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TMI Blog2021 (1) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Rate) dated 14.11.2017 without the benefit of ITC. Therefore, the Respondent is liable to pass on the benefit of tax reduction to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the present investigation has been carried out w.e.f. 15.11.2017 to 30.04.2019. It is also evident that the Respondent has been dealing with a total of 1650 items during the period from 15.11.2017 to 30.06.2019. Upon comparing the average selling prices as per the details submitted by the Respondent for the period from 01.08.2017 to 14.11.2017 and the actual selling prices post rate reduction w.e.f. 15.11.2017 to 30.06.2017 the DGAP has reported that the GST rate of 5% has been charged w.e.f. 15.11.2017. however, the base prices of 1434 products have been increased more than their commensurate prices w.e.f. 15.11.2017 which established that because of the increase in the base prices the cum-tax prices paid by the consumers were not reduced commensurately, inspite of the reduction in the GST rate - While comparing the average pre rate reduction base prices with the post rate reduction actual base prices the DGAP has duly taken in to account the impact of denial o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited in paras 26 27 of the DGAP report dated 31.01.2020. Further, with effect from 15.11.2017, Respondent was not allowed to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, Therefore, in terms of provisions of Section 16 (2) (a) Respondent was not eligible to take ITC w.e.f. 15.11.2017 on the strength of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from ITC availment. As Respondent has received the taxable invoices post 15.11.2017 when he was ineligible to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore the same cannot be considered for computation of denial of Input Tax Credit to net turnover ratio. The office of the DGAP has been charged with the responsibility of conducting a detailed investigation to collect the evidence necessary to determine whether both the above benefits have been passed on or not in terms of the provisions of Section 171 of the CGST Act, 2017 and the Rule 129. The above Rule has been framed by the Central Government under Section 164 of the CGST Act, 2017 read with Section 171 (3) which has the approval of the Parliament a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has been revised vide the DGAP s Supplementary Report dated 08.10.2020. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent is directed to deposit an amount of ₹ 3,10,56,939/- in two equal parts of ₹ 1,55,28,470/- each in the Central Consumer Welfare Fund and the State Consumer Welfare Funds as mentioned in the Table F Revised, as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The above amount of ₹ 3,10,56,939/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned CGST/SGST Commissioner. Penalty - HELD THAT:- The Respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and hence he has committed an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the Respondent was afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period 21.05.2019 to 23.05.2019. The Authorized Representative of the Respondent availed of the said opportunity on 22.05.2019. 3. The DGAP had further reported that the period covered in the current investigation was from 15.11.2017 to 30.04.2019 and the time limit to complete the investigation was extended up to 01.02.2020 by the National Anti-profiteering Authority, in terms of Rule 129(6). 4. The DGAP had further reported that in response to his Notice dated 13.05.2019 and subsequent letters and summons the Respondent submitted his responses before the DGAP vide his e-mails/letters dated 22.05.2019, 03.06.2019, 12.06.2019, 18.06.2019, 09.07.2019, 22.07.2019, 14.08.2019, 26.08.2019, 29.08.2019, 03.09.2019, 23.09.2019, 30.09.2019 and 13.01.2020. Vide his various replies, the Respondent made the following contentions before the DGAP:- a. That he was engaged in the business of Film exhibition service (box office collection), Food and Beverage and advertisement services, etc. Further, it was submitted that the present in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 171 of the CGST Act, his case did nt fit the criteria of a case of profiteering. e. That before 15 Nov 2017, the supply of food and beverage by him was liable to GST rate of 18% with full ITC allowance, whereas w.e.f. 15 Nov 2017, his supply of food and beverages had become liable to GST at 5% without ITC, which had a far-reaching impact on his business and profitability on account of the reduction in tax on outward supplies; and the increase in the cost of his direct and indirect procurements due to loss of ITC; that the actual loss of ITC had been reflected in the GST returns filed by him for periods covering 15 November 2017 onwards and the summary of the same, which duly reconciled with his GST returns, has been given in the table- A below: Table-A Period Food and Beverage Taxable Turnover (i.e. net of taxes) ITC Denied (in Full) and Reversal on Common ITC pool 15-Nov-17 to 31-Mar-18 31.80 Crores 4.87 crores f. That it could be seen from the above Table that he had incurred a loss of 17% (approx.) but he had kept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Incurred by the Respondent Table- C (Amounts in Rs.) Particulars Tea Georgia Popcorn Base Price Before the change in GST rates (A) 76.27 220.34 Loss of ITC 17.21% 17.21% Loss of ITC (Amount) (B) 13.13 37.92 Prices should have been revised to (C = A+B) 89.40 258.26 GST 5% on above (D = 5% of C) 4.47 12.91 The price that should have been charged to the Customer (E = C+D) 93.87 271.17 Actual Price Charged (F) 90.00 260.00 Excess Benefit Passed on the to Customer (E-F) 3.87 11.17 j. That as illustrated above, no incremental profit was made by him, and that the ITC loss parallel to the rate change event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factored before attempting to compare any random data points over a period as long as 18 months. 5. The DGAP had also reported that vide the aforementioned e-mails/letters, the Respondent had also submitted the following documents/information: (a) Copies of GSTR-1 returns for the period July 2017 to April 2019. (b) Copies of GSTR-3B returns for the period July 2017 to April 2019. (c) Copies of sample sale invoices along with sample SKU s at different properties. (d) Copy of the price fluctuation data for different properties. (e) Monthly Summary of Multiplex wise item-wise sales register for the period July 2017 to April 2019 for all the states. (f) Actual ITC loss sheet and excess loss incurred due to benefit passed on. (g) Input Tax Credit register for July 2017 to November 2017. (h) Copy of Sample invoices of ITC availed during November 2017. (i) Copy of Balance Sheets for the FY 2016-17 2017-18. (j) Copy of Maharashtra GST Registration. (k) Reconciliation of F B sales and Non-F B sales with GST Returns. (I) Details of ITC Reversed on Stock of 14 November 2017 in proportion to expected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anti-profiteering provisions attempted to regulate the prices and disregarded business outcomes and their its impact / question the base prices as Section 171 of the Act did not mandate control over the prices of the goods or services as it was to be determined by the supplier and that Section 171 only mandates that any reduction in the rate of the tax or the benefit of ITC which accrues to a supplier must be passed on to the consumers as these were concessions given by the Government and the suppliers were not entitled to appropriate them; that any such benefits must go to the consumers and in case the consumers were not identifiable the amount so collected by the suppliers was required to be deposited in the Consumer Welfare Fund; that he had not examined the cost component included in the base prices but had only factored the denial of ITC to the pre rate reduction base price since Anti-profiteering provisions attempted neither to regulate the prices nor to disregard any business outcomes. 10. It was also stated by the DGAP that the concern over the long period of investigation was frivolous since the period of Investigation has not been prescribed either in the CGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Standing Committee along with the minutes of its meeting with its recommendation that the Application had been forwarded to the DGAP for carrying out the investigation and that the said action was totally in consonance with the contents of Rule 129 of the CGST Rules, 2017. 14. The DGAP has also reported that Respondent s contention that no adequate opportunity of representation was given by the State Screening Committee was not found tenable as Rule 133(2) of the CGST Rules, 2017 only bestows the power of granting any interested party the opportunity of being heard only to this Authority and that there was no such power available with the State Screening Committee or Standing Committee; that Rule 133 (2) reads as follows- An opportunity on hearing shall be granted to the interested parties by the Authority where any request was received in writing from such interested parties . 15. The DGAP has also reported that the Respondent s submissions related to his having opened new units/ properties or supplied new food items and beverages, etc. have been duly considered in the investigation and the profiteering has been computed only for those goods and services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period July-October 2017 if the item had not been sold during 01.11.2017 to 14.11.2017) with the actual item-wise prices post 15.11.2017. 19. The DGAP has reported that during the investigation it was noticed that the lower GST rate of 5% had been charged on the increased base prices of the items in the post-tax rate reduction period after 15.11.2017, which established that the tax amount was computed @ 18% before 15.11.2017 and @ 5% w.e.f. 15.11.2017. The charging of the lower tax on a higher (enhanced) base price had resulted in the customers having to pay more than the commensurate price. Thus, while the Respondent s contention during the investigation that the tax amount was computed 18% before 15.11.2017 and at a reduced rate of 5% w.e.f. 15.11.2017 was correct, this in no way established that the commensurate benefit of the reduction in the GST rate had been passed on by him to his customers. On the contrary, the fact was that the customers should have paid a lower final price after the GST rate was reduced to 5% but the final item-wise prices remained unchanged for the customers and hence it was clear that the benefit was not passed on to them by the Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total taxable turnover of the Respondent, the ITC for the period July 2017 to October 2017, as furnished in the GSTR-3B, has been adjusted by excluding the amount of ITC availed in respect of supplies of other/ non-restaurant services. Further. ITC availed on common inputs, input services and capital goods has been taken proportionately, based on the proportion of Respondent s turnover from restaurant service to his total turnover. While determining the net taxable turnover of the Respondent during the period July 2017 to October 2017, the total taxable turnover (only restaurant service) as per SKU wise sales summary duly reconciled with GSTR-1 returns for the period July 2017 to October 2017 had been taken into consideration by the DGAP. Finally, the ratio of ITC to the net taxable turnover had been taken for determining the impact of denial of ITC for the period from July 2017 to October 2017. On this basis, the finding was that ITC amounting to ₹ 8,92,55,966/- was available to the Respondent during the period July 2017 to October 2017 which was approximately 9.70% of the net taxable turnover of restaurant service (₹ 92,01,72,389/-) supplied during the same perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (C+H) 1,41,37,811 2,26,22,865 2,62,26,606 262,68,684 8,92,55,966 Net Outward Taxable Turnover for the period July, 2017 to October, 2017 (J) = (F) 21,65,99,800 24,03,35,295 21,27,81,452 25,04,55,842 92,01,72,389 . The ratio of ITC to Net Outward Taxable Turnover (K)= (I/J) 9.70% 22. It w as further reported by the DGAP that the analysis of the details of item-wise outward taxable supplies during the period of 15.11.2017 to 30.04.2019 revealed that the Respondent had increased the base prices of different items Supplied by him as a part of restaurant service to make up for the denial of ITC post GST rate reduction. The pre and post GST rate reduction prices of the items sold as a part of restaurant service during the period 15.11.2017 to 31.03.2019 were compared and it was established that the Respondent increased the base prices by more than 9.70% i.e., by more than what was required to offset the impact of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F 18% 5% 7. Denial of ITC of 9.70% as per table- d above G=E*9.70% 11.51/- 8. Commensurate Base price (post Rate reduction) (Excluding GST) H=E+G 130.16/- 9 Commensurate Selling price (post Rate reduction) (including GST) 1=105% of H 136.67/- 10. Post reduction illustrative month J Jan-2018 11. Total quantity Sold K 1,788 12. Total Invoice Value (including GST) L 2,50,320/- 13. Actual Selling price (post rate reduction) (including GST) M=L/K 140/- 14. The excess amount charged or Profiteering per unit N=M-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 19,13,126 5 Gujarat 24 21,72,745 6 Haryana 6 11,93,313 7 Jharkhand 20 4,96,181 8 Karnataka 29 31,02,637 9 Kerala 32 2,61,609 10 Madhya Pradesh 23 7,16,906 11 Maharashtra 27 99,20,757 12 Orissa 21 9,82,190 13 Punjab 3 6,16,561 14 Rajasthan 8 23,84,474 15 Tamil Nadu 33 20,72,177 16 Telangana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold without the approval of the Standing Committee, a pre-requisite under Rule 129(1) of the CGST Rules that reads as follows:- Where the Standing Committee is satisfied that there is a prima-facie evidence to show that the supplier has not passed on the benefit of reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, it shall refer the matter to the Director General of Anti-profiteering or a detailed investigation. c) that in terms of sub-rule (3) of Rule 129 of the Rules, ibid, the notice to be issued by the DGAP before the start of the investigation should inter-alia mention the description of the goods or services in respect of which the proceedings have been initiated ; that it was a specific requirement under the above Rule to mention, in the notice, the description of the goods or services which is a clear indication that proceedings could be initiated only in respect of those goods which were described in the Notice; that, however, in the present proceedings, the Notice issued nowhere mentioned that an investigation was being initiated for all the items; that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne in that way or not at all. 32. The Respondent has further submitted that the DGAP in the given scenario was mandated by GST law to follow a pattern of action while carrying out the investigation. In light thereof, without any specific complaint, any evidence, or any description whatsoever in the Notice, the DGAP could not have suo-moto broadened the scope of the investigation to products other than those which had been referred to it either by the Standing Committee or this Authority. It was for this reason that Rule 133 of the CGST Rules had been amended prospectively by insertion of sub-rule (5) vide Notification No. 31/2019 - Central Tax dated 28.06.2019 granting powers to this Authority (and not to the DGAP) which could expand the scope of an investigation. Even in that scenario, this Authority had to give reasons to believe that there was a contravention of the provisions of Section 171 of the CGST Act 2017. The said amendment, which, was prospectively applicable, has been extracted herein below: (5) (a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Anti-profiteering referred to in sub-rule (6) of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and would apply to even a case where the return was filed before 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 sum of ₹ 1,000. Under section 271(1) (c) (iii) the minimum penalty imposable is a sum equal to the amount of income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. In cases where the minimum penalty imposable exceeds the sum of ₹ 1,000, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner. Under the amended provision, the Income-tax Officer is enabled to deal with cases in which the amount of income concealed did not exceed the sum of ₹ 25,000. In other cases, it is the Inspecting Assistant Commissioner who would have jurisdiction to deal with penalty proceedings. Thus, those cases in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. The Respondent had also placed strong reliance on the recent decision of the Hon ble Delhi Court in the case of Reckitt Benckiser India Private Limited v. UOI wherein the Court directed that no information was required to be submitted to DGAP other than the information pertaining to the goods mentioned in the Application. The relevant extract of the ruling in Reckitt Benckiser (supra) was re-iterated herein below: The Court is of the view that the Petitioner has made out a prima facie case for grant of limited interim relief. It is directed that, till the next date, it will not be required to furnish information to the DGAP pursuant to the impugned notice other than information pertaining to the Subject Goods. It is, however, clarified that the NAPA s inquiry as far as the Subject Goods is concerned will proceed in accordance with law. 37. The Respondent has further submitted that the DGAP s jurisdiction w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which it does not possess. Kiran Singh v. Chaman Paswan [AIR 1954 SC 340] A defect of jurisdiction strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties. Benarsi Silk Palace v. CIT [(1964) 52 ITR 220 (All)] Jurisdiction could be conferred only by statute and not by consent and acquiescence. Since jurisdiction is conferred upon Income Tax Officer to proceed under Section 34 (1) only if he issues a notice an assessee cannot confer jurisdiction upon him by waiving the requirement of notice because jurisdiction cannot be conferred by consent or acquiescence 40. The Respondent also submitted that the DGAP had exceeded its jurisdiction and has thus travelled far beyond its power by investigating all products which neither formed a part of the complaint examined by the Standing Committee nor was it mentioned in the Notice issued by the DGAP. The investigation conducted by DGAP was therefore in gross violation of the mandate in terms of Rule 129 of the CGST Rules and went to the very root of the investigation. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Committee on Anti-profiteering on 02.05.2019 to investigate the matter, hence the period from 15.11.2017 up to the latest month of receipt of reference was taken up for investigation i.e. from 15.11.2017 to 30.04.2019 which has already been conveyed in para-5 above. 44. The Respondent has further submitted that the forwarding of complaint from the Screening Committee was even beyond the extended period of one month that could have been allowed by this Authority. Further, the use of negative words not exceeding a further period of one month under Rule 128 has an inbuilt element of a mandatory prescription. It meant that the legislature intended this Authority to condone the delay of only one month and any further condonation would render the phrase not exceeding a further period of one month wholly otiose. 45. It has been further argued by the Respondent that where a limitation period was prescribed and the condonation of delay period was also prescribed in law, it was not permissible to further extend or condone the delay. When an extension period was prescribed in law, the delay (beyond the extension) could not be condoned even by the Courts. In the case of Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of application by the Screening Committee was even beyond the extended period of one month that could be allowed only by this Authority. Further, it was apparent that the Screening Committee had exceeded the statutory period of two months (to conclude investigation) by seven times. It was argued by the Respondent that the delay was deliberate because, on account of this unlawful delay, the DGAP was allowed an unfettered free play to expand the period of investigation till April 2019 and arrive at a stratospheric alleged profiteering amount of ₹ 3.85 crores (approx.) A period of limitation prescribed by a Rule could not be diluted, more so when the delay has such grave financial implications hardships caused to the taxpayer. 48. The Respondent has also submitted that the use of the word shall in Rule 128 was indicative of the seriousness which the Screening Committee ought to have attached to the prescribed timeline. The use of the word shall in a statute denoted mandatory prescription. The strict requirement of two months was specified to ensure that the taxpayers should not be asked to produce documents and face inquiry after a prolonged delay, as it would irreve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly. 50. The Respondent has also submitted that the Hon ble Supreme Court, in the case of State of Punjab v. Shreyans Industries Ltd., has held that once the period of limitation expired, the immunity to being subject to assessment sets in and the right of the tax officer to make assessment got extinguished. It was further stated in the case of Shreyans Industries (supra) that once an assessment has already become time-barred, a valuable right accrues in favour of the assessee. The relevant extract from Para 23 of the judgment is quoted below: If one is to go by the aforesaid dicta, with which we entirely agree, the same shall apply in the instant cases as well. In the context of the Punjab Act, it can be said that extension of time for assessment has the effect of enlarging the period of limitation and, therefore, once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore, there would be no question of extending the time for assessment when the assessment has already become time-barred. A valuable right has also accrued in favour of the assessee when the period of limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent has also submitted that the DGAP had failed to submit the Impugned Report within the time limit as prescribed under the statute. In terms of sub-rule (6) of Rule 129, as it stood on the date of initiation of proceedings by DGAP, required that the investigation report must be submitted within a period of three months from the date of receipt of a reference from the standing committee. The relevant extract is provided below: (6) The Director General of Anti-profiteering shall complete the investigation within a period of three months of the receipt of the reference from the Standing Committee or within such extended period not exceeding a further period of three months for reasons to be recorded in writing as may be allowed by the Authority and, upon completion of the investigation, furnish to the Authority, a report of its findings along with the relevant records. 55. The Respondent has further submitted that the investigation was neither completed by the DGAP nor a corresponding report submitted in the prescribed 3 months period from the date of initiation of proceedings and that the Impugned Report was furnished only in the 9th month from the date of initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was suggestive of its retrospective application. He further claimed that the enhanced time limit of 6 months could not be made applicable to investigations pending as on the date of such amendment, since the proceedings were initiated under the law before the amendment and hence, would be subjected to conditions/ limitations as existed on that relevant date. 58. The Respondent has contended that notwithstanding the above, and assuming for the mere sake of argument that the 6 months period was available to DGAP in the instant proceedings. it remained a glaring fact that the investigation was completed beyond the stipulated 6 months period too. Hence, the additional period also could not rescue the void character of proceedings as explained above. 59. The Respondent has also submitted that in the given scenario, the only way the Impugned Report would stand the test of law would be when the below conditions were cumulatively satisfied: a. The amended 6 months period was available to the proceedings; and b. The said period was further lawfully extended by another 3 months. 60. It was further submitted by the Respondent that assuming for the mere sake of argument a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly devoid of legal merits and failed on the principles of natural justice as well and was, therefore, illegal. 62. The Respondent has further contended that the CGST Act and the CGST Rules did not prescribe any procedure or mechanism for calculation of profiteering due to which the DGAP arbitrarily adopted a methodology that best suited its motive. Given the absence of knowledge of the basis on which the DGAP had to act, the Respondent was compelled to accept any procedure adopted by DGAP and the opportunity of full defence to the Respondent was also curtailed. This violateed the principles of natural justice. 63. The Respondent has also submitted that as per Rule 126 of the CGST Rules, it was this Authority that could determine the methodology and the procedure. However, in the present proceedings, the DGAP has used its own methodology and procedure to determine the alleged profiteering amount. This violates the mandate given under Rule 126 since the DGAP did not have the statutory power to determine the methodology and procedure that had to be considered while computing the profiteering amount. 64. Further, the Respondent has contended that till 27.02.2020 this Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the Respondent has contended that this Authority, in the case of Jubilant Food works Ltd., has itself admitted in Para 47 that no methodology for 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 prescribed for computing the profiteering amount was untenable and highlighted the lacunae of methodology, which was required to be devised under the law. In this regard, the Respondent has submitted that in the case of anti dumping levies under the Customs Tariff Act, 1975, there were broad guidelines based on which the extent of dumping and anti dumping duty was quantified. Even under anti-dumping investigations, the products under consideration were from completely different industries, still, the general principles for the determination of injury and dumping margin were well enshrined under the law and the Rules made thereunder. In this regard, the principles for the determination of injury, evidence of dumping, and calculation of non-injurious price have been provided in a detailed manner under the Customs Tariff (Identifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice; that he places his reliance on the decision of the Hon ble Supreme Court in the case of Automotive Tyre Manufacturers Association v. Designated Authority, wherein the Directorate General of Anti dumping and Allied Duties (DGAD) had passed an order without granting personal hearing to the parties and the said order was quashed by the Apex Court on the ground that it was a violation of the principles of natural justice. The relevant extract from the judgment was 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], if one person hears and other decides, then personal hearing becomes an empty formality 70. The Respondent has further argued that the DGAP could not be given a free pass to compute profiteer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d his case in a manner that evidenced arbitrariness and inequality; that the DGAP has adopted that period of investigation/ method of computation which was the best suited for it to reach its preconceived objective; that such an approach of the DGAP was a violation of Article 14 of the Constitution of India and the concept of equality before the law; that reliance in this regard has been placed on the decision of the Hon ble Supreme Court in the case of Ajay Hasia and Ors. V. Khalid Mujib Sehravardi and Ors wherein it was inter-alia observed that wherever there was arbitrariness in the State action, whether it was of the legislature or the executive, Article 14 immediately springed into action and struck down such action. The concept of reasonableness and non-arbitrariness pervades the entire constitutional scheme and was a golden thread that ran through the whole of the fabric of the Constitution. The Respondent has relied upon the following decisions to submit that the taxing statutes must conform to Article 14 of the Constitution of India: The State of A.P. and another v. Nalla Raja Reddy and others [AIR 1967 SC 1458] Kunnathat Thathunni Moopil Nair etc. v. the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Authority s own comments, which were published vide its press release on 04.10.2018, which are as under: ..National Anti-Profiteering Authority, assured companies that the National Anti-Profiteering Authority is not a price regulator and neither does it have legislative intent . The Respondent has added that given the above the impugned Report of the DGAP merited to be quashed by this Authority. 77. The Respondent has also submitted that Section 171(1) of the CGST Act, which laid down the framework for anti-profiteering in the context of GST laws, reads as follows- 171. (1) 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. . which implied that no profiteering should be done in the name of GST in an event of (a) reduction in tax rate or (b) benefit of enhanced ITC and that the benefit of the same should be passed on to the recipient of supply by way of commensurate reduction in prices. 78. The Respondent has also submitted that the key aspect to be analyzed was what factual scenario would constitute `profiteering and has relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Make or seek to make an excessive profit Shorter Oxford English Dictionary 3. To seek or obtain excessive profits, one who is given to making excessive profits Law Lexicon 4. As nouns, the difference between profit and profiteering is that profit is total income or cash flow minus expenditures the money or other benefit a business receives in exchange for products and services sold at an advertised price while profiteering is the act of making an unreasonable profit not justified by the corresponding assumption of risk, or by doing so unethically Wiki Diff online 5. Any conduct or practice involving the acquisition of excessive profits Mount vs. Welsh 81. The Respondent has further argued that the above meanings/ definitions/ connotations, read together with the FAQ (supra), suggest that profiteering could be said to have been done only if there has been a willful lack of fairness, i.e. either when any incremental margins or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduction in the rate of tax or ITC allowance or disallowance). 84. It was also submitted by the Respondent that given the above, the supply of food and beverages by the multiplexes could not be compared to the supply of food and beverages by the restaurants, where the supply of food and beverage was based on printed rate or menu card, which were fixed for medium to long duration. In the case of multiplexes, the prices were dynamic and revised frequently depending upon all parameters stated above. Therefore, the computation of profiteering should be undertaken only given the business nuances and uniqueness of his case. 85. The Respondent has also reiterated his submissions made before the DGAP that the supply price data depending upon food/ beverage items, in question, and keeping in view the factors above; the prices could be dynamic on the same date (for different properties) or for the same property (on different dates). It signified differentiation by the film, the day and time of the show, the location of the property etc. 86. The Respondent has also reiterated his submission made before the DGAP that in the present case, no two supplies were comparable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining the amount of profiteering. 89. The Respondent has further submitted that he placed reliance on the decision of this Authority in the case of Kumar Gandhary v. KRBL Ltd. wherein this Authority had accepted the argument that the price of Basmati rice was increased on account of various market factors including the increase in the purchase price of paddy and thus, there was no element of profiteering; that in the above-cited case, the MRP of the product was increased from ₹ 540 to ₹ 585, which constituted an increase of 8.33%, keeping in view, the increase in the purchase price; the increase in the cost has been accepted by this Authority itself as a reason for the price increase; that the entire exercise undertaken by the DGAP should be set aside since the amount of profiteering has been computed arbitrarily. 90. The Respondent has reiterated that the provisions of Section 171 of the CGST Act could restrict the right of the Respondent to increase prices in the normal course of business for such a prolonged period and that the DGAP has assumed that the powers under Chapter XV of the CGST Rules. were akin to price control mechanism and has sought to impinge on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 Tax included in price above at 18% 5% respectively 15.25 4.76 Base price realized by the Respondent 84.75 95.24 (%) Increase in prices [(95.24 84.75) / 95.24] 11.01% 93. Citing the above illustration, the Respondent has submitted that if the ITC loss was more than or equivalent to 11.01%, there was no profiteering since the increased prices were sufficient to offset the ITC losses; that, however, the illustrative factual position in his case was given in the Chart below: CHART Summary of ITC Particulars Amount (INR) ITC loss booked between 15.11.2017 - 31.03.2018 129,737,879 ITC loss booked on transition inventory (i.e. closing stock as of 14.11.2019) 13,590,052 Total ITC loss (as per GSTR 3B) 143,327,9311 % loss on base price pre-rate change Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the absence of such a prescription, the DGAP has erred in arbitrarily vivisecting the ITC pool for F B business, which was not tenable under the law. 96. The Respondent has further contended that if the above contentions had been considered in the computation, the percentage of ITC to Turnover would stand modified as under:- Particulars Data as per Impugned Report (refer Para 27) ITC corresponding to Invoices Dated Between July-October 2017 availed in later months Total Total ITC Availed as per GSTR-3B Total Outward 38,25,67,531 8,19,83,201 46,45,50,732 Taxable Turnover as per GSTR-1 (as duly reconciled at Annexure 22 of the Impugned Report) 4,13,09,24,536 4,13,09,24,536 ITC (A) 11.25% 97. It was submitted by the Respondent that the impact of ITC @11.25% ought to have been considered by DGAP while computing the amount of profiteering but the DGAP has erred in the computation and as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC availed E xclusively on Restaurant Services C 3,13,86,503 . 37,09,230 3,50,95,733 ITC availed on Common inputs, input services and capital Goods D 26,09,23,794 2,87,88,928 28,97,12,722 Total Outward Taxable Turnover as per GSTR-1 E 4,13,09,24,536 4,13,09,24,536 Total Restaurant Taxable Turnover as per SKU Wise Sale Register F 92,01,72,389 92,01,72,389 Total Turnover other than restaurant service G = E-F 3,21,07,52,147 3,21,07,52,147 Proportionate ITC availed towards restaurant Service H D*F/E 5,789,69,463 (refer Page 22 of Impugned Report) 64,12,796 6,42,82,259 Total ITC availed toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt assumptions. It represented actual financial loss incurred by the Respondent, which ought to be netted off/ adjusted in the determination of alleged profiteering amount, as detailed in the Table:- TABLE Amounts (INR) Particulars Key 15.11.2017 to 31.03.2019 ITC Loss as shown in GSTR 3B Return for the period 14.11.2017 to 31.03.2019 A 56,68,27,492 Total Restaurant Taxable Turnover as per GSTR 1 Return per SKU Wise Sale Register for 15.11.2017 to 31.03.2019 B 5,54,03,41,745 ITC Loss% C A/B 10.23% 103. Citing the above Table, it was reiterated by the Respondent that since the actual loss data was available, any alleged profiteering should be determined on considering the same and not otherwise. The Respondent has submitted that from the above Table, it could be observed that various approaches (with respective merits) invariably showed that his ITC as a percentage of turnover was in a narrow range, with the median being close to 10.8%. 104. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment of GST Liability to Government IGST Tax Payable Dr. 5 To Bank .Cr. 5 107. The Respondent has also submitted that if the above relief was upheld, the computation would also be in line with the proposition advocated by this Authority in the following case as well as the commentary in its press release. Extract of the Order dated 16.11.2018 in case no. 14/2018 (Hardcastle Restaurants): 34. It is clear from the definition of profit given by the Respondent in his submissions that it is the advantage or gain derived in a legal business transaction but the same cannot be considered profit if it is illegally derived by appropriating the benefits which were granted by the Government from the public funds to customers. Extract of the press release dated 04.10.2018 it is simple to decide the profiteering by comparing the corresponding invoices of pre-revised rates to post revision which is an accounting procedure and no legality is required. By reduction of rates, the Government sacrifices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months by the Screening Committee is in clear violation of Rule 128 of the CGST, Rules, 2017. Clarification by DGAP : He had received the reference from the Standing Committee on Anti-profiteering on 02.05.2019 with a remark that the complaint had been forwarded to the DGAP for carrying out the investigation. The said action aligned with the contents of Rule 129 of the Central Goods and Services Tax Rules, 2017. c) Para- C : The DGAP failed to complete the investigation proceedings issue the report within the prescribed period thus rendering the impugned report null and void. Clarification by DGAP : In this case, a reference was received from the Standing Committee on 02.05.2019 to investigate the subject matter and NOI was issued on 13.05.2019. Thus the Statutory timeline to complete the investigation was on 01.08.2019 (three months) without extension in terms of Rule 129(6) of the Central Goods and Services Tax Rules, 2017. In the meantime, vide Notification No. 31/2019- Central Tax dated 28.06.2019, the period to investigate the case was replaced with Six months in place of three months earlier which could be extended by a further period of three mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of investigation. In this regard, it is submitted that the period of Investigation has been prescribed neither in the Central Goods and Services Tax Act, 2017 nor in the corresponding Rules/Notifications. This office has received the reference from the Standing Committee on Anti-profiteering on 02.05.2019 to investigate the matter, hence the period from 15.11.2017 up to the latest month of receipt of reference was taken up for investigation, i.e. from 15.11.2017 to 30.04.2019 which has already been conveyed in para-5 above. e) Para- E : Provision of Section 171 (1) cannot be applied to the present case in absence of any transitional supply contract. Clarification by DGAP: The contention of the Respondent that the provisions of Section 171 of the CGST, Act, 2017 did not apply to its case was not tenable as it was found to increase the priced of several items by more than ITC loss suffered by it. The same has been explained in Paras 27 28 of this office report dated 31.01.2020. The relevant extract is reproduced below: 27 .the ratio of input tax credit to the net taxable turnover has been taken for determining the impact of denial of input tax credit f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow: 16. Further, the contention of the Respondent that anti-profiteering provisions attempt to regulate the prices and disregard business outcomes their impact on prices is not correct. Directorate General of Anti-profiteering has not attempted to examine or question the base price as Section 171 does not mandate control over the prices of the goods or services as they are to be determined by the supplier. Section 171 only mandates that any reduction in the rate of the tax or the benefit of ITC which accrues to a supplier must be passed on to the consumers as both are the concessions given by the Government and the suppliers are not entitled to appropriate them. Such benefits must go to the consumers and in case they are not identifiable, the amount so collected by the suppliers is required to be deposited in the Consumer Welfare Fund. This investigation has not examined the cost component included in the base price. It has only added the denial of ITC to the pre rate reduction base price. Therefore, neither Anti-profiteering attempted to neither regulate the prices nor disregard any business outcomes. h) Para- H :- The loss on account of ITC disallowance is higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in later periods also be taken into consideration, it was submitted that Section 16(2) the Central Goods and Services Tax Act, 2017 prescribes certain conditions for entitlement of ITC which are as follows:- i. Respondent is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other taxpaying documents as may be prescribed; ii. Respondent has received the goods or services or both. iii. subject to the provisions of section 41, the tax charged in respect of such supply has been paid to the Government, either in cash or through the utilization of input tax credit admissible in respect of the said supply; and iv. Respondent has furnished the return under section 39: The DGAP has clarified that with effect from 15.11.2017, the Respondent was not allowed to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 Therefore, the Respondent was not eligible to take ITC w.e.f. 15.11.2017 on the strength of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from availing ITC took effect. As the Respondent has received the taxable invoices post 15.11.2017 when he w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onse, the Respondent vide his letter dated 21.07.2020 requested time to file his rejoinder against the clarifications dated 23.03.2020 filed by the DGAP. The above request was allowed by this Authority and the Respondent was granted further opportunity to file his rejoinder latest by 28.08.2020. In response thereto, the Respondent has filed his below-detailed written submissions dated 27.08.2020, in which has averred as follows:- 112. That the DGAP was not the competent authority to increase the scope of the investigation in any profiteering complaint beyond the items that have been complained against and thus DGAP had not just exceeded jurisdiction but also conveniently disregarded the established legal judicial position on the subject matter. 112.1 That in response to his detailed submissions, DGAP s Supplementary response merely provided an ineffectual explanation; that while upholding the validity of its action the DGAP has failed to adduce any legal averments in rebuttal of the contentions made by him and lack the necessary explanation. 112.2 That the DGAP has clarified that unlike the case of Reckitt Benckiser India Private Limited v. UOI he Delhi High Court has sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory prescription had been breached in the said case, the reference by the Standing Committee itself was illegal, and hence, the proceedings ought to be quashed on that basis alone; that the statutory limitation period for completion of investigation and issuance of the corresponding report was not adhered to by DGAP. Contextually, the amendment made in the CGST Rules timelines was only prospective and not available in the present case, which was initiated and was in progress before the relevant amendment; and that the extended period as utilized by DGAP was allowed to it without following principles of natural justice and hence, jeopardizing his interest. 112.6 That the DGAP s Supplementary Report, in Part C, failed to rebut his (Respondent s) contentions in word and spirit.; that DGAP s response seemed to be based upon conjecture that the Amendment to Sub- Rule (6) of Rule 129 by Notification No. 31/2019- Central Tax dated 28.06.2019 would be operative for ongoing investigation as well. 112.7 That vide the amendment to said Sub-Rule, the normal period allowed for completion of the investigation was extended from 3 months to 6 months though without an express stipulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t across different matters that the impugned Report breached the law of limitation and was, therefore, null void. He also submitted that no opportunity of hearing was granted to him while allowing the DGAP extended period to complete investigation, hence, the matter had traversed natural justice and jeopardized his interest. In such a case, the Impugned Report could not be held legitimate since it rightfully ought to be barred by limitation. 113 The Respondent has also argued that the DGAP s approach of measuring each business with the same yardstick was against the principle advocated by this Authority itself in multiple cases. The peculiar facets of the Respondents business, where the price of the same products varied from location to location and for the same location for different show days, show timings, films, etc; must be given due importance while computing the profiteering, which had not been done by the DGAP. 113.1 The Respondent contended that the profiteering provisions could not be applied to supplies other than transitional cases, which were either live or under process when the relevant change in law took place. Adding to its averments, the Respondent submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Respondent had also submitted that the provisions related to payment of GST on the supply of services were governed by Section 13 i.e. time of supply of services. It provided that, if the invoice was issued with in the prescribed time, the time of supply was earlier than the date of invoice or date of payment. The time of supply in the present case, in terms of Section 13 was determined based on the date of the invoice. Further, the Respondent has also stated that the term time of supply has not been defined under the CGST Act. Reference in this regard has been invited to the Point of Taxation Rules, 2011 ( POT Rules ), which were analogous to the time of supply provisions under the CGST Act. He has also claimed that Rule 2(e) of POT Rules defined the term point of tax (comparable to time of supply ), as the point in time when a service would be deemed to have been provided. Conversely put, the actual performance of service, might not be relevant for determining the point of tax. 116. It was also submitted by the Respondent that the time of supply in the present case arose on the date of issuance of invoice. The eligibility to avail ITC was dependent on the date of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to recover Cenvat credit in the event the goods manufactured prior to a cutoff date are cleared at a subsequent date. The Cenvat credit earned being permitted to be used with indefeasible right that cannot be denied in absence of any express provision of law in that behalf. 120. The Respondent has also submitted that it would be preposterous to compute the ITC loss based on extrapolation of proportionate data rather than simply relying upon the actual data reported by the Respondent. The DGAP has provided a flimsy argument that since the actual data was not available on the date of the rate change, hypothetical data should be considered. 121. It was further submitted that various petitions were pending in the High Courts in which the petitioners have raised important issues regarding the constitutional validity of the anti-profiteering provisions along with computation method/ procedures adopted by this Authority for calculating profiteering amount. It was further submitted that the Hon ble High Court of Delhi in the case of Nani Resorts and Floriculture Private Limited vs UOI , had ordered that all the 33 identified matters be listed for hearing on 24.08.2020. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of headwinds, which its premier venture, INOX Leisure Ltd. was facing, coupled with a ZERO revenue stretch of more than 160 days now, has already challenged his strong business foundation and shaken up his financial stability. The Respondent was finding it difficult to discharge even the salaries to his employees and other routine expenditures in absence of any revenue now. He was fighting for survival hence; any liability imposed for the said profiteering would lead to the closure of the business. Given the ground realities, the case needed to be seen sympathetically as well. The Respondent has further added that the Respondent s representation in the present proceedings was further severely obstructed by the fact that since mid-March 20, several of his employees had tested positive for Covid-19. This has led to a complete shutdown of even back-office operations for a significant period; thus, impacting ability to either submit responses or appear before this Authority. The Respondent would like to report the severity of the issues, sadly though, given the demise of some of the said employees, an irrecoverable loss of the Respondent. The Respondent has stated that without prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore the same cannot be considered for computation of denial of Input Tax Credit to net turnover ratio. However, the DGAP has inadvertently not considered the ITC availed during the period 01-14 Nov. 2017 pertaining to the invoices issued from July 2017 to Oct., 2017. Therefore, he has re-computed the ratio of Input Tax Credit to Net Outward Taxable Turnover after adding the amount of ITC pertaining to the invoices issued from July 2017 to Oct., 2017 but availed during 01-14 Nov., 2017 and also excluding the amount of ITC pertaining to the period before July, 2017 which was availed during the period July, 2017 to Oct., 2017 as per GSTR-3B returns. Accordingly, the ratio of Input Tax Credit to Net Outward Taxable Turnover is determined as 10.22% as per table below: Table- D (revised) Particulars July-2017 Aug.-2017 Sept.-2017 Oct.-2017 Total ITC Availed as per GSTR-3B (A) 5,10,45,836 8,64,73,023 12,02,04,147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than restaurant service (K)= (I) (J) 72,07,86,672 84,43,86,507 79,98,60,105 84,57,18,863 3,21,07,52,147 Proportionate ITC availed towards restaurant Service (L)= (H*J/1) 6,02,25,143 Total ITC availed towards Restaurant Service (M) = (C+D+L) 9,40,64,163 Net Outward Taxable Turnover for the period July, 2017 to October, 2017 (N) = (J) 92,01,72,389 Ratio of Input Tax Credit to Net Outward Taxable Turnover (0)= (M/N) 10.22% ( III) Further with regards to the total profiteering, only those items where the increase in base price is more than what is required to offset the impact of denial of input tax credit, have been considered. On the basis of the pre and post reduction in GST rates, the impact of denial of input tax credit and the details of outward supplies (other than zero rated, nil rated and exempted supplies) during the period 15.11.2017 to 30.04.2019, as per the item wise sales registers, the amount of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49,10,394 Grand Total 3,10,56,939 124. The Respondent vide his additional submissions dated 19.10.2020 on the supplementary Report of the DGAP dated 08.10.2020 he submitted that the profiteering provisions being applicable to only transitional contracts the DGAP s office has stated sweeping commented that the profiteering is found in later contracts also and hence, provision of Section 171 extended to such later period. The DGAP has failed to explain its position that why a contract of sale that is proposed/ executed/ serviced (all events) post the change in rate of tax should even concern Section 171 in first place (the computational aspects should be delved into only if provisions are applicable at an in-principle level). It is submitted that the prices of supplies would but naturally change over a period of time inculding in our case where the prices have been revised (including downwards) purely out of commercial considerations. As per DGAP s view once the rate of tax has been lowered, any subsequent price increase (for indefinite period) would fall within purview of profiteering provisions. He req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is earlier submissions of the supplementary Report dated 08.10.2020. 126. The DGAP s Supplementary Report dated 09.11.2020 was supplied to the Respondent vide Order dated 11.11.2020 to file his consolidated and concise submissions by 18.11.2020. The Respondent has filed his consolidated submissions dated 18.11.2020, wherein he has stated that: S. No. Particulars of Averment/Ground 1. DGAP has exceeded its power by investigating products beyond contours or the complaint which goes to the very root of its jurisdiction. 2. Examination over 14 months by the screening committee is in clear violation of Rule 128 of the CGST Rules. 3. The DGAP failed to complete the investigation proceedings issue the Report thereof within the prescribed time thus rendering the impugned report Null Void. 4. No methodology was prescribed to derive profiteering, thus, leading to an arbitrary exercise of powers by DGAP. 5. Provision of Section 171(1) cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with a total of 1650 items during the period from 15.11.2017 to 30.06.2019. Upon comparing the average selling prices as per the details submitted by the Respondent for the period from 01.08.2017 to 14.11.2017 and the actual selling prices post rate reduction w.e.f. 15.11.2017 to 30.06.2017 the DGAP has reported that the GST rate of 5% has been charged w.e.f. 15.11.2017. however, the base prices of 1434 products have been increased more than their commensurate prices w.e.f. 15.11.2017 which established that because of the increase in the base prices the cum-tax prices paid by the consumers were not reduced commensurately, inspite of the reduction in the GST rate. 130. While comparing the average pre rate reduction base prices with the post rate reduction actual base prices the DGAP has duly taken in to account the impact of denial of ITC in respect of the restaurant service being supplied by the Respondent as a percentage of the taxable turnover from the outward supply of the products made during the pre-GST rate reduction period by taking into consideration the period from 01.07.2017 to 31.10.2017 and not up to 14.11.2017. This has been done because: (a) The Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w products launched post-GST rate reduction. 132. Based on the aforesaid pre and post-reduction GST rates, the impact of denial of ITC and the details of outward supplies (other than zero-rated, nil rated, and exempted supplies) during the period from 15.11.2017 to 30.04.2019, the amount of net higher sale realization due to increase in the base prices of the products, despite the reduction in the GST rate from 18% to 5% with denial of ITC or the profiteered amount has come to 3,85,30,314/- including the GST on the base profiteered amount. The details of the computation have been given by the DGAP in Annexure-22 of his Report. However, the DGAP vide his Supplementary Report dated 08.10.2020 has partially accepted the objection of the Respondent regarding under-reporting of the eligible ITC allowance. The DGAP has submitted that the ratio of input tax credit to the net taxable turnover has been computed on the basis of actual data submitted by the Respondent himself before him and it was reiterated by him that the Respondent s contention of considering actual ITC loss data for the period 15.11.2017 to 31.03.2018 was not tenable as the same could only be computed after the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from ITC availment. As Respondent has received the taxable invoices post 15.11.2017 when he was ineligible to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore the same cannot be considered for computation of denial of Input Tax Credit to net turnover ratio. He has also relied upon the Hon ble Chennai Tribunal in the case of Same Duetz-Fahr India Pvt. Ltd. Wherein it was upheld that the eligibility to avail ITC is with reference to the date of receipt of inputs in the factory and subsequent exemption granted to the final product shall not impair such right. The Tribunal further said that the denial of ITC on inputs reaching the factory after the prescribed date is possible, however, eligibility to avail ITC on inputs received before the exemption is not hampered and that such credit could be availed at a later date too however, the present case is different from the above quoted case and the denial of ITC arose out of the Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 which was not the scenario in the above quoted case. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,689 24,84,290 71,79,538 1,03,33,922 Less: Common Input Tax Credit pertaining to prior July, 2017 but availed in July,2017 to October, 2017 GSTR-3B (Annex- (G) (6,72,096) (1,87,777) (24,461) - (8,89,334) Net ITC availed on Common inputs, input services and capital goods (H)=(E+F-G) 4,31,69,858 6,79,69,344 7,83,43,910 8,08,85,270 27,03,68,382 Total Outward Taxable Turnover as per GSTR-1 (I) 93,73,86,472 1,08,47,21,802 1,01,26,41,557 1,09,61,74,705 4,13,09,24,536 Total Restaurant Taxable Turnover as per SKU Wise Sale Register (J) 21,65,99,800 24,03,35,295 21,27,81,452 25,04,55,842 92,01,72,389 Total Turnover other than restauran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51,318 6 Haryana 6 9,61,857 7 Jharkhand 20 3,99,941 8 Karnataka 29 25,00,847 9 Kerala 32 2,10,867 10 Madhya Pradesh 23 5,77,855 11 Maharashtra 27 79,96,518 12 Orissa 21 7,91,684 13 Punjab 3 4,96,972 14 Rajasthan 8 19,21,980 15 Tamil Nadu 33 16,70,255 16 Telangana 36 9,08,253 17 Uttar Pradesh 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 2017 read with Section 171 (3) which has the approval of the Parliament and all the State Legislatures and of the GST Council which is a constitutional body established under 101st Amendment of the Constitution and also has the approval of the Central Government and the State Governments. There is no provision in the above Act or the Rules which provides that the investigation shall be limited to the products against which complaint has been received. On the contrary, every product on which the rate of tax has been reduced is required to be investigated by the DGAP and report submitted to this Authority to determine whether the above benefits have been passed on as per the provisions of Section 171 of the above Act. Moreover, Section 171 (2) of the above Act empowers this Authority to examine all such cases in which the benefit of tax and ITC is required to be passed on. Since the account of ITC is kept for all the products in one common ledger/Register the same cannot be apportioned product-wise hence, all the products being supplied by the Respondent are required to be investigated to determine whether the benefit of tax reduction after duly considering the denial of ITC h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th immediate effect on all pending proceedings, the period available to the DGAP to investigate the case was extended to Six months in place of three months earlier which could be extended by a further period of three months (total nine months) by this Authority. After the expiry of six months, necessary extension of three months was duly granted by this Authority which has been clearly mentioned in para-6 of the DGAP report dated 31.01.2020. Thus, the submission of the Respondent that the report of the DGAP is time-barred is bereft of facts. 138. The Respondent has further submitted that the CGST is a substantive law in nature and substantive law could not be retrospectively amended. He also placed reliance on the cases of Purbanchal Cables and Conductors Pvt. Ltd. v. Assam State Electricity Board and Continental Commercial Corporation v. ITO Supra . However the above mentioned cases are of no assistance to the Respondent as the Notification No. 31/2019- Central Tax dated 28.06.2019 has come into force with immediate effect for the pending proceedings and was not retrospectively implemented. The Respondent submitted that the period of limitation and the condonation period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Respondent on the above judgements is misplaced which does not help his case. 140. It was further contended by the Respondent that no methodology was prescribed to compute profiteering which has led to an arbitrary exercise of powers by the DGAP. The above contention of the Respondent is frivolous as the Procedure and Methodology for passing on the benefits of reduction in the rate of tax and ITC or computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that 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. It is clear from the plain reading of the above provision that it mentions reduction in the rate of tax or benefit of ITC which means that if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails the benefit of additional ITC the same have to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their tax revenue. It also provides that the above b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of benefit which a supplier is required to pass on to a buyer. Similarly, computation of the profiteered amount is also a mathematical exercise that can be done by any person who has elementary knowledge of accounts and mathematics. However, to further explain the legislative intent behind the above provision, this Authority has been authorized to determine the Procedure and Methodology which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed mathematical formula, in respect of all the Sectors or the SKUs or the services, can be set for passing on the above benefits or for computation of the profiteered amount, as the facts of each case are different. In the case of one real estate project, date of start and completion of the project, price of the flat/shop, mode of payment of price or installments, stage of completion of the project, rates of taxes pre and post GST implementation, amount of CENVAT and ITC availed/available, total saleable area, area sold and the taxable turnover received before and after the GST implementation would always be different from the other project and hence the amount of benefit of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to his customers on the above ground and enrich himself at the expense of his buyers as Section 171 provides a clear cut methodology and procedure to compute the benefit of tax reduction and the profiteered amount. Therefore, the above plea of the Respondent is wrong, and hence, it cannot be accepted. 141. Further The Respondent has placed reliance on the decision of the Hon ble Supreme Court in the case of Commissioner of Central Excise and Customs Kerala v. Larsen and Toubro Limited supra wherein it has been held that in the absence of machinery provisions for computation of taxable value, the levy of tax would become non-existent. Reliance was also placed on the cases of State of Uttar Pradesh v. Singhara Singh, State of Jharkhand v. Ambay Cements, Petroleum and Natural Gas Regulatory Board v. Indraprastha Gas Limited Ors and Commissioner of Income Tax, Bangalore v. B. C. Srinivasa Shetty supra. However, the above quoted cases are not being followed as the facts of the present case are different from the above-quoted cases. The Respondent has failed to understand that Section 171 is not a charging section and anti-profiteering provisions do not levy any tax. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the entire period and hence we do not see any reason to accept this contention of the Respondent. We further observe that had the Respondent passed on the benefit before 31.03.2019, he would have been investigated only till that date. The Respondent has failed to cite any ground due to which the profiteered amount should be computed till March 2018 only. Therefore, the period of investigation from 15.11.2017 to 30.04.2019 has been rightly taken by the DGAP for computation of the profiteered amount. 145. The Respondent has also argued that the right to trade was a fundamental right guaranteed under Article 19 (1) (g) of the Constitution which included the right to determine prices that could not be taken away without any explicit authority under the law. Therefore, this form of price control was a violation of Article 19 (1) (g). In this connection, it would be relevant to mention that the Respondent has full right to fix his prices under Article 19 (1) (g) of the Constitution but he has no right to appropriate the benefit of tax reduction under the garb of the above right. The DGAP has not acted in any way as a price controlling authority as it does not have the mandate to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, the Respondent has failed to produce any evidence to prove that the price increase was not sufficient to compensate the loss of denial of ITC which has been rightly computed as 10.22%. The Respondent was to maintain the base price of the product which he was charging as on 14.11.2017 and then add the amount on account of denial of ITC and charge GST @5% w.e.f. 15.11.2017. Instead of doing that he has raised his prices by adding more than denial of ITC as is evident from the above discussion. It is also clear from the above narration that the Respondent has increased the base prices of 1434 items more than the loss on account of ITC disallowance. Further, with effect from 15.11.2017, Respondent was not allowed to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore, in terms of provisions of Section 16(2)(a) Respondent was not eligible to avail ITC w.e.f. 15.11.2017 on the strength of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from ITC availment. As Respondent has received the taxable invoices post 15.11.2017 when he was ineligible to avail ITC in terms of Notification No. 46/2017 Central T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the present proceedings cannot be kept pending as they are to be completed within the prescribed period. Therefore, the above contention raised by the Respondent is not sustainable. 149. Based on the above facts the profiteered amount is determined as ₹ 3,10,56,9391- as has been revised vide the DGAP s Supplementary Report dated 08.10.2020. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent is directed to deposit an amount of ₹ 3,10,56,939/- in two equal parts of ₹ 1,55,28,470/- each in the Central Consumer Welfare Fund and the State Consumer Welfare Funds as mentioned in the Table F Revised, as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The above amount of ₹ 3,10,56,939/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order fail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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