the below mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tier 2 City Store Percentage Increase Apr-15 170 5.88% 155 6.45% 155 6.45% Oct-15 180 165 165 Apr-16 185 2.77% 170 3% 170 3.00% Oct-16 190 2.70% 175 2.94% 175 2.94% Apr-17 195 2.63% 180 2.85% 180 2.85% Nov-17 210 7.69% 195 8.33% 195 8.33% Apr-18 220 4.76% 205 5.12% 205 5.12% It is clear from the comparison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ov-17 245 8.88% 230 9.52% 230 9.52% Apr-18 255 4.08% 240 4.34% 240 4.34% 74. The Respondent has similarly submitted the price increase trend in respect of his product Tall Macchiato along with the copies of the invoices placed at page 120-142 for his various types of Stores which again do not establish the claim of periodical increase in the prices due to their being no comparison of the price increases overtime twice a year. The details of the claim made by the Respondent in respect of all the three above mentioned products are mentioned hereunder in Table-D which clearly prove that the percentage increase claimed by the Respondent twice every year is wrong and incorrect:- TABLE-D Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Nov-17 Apr-18 Tall Latte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.26 2.5 2.43 7.14 8.16 2.04 Tier 2 City Store Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Nov-17 Apr-18 Tall Latte 155 165 170 175 180 195 205 Increase (%) 6.45 2.94 2.85 8.33 5.12 Tall Java Chip Frapuccino 185 190 195 200 210 230 240 Increase (%) 2.7 2.63 2.56 5 9.52 4.34 Tall C Macchiato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer to the findings recorded by this Authority in paras supra where it has been held that the observation of the DGAP that the Respondent has been increasing his prices twice in a year is not backed by reliable, cogent and clear evidence and hence the profiteered amount cannot be reduced to ₹ 33,82,472/-. 79. The Respondent has also stated that the DGAP ought to have adopted a reasonable period for investigation. He has also cited the Order dated 26.6.2019 passed by this Authority in the case of Mohammad Azid Ramzani another v. M/s. Adarsh Marbles 2019-TIOL-42 NAA-GST = 2019 (6) TMI 1337 - NATIONAL ANTI-PROFITEERING AUTHORITY in his support on the ground that he was having very limited stock holding period and he had increased his prices w.e.f. 18.04.2018 and hence the investigation should be carried out till 17.04.2018 only. As has been discussed above the Respondent has not passed on the benefit of tax reduction any time in the post reduction period and he still continues to be in violation of the provisions of Section 171 (1) and hence he is required to be investigated even at this stage. Hence, the period of investigation can neither be limited to 17.04.2018 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITC and incremental increase in his costs was not built in the post rate reduction prices, therefore, he cannot resile from his above claim and seek set off against the profiteered amount. Moreover, he could have increased his prices in the month of October, 2017 as per the practice being followed by him but he had not done so and chosen to misappropriate the benefit of tax reduction which he was required to pass on. Therefore, the above contention of the Respondent is untenable. 82, The Respondent has further claimed that the investigation ought to have been restricted to the product in respect of which the complaint was made and it could not have been expanded to include all the products sold by him. In this context it is clear from the perusal of Sub-Section 171 (1) that both the benefits of tax reduction and ITC are required to be passed on by the suppliers to the buyers by commensurate reduction in the prices as they are the concessions which have been granted to them from the public exchequer in the interest of the buyers. Sub-Section 171 (2) provides that the Central Government may on the recommendations of the GST Council constitute an Authority to examine whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Section 171 (1), while supplying other goods or services if it comes to his notice during the course of the investigation. Since, the DGAP is the investigating arm of this Authority any Report furnished by him to this Authority has to cover all the cases of denial of the above benefits once they have come to his notice keeping in view that this Authority has mandate to examine all such cases, determine the amount of benefit and provide relief to the affected buyers. The DGAP is bound to bring before this Authority all such cases in which both the above benefits have not been passed on irrespective of the fact whether any complaint has been received concerning them or not once they have come to his notice. The Respondent cannot be allowed to deny benefit of rate reduction to the other buyers under the above pretext and misappropriate the amount of benefit of ITC which he is not to pay from his pocket. Accordingly, the DGAP has rightly investigated the benefit of rate reduction to be passed on to the other buyers on the products other than the complained product after giving him due notice under Rule 129 (3) and hence, the investigation conducted by him in this regard is le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entity level. Any passing of benefit at entity level would amount to denial of commensurate benefit which would fall foul of the provisions of Article 14 of the Constitution as well as Section 171 (1). Therefore, the claim made by the Respondent that he has increased his prices by 9-10% at the entity level which was well below the loss of ITC cannot be accepted. Moreover, the above claim of the Respondent is not borne out from the perusal of Annexure-4 of the investigation Report dated 05.02.2020 which shows that the Respondent has increased his prices by more than 11 .79%, the permissible limit upto which he could have increased them to offset the denial of ITC. Accordingly, the above contention of the Respondent is not correct. 86. It was further contended that the average prices computed for the period upto 14.11.2017 should be compared only with the average prices for the products sold from 15.11.2017. In this regard it would be pertinent to mention that it was essential to compute the pre rate reduction average base price of each product being supplied by the Respondent as he was not selling it on the same price to the various customers and the impact of differential p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both. These benefits can also not be passed on at the entity/organisation/branch level as the benefits have to be passed on to each and every buyer on each product/unit/service level by treating them equally. The above provision also mentions any supply which means each taxable supply made to each buyer thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer therefore he would pass less benefit or no benefit to another customer than what is actually due to that customer. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him of course subject to his entitlement. The word commensurate mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product or unit or service based on the tax reduction or the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service are completely different from each other and therefore, the mathematical methodology employed in the case of one sector cannot be applied in the other sector. Moreover, both the above benefits have been given by the Central as well as the State Governments as a special concession out of their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous, mandatory and legally enforceable, The above provisions also reflect that the true intent behind the above provision, made by the Central and the State legislatures in their respective GST Acts is to pass on the above benefits to the common buyers who bear the burden of tax. The Respondent is trying to mislead by wrongly claiming that he was required to carry out complex mathematical computations for passing on the benefit of tax reduction which he could not do in the absence of the procedure and methodology. His claim is absolutely incorrect as he was only required to maintain the pre rate reduction base price of each pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DGAP that the Respondent had profiteered an amount of 1,04,70,664/- including the GST on the products on which he has increased his prices by more than 11.79%. It would also be relevant to mention here that no profiteering has been computed in respect of those products on which the prices were increased upto 11.79% to make up for the loss of ITC by the Respondent. Therefore, the above plea of the Respondent is untenable. 90. It was also argued by the Respondent that right to trade was a fundamental right guaranteed under Article 19(1)(g) of the Constitution of India which included the right to determine prices which could not be taken away. In this context it would be appropriate to state that there is no provision under Section 171 of the above Act to regulate prices of the products being sold by the Respondent and the mandate of the above Section is limited to the extent pf passing on the benefits of tax rate reduction and ITC. Neither the DGAP or this Authority has tried to act as a price controller or price regulator nor there is any such power vested in them. The Respondent is free to fix his prices and carry out his business operations as per the right guaranteed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rightly been included in the profiteered amount as it denotes the amount of benefit denied by the above Respondent. It would also be appropriate to state here that price includes CST also. Therefore, the above contention of the Respondent is untenable and hence it cannot be accepted. 93. It is established from the perusal of the above facts that the Respondent has profiteered to the tune of ₹ 1 ,04, 70,664/- during the period from 15.11.2017 to 30.06.2018 which he is required to pass on to the buyers by commensurately fixing prices of his products after taking in to account the impact of denial of ITC, which he has not done and hence he has violated the provisions of Section 171 (1) of the CGST Act, 2017. Accordingly, as per the provisions of Section 171(2) of the above Act read with Rule 133 (1) of the CGST Rules, 2017 the profiteered amount is determined as ₹ 1,04,70,664/-. The details of the computation have been given in Annexure-4 of the DGAP s Report dated 05.02.2020. The State wise profiteered amount has been mentioned in the Table given below:- Table Sr.No. State Code (Place of Supply) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so evident from the above narration of the facts that the Respondent has denied benefit of rate reduction to the buyers of his products in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171(1) during the period from 15.11.2017 to 30.06.2018 and therefore, he is apparently liable for imposition of penalty under the provisions Of Section 171 (3A) of the above Act. However, perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 15.11.2017 to 30.06.2018 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent. 97. As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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