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TMI Blog2022 (5) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... on in prices. The investigation by the DGAP was conducted under the provisions of Section 171 of the Act read with Rule 129 of the CGST Rules, 2017, on the recommendation of the Standing Committee on Anti-Profiteering and the Investigation Report was submitted to this Authority under Rule 129(6) of the Rules in terms of the mandate of law. Therefore, this Authority finds that, there has been no violation of the principles of natural justice and the Notice issued by the DGAP under Rule 129(3) of the Rules is perfectly legal and maintainable and hence there is no merit in this submission of the Respondent. This Authority has examined the sequence of events and the documents placed on record. This Authority finds that, the supply of goods by the Respondent to the Applicant no. 1 was made as per the order placed during February 2017 on the prices agreed as per the offer of the Respondent given during November 2016. In such offer and quote, the amount of Additional Duty of Customs (referred as CVD), payable at the time of import and on which no ITC was then available, was necessarily factored into the prices. As per the mandate of Section 171 of the CGST Act, 2017, if the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @18% thereon, from the date when the above amount was profiteered by him till the date of such refund, in accordance with the provisions of Rule 133 (3) (b) of the GCST Rules 2017 - this Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. - Case No. 04/2022 - - - Dated:- 9-5-2022 - SH. AMAND SHAH, TECHNICAL MEMBER AND CHAIRMAN, SH. PRAMOD KUMAR SINGH, TECHNICAL MEMBER AND SH. HITESH SHAH, TECHNICAL MEMBER. Present:- 1. Shri Sunil Deshpande, Applicant No. 1 in person. 2. Shri Reji Mathew, Chartered Accountant, Shri Aditya Chatterjee and Shri Sumer Dev Seth, Advocates and Shri Sandeep Mittal, Managing Director for the Respondent. ORDER 1. A Report dated 29.10.2020 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) on 29.10.2020 after detailed investigation under Rule 129 (6) of the Central Goods Services Tax (CGST) Rules, 2017. The brief facts of the Report are that the Applicant No. 1 had filed application before the Standing Committee on Anti-profiteering, under Rule 128 (1) of the CGST Rules, 2017 and alleged profiteering in respect of the supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed on to his recipients by way of commensurate reduction in price and if so, to suomoto determine the quantum thereof and indicate the same in his reply as well as furnish all documents in support of his reply. Further, in the said Notice dated 24.10.2019, the Respondent was also given an opportunity to inspect the non-confidential evidences/ information which formed the basis of the said Notice, during the period 30.10.2019 to 31.10.2019, which the Respondent did not avail of. 5. It has been further reported by the DGAP that even after giving several reminder letters dated 25.11.2019, 03.01.2020, 24.01.2020 and 06.05.2020, the Respondent had not submitted the requisite documents. Hence, a Summon dated 02.06.2020 was issued to the Respondent to submit the complete requisite documents by 08.06.2020. In response to Summons, the Respondent submitted his reply and certain details vide his e-mail dated 03.06.2020. 6. The DGAP has submitted that another Summon dated 03.07.2020 was issued to the Respondent to submit the complete requisite documents by 20.07.2020. In response to the Summon, the Respondent requested extension of time due to lockdown in the state to submit the requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 168 (A) of the CGST Act, 2017, it was notified that where any time limit for completion/ furnishing of any report, had been specified in, or prescribed or notified under the CGST Act, 2017 which fell during the period from the 20th day of March, 2020 to the 29th day of June, 2020, and where completion or compliance of such action had not been made within such time, then, the time limit for completion or compliance of such action, would stand extended upto the 30.06.2020. Further, vide Notification No. 55/2020-Central Tax dated 27.06.2020 and Notification No. 65/2020 dated 01.09.2020, it was extended upto 30.11.2020. 11. Further, the DGAP has stated that this Authority vide its Order dated 24.03.2020 had granted three months extension in terms of Rule 129 of the CGST Rules, 2017. Accordingly, time limit to complete the investigation was 28.02.2021. 12. The DGAP has further reported that the Respondent had submitted his replies to the said Notice vide letters/ e-mails dated 16.11.2019, 11.12.2019, 08.01.2020, 13.01.2020, 31.01.2020, 01.02.2020, 11.02.2020, 12.03.2020, 13.03.2020, 19.05.2020, 03. 06.2020, 17.07.2020, 05.08.2020, 21.09.2020, 22.09.2020, 25.09.2020, 05.10.2020 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 of the CGST Act, 2017. 15. The DGAP has stated that the Central Government implemented GST w.e.f 01.07.2017 which subsumed various taxes levied by the Central Government and State Governments. In the erstwhile pre-GST regime, the following taxes and cesses were being levied by the Central Government and the State Governments: - Taxes which were subsumed in the Goods and Services Tax (GST) Central Taxes State Taxes Central Excise Duty State VAT/ Sales Tax Additional Duties of Excise (Goods of special importance) Central Sales Tax Additional Duties of Excise (Textiles and Textile products) Entertainment Tax (other than by local bodies) Excise Duty levied under Medicinal Toilet Preparation Act Entry Tax/ Octroi (all forms) Additional Duties of Customs (commonly known as CVD) Purchase Tax Special Additional Duties of Customs (SAD) Taxes on lottery, betting gambl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72,51,634/- (plus CST 2%, if applicable), was given to the Applicant No. 1 by the Respondent. Thus, as per the quotation, the total amount which had to be paid by the Applicant 1, have been furnished by the DGAP in the table below:- S.No. Description Size Qty(as mentioned in bill of entry) Price Amount Plus (CST @ 2%), if applicable 1. Anutone Serge Astral Lay-in, Aluminium, Unperforated, Aquila 595*595*0.6mm 17416.80 533.80 9297088 2 Anutone Serge Astral Lay-in, Aluminium, Perforated Mensa (2.5mm dia) 595*595*0.6mm 2304.00 873.80 2013235 3 Anutone Serge Astral Lay-in, Aluminium, Unperforated, Aquila 1200*600*0.6mm 2878.56 740.52 2131631 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available, and would have formed an embedded part of the cost of the products in the said quotation. However, the actual import of the said 04 goods had taken place vide Bill of Entries No. 2638860 dated 28.07.2017 and 3139630 dated 07.09.2017, i.e., after implementation of GST, when the CVD and SAD were replaced by IGST and the full amount of IGST @ 18% paid at the time of actual import was available as ITC to the Respondent. 20. The DGAP has also submitted that in the light of the aforementioned legal position regarding the duties payable and the credits available (or not available), both at the time, the quotation was given and when the actual import took place after introduction of GST, the finding was that the Respondent should have reduced the base price to the extent of the CVD that was no longer to be paid as well as to the extent of the IGST, the credit of which was now available. However, the invoices raised by the Respondent for the supply of said 04 goods on which IGST @18% was charged show that the base price of the goods remained the same, as reflected in the purchase order dated 18.02.2017. Thus, the base price was not reduced to the extent of CVD that was not pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lve Lakh Seventy Nine Thousand Three Hundred and Four only) in respect of aforesaid 04 goods. 23. The DGAP has further concluded that as the benefit of ITC had not been passed on to the Applicant No. 1, the provisions of Section 171(1) of the CGST Act, 2017 had been contravened in the present case. The amount of profiteering by the Respondent was Rs. 12,79,304/(inclusive of GST @18% amounting to Rs. 1,95,148/-). 24. The above Report was carefully considered by this Authority and a Notice dated 05.11.2020 was issued to the Respondent to explain why the Report dated 29.10.2020 furnished by the DGAP should not be accepted and his liability for profiteering in violation of the provisions of Section 171 should not be fixed. The Respondent was directed to file written submissions which have been filed on 26.11.2020 wherein the Respondent has submitted:- a) That he vide his letter dated 31.01.2020 and e-mail dated 03.06.2020 to the DGAP had given all the necessary details and had also stated that though during the relevant period there was a price variation in the raw materials cost, he had not passed on the same to his buyers and absorbed the same and hence he had not made any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrelevant. c) That by not passing on the tax benefit to him, he was the one who had suffered heavy losses by way of bank interest charged on cash credit limits. Due to shortage of funds caused by the Respondent, he had not been able to carry out his regular business effectively. Covid19 lockdown scenario had added fuel to the fire and his business was suffering badly. He immediately needed his legitimate money along with interest @18% in terms of Rule 127 of the CGST Rules, 2017. d) That nowhere in the Report of the DGAP, there was any mention of interest @18% to be recovered from the Respondent and paid to him as per Rule 127 of the CGST Rules, 2017. 'Rule 127 of CGST Rules was reproduced below: 127. Duties of the Authority. - It shall be the duty of the Authority, - (i) to determine whether any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices; (ii) to identify the registered person who has not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit of input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iron hand and do justice to a sincere business organization like his which was an MSME too. i) The Applicant No. 1 further requested to grant him his long outstanding dues along with interest @18% and provide relief to his already suffering business as explained above. 26. Copy of the above submissions dated 26.11.2020 and 10.11.2020 filed by the Respondent and the Applicant No. 1 were supplied to the DGAP for clarifications under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications on the Respondent's submissions dated 26.11.2020 vide supplementary Report dated 14.12.2020 and has clarified:- a) That the Respondent's contention that during the relevant period there was a price variation in the raw materials cost and that he had not passed on the same to his buyers and absorbed the same and hence he had not made any undue profiteering in the case was not correct as vide Report dated 29.10.2020 the DGAP had computed the profiteered amount of Rs. 12,79,304/- for the period 01.07.2017 to 30.09.2019. b) That the averment made by the Respondent that the purchase order was received prior to introduction of GST and supplies had to take place su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 which needed to be considered as rightly pointed out by the DGAP in his comments. c) That the profiteered amount calculated by the DGAP after his investigations was Rs. 12,79,304/- as submitted vide his report dated 29.10.2020. The Applicant No. 1 submitted invoice-wise and date wise details of the cost of material purchased by him along with corresponding profiteering amount worked out by the DGAP. The Applicant No. 1 also enclosed worksheet showing quantification of simple interest @18% as per Rule 127 of CGST Rules and that he had worked out the interest payable for ease of understanding. d) That the entire amount towards purchase of material had been paid to the Respondent in advance i.e. before raising any invoice. Copy of Ledger Account of the Respondent duly certified by Chartered Accountant A. K. Mahabal Co. was enclosed along with these submissions showing advance payment details. Date wise details of the invoices raised against him by the Respondent have been furnished below:- Invoice no. Date of invoice 1790079 03/08/2017 1790080 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed his consolidated written submissions wherein he has stated:- A) That alleged Notice issued by the DGAP was defective and did not meet the mandate of Rule 129(3) of the CGST Rules, 2017 and the investigation was in violation of principles of natural justice:- a) It was settled law that due and sufficient Notice was a sine qua non to any administrative or quasi-judicial action. In the present case, the Alleged Notice issued by the DGAP was defective, inadequate and did not contain material particulars to form effective and sufficient Notice. Pertinently, it did not comply with the mandatory provisions of Rule 129 of the CGST Rules, 2017. b) A bare perusal of Rule 129(3) of the CGST Rules mandated that the DGAP should before initiation of the investigation, have issued a Notice to the interested parties containing, inter alia, information on the following, namely- (a) the description of the goods or services in respect of which the proceedings have been initiated; (b) Summary of the statement of facts on which the allegations are based; and (c) The time limit allowed to the interested parties and other persons who may have information related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seless unilateral finding against the Respondent in the context of the way in which the charging provision of Section 171 of the CGST Act, ought to have been complied with. Therein, the DGAP Report wrongfully noted that this is a fact which has not been contested by the Respondent. The Respondent pleaded that the said assumption on part of the DGAP demonstrated the non-application of mind to the response and defences urged by the Respondent. Accordingly, in the event this Authority was unwilling to reject the DGAP's Report as prayed for, it might, in the alternative, exercise powers available under Rule 133(4) of the CGST Rules and directed the matter to be inquired in to further. b) The Respondent had at no point admitted to any allegation of profiteering, or any part thereof. Therefore, none of his submissions either to this Authority or to the DGAP ought to have been treated as admissions to any of the allegations levelled against him. At best, without prejudice to any of his contentions on merits, the Respondent made a mere prayer for leniency and equity to be exercised in his favour since his business had suffered huge losses and severe disruptions before and during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. Notably, in the interim the raw material price of aluminum in the international market had increased significantly. Yet, the Respondent did not make any commensurate change to the base price of the aluminum goods listed in SO 002 since the natural increase in price had been absorbed by the ITC. f) That the Applicant No. 1 continued to enjoy the benefit of purchasing the concerned goods as per the base price in SO 002, though the same were not valid beyond February 2017 and even though the same products costed significantly more due to the drastic escalation in the price of raw materials. In other words, the Applicant No. 1 had, in fact, received the benefit of lower base prices since the Respondent did not impose an increased base price on the Applicant No. 1 due to the change in raw material costs. As a result, there had been no profiteering by the Respondent. The DGAP's Report had failed to appreciate the same and accordingly deserved to be rejected. D) That the DGAP's Report failed to account for increased raw material prices and increased Customs Duty while ascertaining alleged incidence of profiteering:- a) The actual increase in the base price of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt 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 or both]. d) Evidently, it was clear from the scheme of Section 171 of the CGST Act and the definition of profiteering, that implicit therein was wrongful or unjust gain. Section 171 of the CGST Act and the Explanation therein also suggested 'profiteering' to mean the wrongful retention of the benefit of ITC and denying the end recipient of the good or service the commensurate reduction in price. In the present case however, the facts clearly established that: i. The Respondent had not unjustly retained for himself any benefit or gain; ii. The Respondent had ensured that benefit of ITC in monetary terms was passed on to the end recipient by ensuring that the prices of goods sold were not increased despite increase in the raw material prices of the same; and iii. The Respondent had not earned any profit, in fact, it had suffered losses. Therefore, the question of having profiteered did not arise. e) That neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution of India, No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence . Therefore, Section 171 (3A), which came into force only on 1 January 2020 could not be applied retrospectively to impose a penalty on the Respondent as the alleged profiteering, even as per the Applicant No. 1 and the DGAP, took place in the year 2017. iii. The Constitution of India protected the fundamental rights of the Respondent from being subjected to penalty by virtue of an ex post fact law or an enhanced punishment prescribed by a later amendment. [ T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177, Supdt., Narcotic Control Bureau v. Parash Singh, (2008) 13 SCC 499, Nemi Chand v. State of Rajasthan, (2018) 17 SCC 448]. In the landmark judgment of State v. Gian Singh [(1999) 9 SCC 312 : 1999 SCC (Cri) 1512], the Hon'ble Supreme Court laid down that it was a Fundamental Right of every person under Article 20(1) of the Constitution that he should not be sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re made available to the Applicant No. 1 or any other third party. Necessary directions might accordingly be issued to the registry as well as the DGAP. g) Further the Respondent submitted that:- i. The alleged Notice issued by the DGAP was defective and did not meet the mandate under Rule 129(3) of the CGST Rules, 2017. Accordingly, DGAP's investigation was in violation of principles of natural justice and could not be relied on for the findings recorded therein. ii. The DGAP had wrongly assumed admissions on part of the Respondent without basis. iii. The DGAP's Report erred in assuming that non-reduction of base price amounts to profiteering . The fact that ITC had accrued to Applicant No. I's benefit through non-increase of base prices despite significant rise in prices of raw aluminium in the international/ import market had been ignored. iv. The DGAP Report completely failed to account for increased raw material prices and increased Customs Duty while ascertaining alleged incidence of profiteering. The fact that SO 002 was valid only till the end of February 2017 has been lost sight of. There was no positive finding that the Respondent has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP filed by the Respondent. B. That the Applicant No. I be provided the copy of the non-confidential evidence/ documents filed by the Respondent as recorded at para 10 of the DGAP's Report issued vide F. No. 22011/ API/153/2019/3384 dated 29.10.2020 which had not been provided so far despite various requests to the Respondent by the DGAP. C. That in the above order sheet No. 22011/NAA/220/AAL/2020/963-966 dated 24.02.2021 it had been mentioned that since the Respondent had prayed to ensure that the records supplied by him were to be maintained with utmost confidentiality during the pendency of the proceedings and thereafter, therefore the request of the Applicant No. 1 could not be accepted. Therefore, only copy of Respondent's consolidated written submissions dated 15.02.2021 minus annexures (without annexures) had been ordered to be supplied to Applicant No. 1. D. That page 6 of the Respondent's consolidated written submissions dated 15.02.2021 that contained information regarding price movement of aluminium in the international market had not been attached. The same needed to be provided to him. E. That vide DGAP's email dated 07.10.2020 the Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. l. Referring to the written submissions filed by the Respondent, the Applicant No. 1 made the following submissions: (i) With regard to the arguments submitted by the Respondent in his submissions dated 15.02.2021 regarding the change or escalation in the base price of the aluminium goods, it was pointed out that the National Anti-Profiteering Authority (NAA) was a statutory body constituted by the Central Government to examine whether the ITC availed by any registered person or reduction in tax rates have actually resulted in corresponding reduction in prices of goods or services supplied . The inflation occurred because the suppliers did not pass on the benefit to the consumers as they intended to earn illegal profits. So, to keep a check on such illegal practices, the central government had constituted the National Anti-Profiteering Authority. (ii) Therefore variation in international prices affecting the base prices and their consequent effect on the agreed prices between buyer and seller as contended by the Respondent was subject matter not within the purview of the National Anti-Profiteering Authority. (iii) The above argument regarding price escalation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and there was no scope for dispute whatsoever. (ix) With regard to submissions of the Respondent regarding Sec 171 of the CGST Act, it was submitted that this Authority might like to decide on the same. However, it was pointed out that interest element was applicable in terms of Rule 127 of CGST 2017 and the same should be given to him as he had faced heavy financial losses because of reduced rates and non-availability of funds for business. It was the duty of this Authority to return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen per cent from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be. J. Therefore, the Applicant No. 1 requested to direct the Respondent to forthwith pay an amount of Rs. 12,79,304/- as per DGAP's investigation being the profiteering amount, along with applicable interest in terms of Rule 127 of the CGST Rules, 2017. 31. The Respondent vide his submissions dated 15.02.2021 requested for Personal Hearing in the case. Personal hearing via vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient and the supplier were not related. C. Despite the fact that the price quoted in the Sales Order dated 17.02.2017 was valid only till the end of the month concerned, i.e. February 2017 - which was a mere 11 days, and that the raw material price of aluminium in the international market had increased significantly; yet the Respondent did not make any commensurate change to the discounted price of the goods. Despite the aforesaid change in circumstances, the Applicant No. 1 continued to enjoy the benefit of purchasing the concerned goods at a discounted price of 32%, though the same was not valid beyond February 2017 and the raw material price of aluminium in the international market had increased significantly. It was further submitted that the discount of 32% on the market price given to the Applicant No. 1 was in fact a special discount since the usual trade discounts were around 15-20% for direct sales and dealer discounts were a maximum of 25% as per dealer agreements. Thus, it was clear that Applicant No. 1 was asking for a further discount on an already discounted product. It was also pertinent to note that the Applicant No. 1 never raised any objection, protes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the lowest bidder on 16.09.2016. The approved makes/brands of false ceiling items in the above tender were of the following companies viz. Armstrong, St. Gobain, Hunter Duglas, Aerolite and Anutone [Respondent]. Accordingly the Applicant No. 1 had been approached by the representatives of the above companies with their best discounted rates for supply of the subject items. C. The Respondent offered the lowest price among the above parties by offering discount on the quoted price. During negotiations, the Respondent had stated that they would match the lowest rates. Accordingly, the Respondent submitted his offer letter 29.11.2016. Work order was issued by GSIDC Ltd. on 20.12.2016 and the work commencement date was 30.12.2016. The Applicant No. 1 issued Purchase Order to the Respondent on 18.02.2017. Supply was complete by 04.11.2017. D. Chain of events in chronological order was as below for ease of understanding: Tender Notice date 26/08/2016 Last date of submission of tender 14/09/2016 Tender opening date 16/09/2016 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;Manoj Asho Joshi' [email protected] Sent : Monday, 27 May, 2019, pm IST Subject: Re: Regarding reduced rates on account of GST. Dear Bharti Madam, We wish to bring to your kind notice that we are requesting you to refund the amount of taxes, which you are not required to pay on account of GST. These taxes are Central Excise, Countervailing Duties, Special Additional Duties etc., which you were not required to pay as the same was merged in GST. However, in post GST regime you have kept the basic material rate same as prior to GST rate and above this you have charged GST. We are requesting you to refund only the amount to the extend you were not required to pay in the basic cost on account of old taxes and duties and nothing else. We have also brought to your notice that GSIDC Ltd. has reduced our rates for the same reasons which your dealer M/s Harshadda trading company is aware off. Please note that if we do not receive positive replay within 24 hours, we shall be free to represent our case before National Antiprofiteering Authority or any other forum. Please also note that GSIDC Ltd (Government of Goa undertaking) registers bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till only February 2017 as the Respondent went ahead with the complete supply without any issues. The Applicant No. I's purchase order did not speak of any time limit. Also, this issue was not a subject matter before this Authority. It was categorically pointed out that the agreed price between the Applicant No. 1 and the Respondent was crystallized by way of offer letter of the Respondent and purchase order of the Applicant No. 1. Therefore, there was no scope for variation of the base price whatsoever in terms of the said offer letter and purchase order. (iii) There was escalation in raw material price hence no profiteering:- In this regard the Applicant No. 1 has stated that even if there was an escalation in raw material price, the same could never be adjusted by over charging the Govt. taxes. Even this was not a subject matter before this Authority. For that matter a firm purchase order was placed by the Applicant No. 1 on 18.02.2017, hence the Respondent should have taken immediate action to import the material in order to avoid issues arising out of escalation. In any case, it was a matter of speculation by the Respondent. It was not the concern of the Applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet the mandate of Rule 129(3) of the CGST Rules, 2017; the investigation was in violation of principles of natural justice, the DGAP has clarified that the State Screening Committee Karnataka vide its letter dated 12.07.2019 to the Standing Committee on Anti-Profiteering had mentioned that Applicant No. 1 had in his complaint alleged that the Respondent had not passed on the benefit of additional ITC available after the introduction of GST on 'false ceiling materials'. The description of goods was mentioned as 'false ceiling materials' in the NOI dated 30.04.2019 as per the description of goods used in Screening Committee Report. It was during the course of Investigation that the exact detailed description of the 'false ceiling materials' was found while scrutinizing the documents filed by the Respondent and accordingly, the Notice was issued with correct description on 30.10.2019 under Rule 129(3). B. For the Respondent's contention that DGAP had wrongly assumed admissions on part of the Respondent, the DGAP has stated that Para-17 of his Report dated 29.10.2020 mentioned that in terms of Section 171 of the CGST Act, 2017 the additional benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice (price without GST) of the product. The computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product and hence no fixed mathematical methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a recipient or the profiteered amount. A single formula, which fits all, cannot be set while determining such a Methodology and Procedure as the facts of each case are different. For example, in one real estate project, the variables are different from the other project and hence the amount of benefit of additional ITC to be passed on. Also, the facts of the cases relating to the Fast-Moving Consumer Goods (FMCGS), restaurants, construction and cinema houses are completely different and therefore, the mathematical methodology adopted in the case of one sector cannot be applied in the other sector otherwise it would result in denial of the benefit to the eligible recipients. Moreover, both the above benefits have been granted by the Central as well as the State Governments by sacrificing their tax revenue in the public int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larifications were devoid of any merit and application of mind. The DGAP had ignored the Respondent's legal submissions inter alia with respect to: (a) the DGAP's error in considering the discounted price as the base price, instead of the actual price at which the goods in question were sold in the market while attempting to determine alleged profiteering; (b) increase of cost price of raw materials and non-consideration of trade discount availed by the Applicant No. 1 A. In response to Paragraph A of the DGAP's Report dated 24.03.2021, the Respondent submitted that the Alleged Notice dated 24.10.2019 issued by the DGAP under Rule 129(3) of the CGST Rules, which formed the basis for the purported investigation to be commenced, was defective, inadequate and non est in law as it did not contain material particulars regarding the description of the goods... in respect of which proceedings. were sought to be initiated. By merely making a passing reference to the supposed goods involved as false ceiling materials , the DGAP failed to discharge his duty and obligation to give sufficient notice to the Respondent in accordance with law. It was denied that the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease/ correction of sale price due to rising costs of raw materials, would amount to an act of profiteering. It was submitted that the same would lead to disastrous consequences and would make the provision vulnerable to being misused by the DGAP. D. In response to Paragraph D of the DGAP's Report dated 24. 03.2021, it was stated that the contention of the DGAP that the cost component is not taken into cognizance while determining profiteering was fundamentally flawed as the increase/decrease of cost prices of raw materials was an important factor to be taken into consideration while determining profiteering. It was submitted that profiteering cannot be determined in isolation of costs. In the present case, despite the fact that the price quoted in the Sales Order dated 17.02.2017 was valid only till the end of February 2017 - which was a mere 11 days, and that the raw material price of aluminium in the international market had increased significantly; yet the Respondent did not make any commensurate change to the discounted price of the goods. Despite the aforesaid change in circumstances, the Applicant No. 1 continued to enjoy the benefit of purchasing the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have considered the base price of the goods supplied de hors the discounts offered to the Applicant No. 1. Therefore, the contention of the DGAP that existing base price of the product was to be taken into account while computing commensurate reduction in prices must be interpreted taking into account this factor in the present case, a special discount of 32% on the market price was given to the Applicant No. 1 in the month of February 2017 - which was valid for a mere 1 1 days i.e. till the end of the month as per the SO 002. G. That the eventual sale of the four distinct aluminium products took place vide Invoices dated 3 August 2017, 7 October 2017, 13 October 2017, 25 October 2017 and 4 November 2017. It was thus evident that none of the sales were subject to the same base price as indicated in SO 002. In fact, while the base price quoted in SO 002 was valid only until the end of February 2017, the earliest sale in pursuance thereof took place only in August 2017. Notably, in the interim the raw material price of aluminium in the international market had increased significantly. Yet, the Respondent did not make any commensurate change to the base price of the alumin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard. During the personal hearing the Respondent has re-iterated his arguments based on his written submissions dated 26.11.2020, 15.02.2021, 04.03.2021 and 08.03.2021. The Respondent and the Applicant No. 1 further requested time till 04.04.2022 to file their consolidated written submissions. 39. The Respondent vide his letter dated 05.04.2022 submitted his consolidated written submissions wherein he has re-iterated his earlier written submissions. 40. The Applicant No. 1 vide his letter dated 04.04.2022 also submitted his consolidated written submissions wherein he has stated:- a. That he had purchased material from the Respondent, partly before GST as well as after GST. Part material had been supplied to him under the old regime at the rates agreed upon in the Purchase Order with 2% CST as per the then prevailing tax structure. Major material had been supplied to the Applicant No. 1 after introduction of GST by charging GST @ 18% on the very same rates as mutually agreed in the Purchase Order. b. That the Respondent was not disputing the fact that the rates had been maintained the same despite reduced input taxes on account of GST. This has led to profiteering by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 574.59 Rs.24,48,989/- 6. 1790081 03/08/17 Rs.20,75,414.40 Rs.3,73,574.59 Rs.24,48,989/- 7. 1790122 06/10/17 Rs.9,60,840.00 Rs.1,72,951.20 Rs.11,33,791/- 8. 1790123 06/10/17 Rs.19,60,113.60 Rs.3,52,820.45 Rs.23,12,934/- Total Rs.1,43,67,743.83 Rs.25,86,193.97 Rs.1,69,53,937.00 e. That the Respondent continued to supply material to the Applicant No. 1 at quoted rates as per Purchase Order plus 18% GST without reducing tax component of Customs and other duties that were subsumed in GST. f. That the Applicant No. 1 had committed to GSIDC and the project management consultant that he would be using the Respondent's make/ products for the metal false ceiling, and therefore the Applicant No. 1 continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts filed by the DGAP, all the submissions and the documents placed on record and the arguments advanced by the Respondent and the Applicant No. 1. 42. This Authority finds that, the prices (exclusive of Central Sales Tax i.e. CST) quoted by the Respondent for supply of goods to the Applicant in the pre GST period and the prices (exclusive of IGST on supply) at which such goods were supplied during the GST regime remained the same as is evidenced in the Tables at paragraphs 17, 18 and 21 above. 43. This Authority also finds that, the Respondent supplied the above 04 categories of goods i.e. Anutone Serge Astral Lay-in Aluminium Unperforated Aquila 595*595*0.6mm, Anutone Serge Astral Lay-in Aluminium Unperforated Aquila 1200*1200*0.6mm, Anutone Serge Astral Lay-in Aluminium Perforated Mensa (2.5 mm dia) 595*595*0.6mm and Anutone Serge Astral Lay-in Aluminium Perforated Mensa (2.5 mm dia) 1200* 1200*0.6mm, as per the order placed during February 2017 on the prices agreed as per the offer of the Respondent given during November 2016. At the time of placing order, since it was an inter-state transaction, CST of 2% was applicable. Consequent to the introduction of GST, IGST @ 18% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent, as tabulated in the Reports of the DGAP cited above. The Authority finds that, as both import and supply were made by the Respondent during the GST regime, the benefit of ITC of IGST paid at the time of import was available to the Respondent. Hence, on account of availability of ITC of such IGST, the price of supply should have been reduced commensurate to the amount of such ITC of IGST the amount of Rs. 12,79,304/- which is the amount factored into the base prices quoted by the Respondent on account of the incidence of Additional Duty of Customs (referred as CVD) in the pre GST period. The benefit equal to such amount should have been passed on to the Applicant No. 1 by the Respondent by commensurate reduction in prices. There has been no commensurate reduction in prices and hence, this Authority finds that, the provisions of Section 171(1) of the CGST Act, 2017 had been contravened in the present case. 46. The Respondent vide his written submissions contended that the Notice issued by the DGAP was defective and did not meet the mandate under Rule 129(3) of the CSGT Rules, 2017 and that, the investigation was in violation of principles of natural justice. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the documents placed on record. This Authority finds that, the supply of goods by the Respondent to the Applicant no. 1 was made as per the order placed during February 2017 on the prices agreed as per the offer of the Respondent given during November 2016. In such offer and quote, the amount of Additional Duty of Customs (referred as CVD), payable at the time of import and on which no ITC was then available, was necessarily factored into the prices. As per the mandate of Section 171 of the CGST Act, 2017, if the benefit of ITC, which was not available earlier, was made available to the Respondent in the post GST period, it was incumbent on the Respondent to pass on such benefit to the Applicant no. 1 by commensurate reduction in price. Hence, this Authority finds that, while arriving at profiteering in terms of Section 171 of the CGST Act, 2017, the DGAP has correctly examined as to whether the Respondent had benefited by any additional amount of ITC, and if so, the quantum thereof, and whether the Respondent had passed on the said benefit to the Applicant No. 1 by commensurate reduction in prices. The Authority also finds that, Section 171 of the CGST Act 2017 itself def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of their business which do not constitute passing on of the benefit which accrued to the Respondent on account of availability of ITC of IGST paid at the time of import during the GST period. The Respondent is legally bound to pass on the above benefit through commensurate reduction in prices. Hence, the Authority holds this contention of the Respondent devoid of any merit. 50. The Respondent has contended that, neither the CGST Act nor the CGST Rules provide the methodology for calculating the amount of profiteering. The Authority finds that, the main contours of the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself. It mandates 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 . Section 171 (2) requires the Authority to examine whether input tax credits availed by a registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of goods or services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax and the second pertaining to the passing on the benefit of the ITC. The issue to be examined by the Authority is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report that, the Respondent should have reduced the base prices to the extent of the Additional Duty of Customs (referred as CVD) that was no longer to be paid by the Respondent as well as to the extent of the IGST paid at the time of import, the credit of which was now available. This proceeds on the fact that, in the GST period, the Additional Duty of Customs (referred as CVD) is subsumed under the GST and in particular by the IGST to be paid at the time of import. On the one hand, there has been no incidence of the Additional Duty of Customs (referred as CVD) on the goods imported and supplied by the Respondent to the Applicant No. 1, whereas on the other hand such Additional Duty of Customs (referred as CVD) had been subsumed in the IGST paid on such goods by the Respondent and ITC of such IGST was made available for to the Respondent for payment of IGST on the same goods supplied to the Applicant No. 1. This Authority finds that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the situation arising on account of Covid-19 pandemic, has extended the period of limitations prescribed under general law of limitation or any other specified laws (both Central and State) including those prescribed under Rule 133(1) of the CGST Rules, 2017, as is clear from the said Order which states as follows:- A period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings. Further, the Hon'ble Supreme Court, vide its subsequent Order dated 10.01.2022 has extended the period(s) of limitation till 28.02.2022 and the relevant portion of the said Order is as follows:- The Order dated 23.03.2020 is restored and in continuation of the subsequent Orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general of special laws in respect of all judicial or quasi-judicial proceedings. Accordingly this Order having b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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