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TMI Blog2022 (5) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... f the DGAP dated 01.07.2020 to show cause why the aforesaid report not be accepted and the petitioner s liability for profiteering determined. The petitioner is thus at liberty to comply with the directive under the impugned notice, put forth its explanation in writing within a period of three (3) weeks from date of uploading of this order in the official website of this Court, appear before the Authority on a date to be fixed by the authority per mutual convenience of the parties and contest the findings and conclusion in the report of the DGAP dated 01.07.2020 - Barring the aspect of assumption of jurisdiction that has been held adverse to the petitioner, both parties are at liberty to pursue all lines of argument as they believe are available to them and nothing contained in this order shall stand in the way of a de novo hearing on the merits of the matter, with all issues left open, for decision afresh. Petition dismissed. - W.P.No.15527 of 2020 And WMP.Nos.19385 of 2020 & 7418 of 2021 - - - Dated:- 27-10-2021 - THE HONOURABLE DR. JUSTICE ANITA SUMANTH For Petitioner: Mr.V.S.Manoj For Respondents: Mr.Zoheb Hussain Assisted by Mr.M.Santhanaraman, Senior Standin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, it would, in their view, be difficult to work out the exact component of GST and consequently the enrichment, if at all. Several other apprehensions were also raised by the DGAP in its report dated 12.04.2019. (v) Having received the above report, the Authority, after nearly four months, reiterated its direction by order dated 01.08.2019 to conduct an investigation in respect of probable unjust enrichment, referring to Rule 128 of the CGST Rules relating to the conduct of suo moto investigation. The period to be covered spanned 01.07.2017 to 30.08.2019. The apprehension expressed by the DGAP on the aspect of assumption of jurisdiction were sought to be allayed as follows: .... 7.Regarding the claim of the DGAP that the trigger for initiating investigation starts after filing application under Rule 128 of the CGST Rules, 2017 after satisfaction of the Standing Committee, it is clarified that the power of expanding the scope of investigation was already available to the Authority as per Para 12 of the Methodology and Procedure notified by the Authority on 28.03.2018 under the powers given to it vide Rule 126 of the CGST Rules, 2017. The above power of exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above report of the DGAP not be accepted under threat of exparte proceedings if the petitioner does not respond. 3. The petitioner has hence approached this Court challenging the aforesaid notice, mainly on the ground that Rules 133(4) and (5) (a) (b), by virtue of which the Authority is vested with the powers to refer the matter to the DGAP for further investigation or enquiry, has been inserted with effect from 28.06.2019, and would operate prospectively only. The complaint in this case was filed on 06.02.2018, prior to 28.06.2019 and the impugned notice is thus bereft of jurisdiction and bad in law. 4. The petitioner argues that with the insertion of Rules 133 (4) and (5) (a) (b), there has been a substantive expansion in the powers endowed upon the Authority and such a substantive shift has grave civil consequences. Seen in this light, the Rules must be held to be applicable only prospectively and the power of suo moto enquiry must be held to be available only with effect from 28.06.2019 and not in respect of any complaint filed prior thereto. 5. Rule 126 of the CGST Rules provides for the power to determine the methodology as well as the procedure for the determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial Developments Corporation and another ((2007) 9 SCC 593) (ii) Secretary, Ministry of defense and others Vs. Prabhash Chandra Mirdha ((2012) 11 SCC 565), (iii) Wabco India Limited Vs. Deputy Commissioner of Income Tax (W.A.No.884 of 2018) and (iv) Commissioner of Income Tax Vs. Vatika Township P Ltd ((2014) 367 ITR 466). The petitioner also refers to interim orders passed by four High Courts granting interim protection in regard to this very issue, as to whether the provisions of Rule 133(5) would be attracted in case of proceedings/complaints that were initiated/pending even prior to the date of insertion of the Rule. 9. In addition, the petitioner points to certain lacunae in the methodology of computation of profiteering under the Act and Rules. The measure of profiteering as set out under the Rules is not capable of precise determination and hence the computation as set out in the impugned show cause notice is questioned. Though various grounds are raised in this regard, the relevant provisions in the Act and Rules have not been challenged and I am not, in the absence of such challenge, inclined to advert to this submission. 10. The sole point to be decided is a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DGAP before the Authority or to file a reply before the Authority that has issued notice dated 10.07.2020 calling upon the petitioner to respond and furnish explanations to the allegations made. 16. Learned counsel for the respondent relies on the following judgments, some rendered in the context of Competition Law, to buttress his submissions on merits: i. Excel Crop Care Ltd. Vs. Competition Commissioner of India (2017) 8 SCC 47 ii. Cadila healthcare Ltd. Anr. Vs. CCI Ors., (2018) SCC Online Del 11229 iii. Competition Commission of India Vs. Grasim Industries Ltd., (2019) SCC Online Del 10017 iv. Shri Balaganesan Metals Vs. M.N.Shanmugham Chetty Ors., (1987) 2 SCC 707 v. Spring Meadows Hospital Ors. Vs. Harjol Ahluwalia (1998) 4 SCC 39 vi. State of Karnataka Vs. Vishwabharti House Building Co-op. Society Ors., (2003) 2 SCC 412 vii. Lucknow Development Authority Vs. M.K.Gupta (1994) 1 SCC 243 17. As regards the aspect of retrospectivity, he would argue that Rules 133 (4) and (5) only prescribe procedure and must apply retrospectively in order to ensure uniformity in procedure at all times. Sub-rule 5 (a) of Rule 133 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed. [(3A) Where the Authority referred to in sub-section (2), after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered: Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. 20. In line with Section 171, the Rules provide for the methodology by which, profiteering may be addressed, in Chapter XV spanning Rules 122 to 137. Rule 126 vests power to put in place methodology and procedure to determine instances of profiteering in the Authority. One of the points raised by the petitioner is that no Rules have been prescribed for determination of such methodology and in the absence of such a prescription, the Rule, by itself, fails. Be that as it may, as stated earlier, there is no challenge to the Rule in this matter and the question raised before me is something else altogether. 21. Rule 128 provides for the examination of an application alleging profiteering by a S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Act; and (e) cancellation of registration under the Act. Explanation: For the purpose of this sub-rule, the expression, -concerned State? means the State [or Union Territory] in respect of which the Authority passes an order.] (4) If the report of the Director General of [Anti-profiteering] referred to in sub-rule (6) of rule 129 recommends that there is contravention or even non-contravention of the provisions of section 171 or these rules, but the Authority is of the opinion that further investigation or inquiry is called for in the matter, it may, for reasons to be recorded in writing, refer the matter to the Director General of [Anti-profiteering] to cause further investigation or inquiry in accordance with the provisions of the Act and these rules.] [(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 rule 129, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation or enquiry with regard to such other goods or services in accordance with the provisions of the Acts and Rules. The phrase such other goods or services or both figures only in Rule (5)(a). Thus, the distinction, in my view is that while Rule (4) contemplates review of only the specific subject matter under the complaint, Rule (5)(a) empowers the Authority to cause enquiry even with regard to other goods or services. 26. In this case, the power invoked is in terms of Rule (5)(a) insofar as, the Authority has expanded the scope of enquiry to all business transactions of the petitioner between the period 01.07.2017 to 2019. For an investigation as contemplated under Rule (5)(a), the procedure for enquiry shall be as set out under Rule 129. 27.This procedure commences with the prima facie satisfaction of the Standing Committee, reference of the matter to the DGAP for investigation, conduct of a detailed investigation by the DGAP in compliance with the principles of natural justice including the issue of notices to the assessee as well as any other parties thought necessary and thereafter, the finalization of a report. 28. The DGAP has heard the petitioner prior to for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (9 of 1908), or any other law for the time being in force relating to limitation of action. It will be seen that this is mainly a procedural section replacing the earlier s. 48 and lays down that sums payable to the Government or to the Custodian can be recovered thereunder as arrears of land revenue. The section also provides that where there is any dispute as to whether any sum is payable or not to the Custodian or to the Government, the Custodian has to make an inquiry into the matter and give the person raising the dispute an opportunity of being heard and thereafter decide the question. Further, the section makes the decision of the Custodian final subject to any appeal or revision under the Act and not open to question by any court or any other authority. Lastly the section provides that the sum shall be deemed to be payable to the Custodian notwithstanding that its recovery is barred by the Indian Limitation Act or any other law for the time being in force relating to limitation of action. Subsections (1) and (2) are clearly procedural and would apply to all cases which have to be investigated in accordance therewith after October 22, 1956, even though the claim may h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued. 36. The above view taken by the Competition Appellate Tribunal was accepted by the Court that held that the purpose of an investigation was to determine anti-competitive practices. In this view of the matter, the provisions of Section 3, though notified subsequent to the date when the impugned notice in that matter was issued, was held to stand attracted. Para 45 of the judgment reads as follows: 45. If the contention of the appellants is accepted, it would render the entire purpose of investigation nugatory. The entire purpose of such an investigation is to cover all necessary facts and evidence in order to see as to whether there are any anti-competitive practices adopted by the persons complained against. For this purpose, no doubt, the starting point of inquiry would be the allegations contained in the complaint. However, while carrying out this investigation, if other facts also get revealed and are brought to light, revealing that the persons or enterprises had entered into an agreement that is prohibited by Section 3 which had appreciable adverse effect on the competition, the DG would be well within his powers to include those as well in his report. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in determining the effective date of a provision what is to be taken into account is the object and spirit behind the legislation and the purpose for which the new provision is sought to be introduced. 40. In the case of Cadila healthcare Ltd (supra), the judgment in the case of Excel Crop Care was explained. Paragraph 43 of the judgment would throw light on the understanding of Rules 133 (4) and (5) (a) (b), and their interplay. 43. Cadila's argument, that in Excel Crop Care the issue was inclusion of more than one instance or incident within the ambit of investigation (given that the complaint was in respect of one tender only) is distinguishable, is in this court's opinion, insubstantial and needs to be rejected. Its reliance on Grasim Industries, is no longer apt. At the stage when the CCI takes cognizance of information, based on a complaint, and requires investigation, it does not necessarily have complete information or facts relating to the pattern of behaviour that infects the marketplace. Its only window is the information given to it. Based on it, the DG is asked to look into the matter. During the course of that inquiry, based on that solitary compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire into the matter . At this stage, there is no individual; the scope of inquiry is the tendency of market behaviour, of the kind frowned upon in Sections 3 and 4. The stage at which it CCI can call upon parties to react is when it receives a report from DG stating there is no material calling for action, it has to issue notice to the concerned parties (i.e. the complainant) before it proceeds to close the case (Sections 26 (5) and (6)). On the other hand, if the DG's report recommends otherwise, it is obliged to proceed and investigate further (Sections 26 (7) and (8)). Again Section 27 talks of different parties [-enterprise or association of enterprises or person or association of persons?- per Section 27 (a)]. Likewise, the steps outlined in Section 26 are amplified in the procedure mandated by Regulation 20 and 21, which requires participation by the parties in the event a report after DG's inquiry, which is likely to result in an adverse order, under Sections 27-34 of the Act. Consequently Cadila's argument that a specific order by CCI applying its mind into the role played by it was essential before the DG could have proceeded with the inquiry, is rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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