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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 ..... mely 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) mm by the Respondent. 2. The DGAP has submitted that the Applicant No. 1 vide his submissions had mentioned that the Respondent supplied the above 04 goods 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 inter-state transaction, CST of 2% was applicable. Consequent to the introduction of GST, IGST @ 18% was applicable on the inter-state supply of such goods. The Respondent had been charging 2% CST prior to July 2017 and started charging 18% IGST from July 2017 but the basic price of the goods remained unchanged. The Respondent, an importer of the said goods, was not eligible to avail the input tax credit (ITC) of Additional Duty of Customs (referred as CVD) paid on such goods at the time of import till June 2017 as the goods imported were traded. With the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 27.07.2020 was issued to the Respondent to submit the complete requisite documents by 07.08.2020. In response to the Summon, the Respondent replied vide e-mail dated 05.08.2020 and submitted certain documents. 7. The DGAP has also reported that in addition to the above, letter dated 27.07.2020 was sent to the jurisdictional office to obtain the desired documents from the Respondent and forward the same to the DGAP. In response to that no reply was received from the jurisdictional office. Further, on scrutiny of the documents submitted it was observed that the Respondent had not submitted the complete documents, hence reminder letters were issued to the Respondent again and the Respondent submitted requisite documents vide e-mails dated 21.09.2020, 22.09.2020, 25.09.2020 and 05.10.2020. 8. The DGAP has further submitted that vide e-mail dated 07.10.2019, the Applicant No. 1 was given an opportunity to inspect the non-confidential evidences/ documents submitted by the Respondent on 09.10.2020 or 12.10.2020. In response, the Applicant No. 1 replied vide e-mail dated 08.10.2020 and stated that he resided in Goa and being a senior citizen, coming to Delhi all the way to insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent submitted: - (i) That he was engaged in manufacturing and trading of wall and ceiling panels. The manufacturing unit at 95, KIADB Phase-3, Malur, Kolar District had stopped the production activities due to continuous loss in the business and therefore it was used as warehouse for trading. Also, he had a trading warehouse at Bhiwandi, Maharashtra, which had been closed due to loss in the business. Further, the Corporate Office at 231, 7th Cross, Indira Nagar 1st Stage, Bangalore -560038 had also been closed due to financial activities. Only one unit at 3A, Visvesaraya Industrial Area, Mahadevapura, Bangalore-48 was operating on a low-key basis. (ii) That he had submitted the details pertaining to the Applicant No. 1 only, as it was the first time he got the order for the said specified 04 goods and after that he had not imported the said goods for any other buyers. (iii) That he had 2 CST registrations i.e. 29AADCA1269KIZH (Active) and 27AADCA1269KIZL (De-registered). 13. The DGAP has also reported that vide the aforementioned letters/ e-mails, the Respondent submitted the following documents/ information: a) Copy of sale invoices pertaining to the supply of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price. With the introduction of GST with effect from 01.07.2017, all these taxes got subsumed in the GST and the ITC of GST was available in respect of all goods and services, unless specifically denied. Thus, the additional benefit of ITC in the GST regime would be limited to those input taxes, the credit of which was not allowed in the pre-GST regime but was allowed in the GST regime. This additional benefit of ITC in the GST regime was required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 171 of CGST Act, 2017. This was a matter of fact which had not been contested by the Respondent. 16. The DGAP has further reported that before enquiring into the allegation of profiteering, it was important to examine Section 171 of the CGST Act, 2017 which governed the anti-profiteering provisions under GST. Section 171(1) of the CGST Act, 2017 reads as "any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices". Thus, the legal requirement was abundantly clear that in the event of benefit of ITC or reducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .34 3. Anutone Serge Astral Lay-in, Aluminium, Unperforated, Aquila 1200*600*0.6mm 1790142-04.11.2017 1790135-25.10.2017 2878.56 740.52 2131631 383693.63 4. Anutone Serge Astral Lay-in, Aluminium, Perforated, Mensa (2.5mm dia) 1200*600*0.6mm 1790142 04.11.2017 856.80 1080.52 925790 166642.12 19. The DGAP has further submitted that had the import of the said 04 goods taken place prior to implementation of GST, when the quotation dated 18.02.2017 was provided to the Applicant No. 1, the Respondent would have suffered Countervailing Duty (CVD) @ 12.5% and Special Additional Duty of Customs (referred as CVD) paid by the Respondent would not have been 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 regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering on account of benefit of ITC would be restricted to said 04 goods which were supplied to the Applicant No. 1 only. The Respondent had submitted that during the period 01.07.2017 to 30.09.2019, he had supplied only the aforesaid 04 goods for the first time to the Applicant No. 1, for which quotation was given in the pre-GST era. Further, the Respondent had also submitted that he had not sold the subject goods to any other buyers. Therefore, based on the submission of the Respondent during the period of the current investigation i.e., from 01.07.2017 to 30.09.2019, the amount of profiteering by the Respondent was worked to Rs. 12,79,304/- (Rupees Twelve 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 Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions dated 26.11.2020 wherein he has stated:- a) That the non-confidential evidences/ documents submitted by the Respondent on 9/10/2020 and 12/10/2020 to the DGAP had not been sent to him despite DGAP's directions as mentioned in para 10 of the Report. However, the Applicant No. 1 requested to go ahead with the proceedings initiated vide Notice dated 05.11.2020. b) That if the Respondent by mentioning about the financial losses and shutting down of his manufacturing/ trading units was trying to justify his action of not passing on the legitimate tax benefit to him, then the same was not acceptable as the same was 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of collection of higher amount till the date of return of such amount at the earliest. h) That he had been requesting the Respondent to pay him the amount commensurate to reduction in prices vide his several e-mails dated 09/04/2019, 15/05/2019, 27/05/2019, 03/06/2019. However, he chose to not only ignore his requests but it was also seen from the DGAPs observations made at paras 5,6,7,8,9 and 10 of his Report, that the Respondent had been showing scant regard to the legal provisions and not respecting this Authority. Hence, it was requested to deal with the matter with an 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eered amount which was to be determined by this Authority. 27. On the basis of the above clarifications of the DGAP, the Respondent and the Applicant No. 1 were directed to file rejoinder/ reply. The Applicant No. 1 vide his submissions dated 04 01.2021 has filed his rejoinder on the DGAP's clarifications dated 14.12.2020 wherein he has stated:- a) That he reiterates submissions made by him at para 25 (d) & (e) above vide his reply dated 10.11.2020. b) That interest provisions were statutory as could be seen in Rule 127 of the CGST Rules, 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 purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e his submissions dated 15.02.2021 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 infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a baseless 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 durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 aluminium products sold may be identif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply 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 neither the CGST Act nor the CGST Rules provided the methodology for calculating profiteering:- i. The me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subjected to greater penalty than what the law prescribed and no ex post fact legislation was permissible for escalating the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in fact, profiteered. v. Neither the CGST Act nor the CGST Rules provided the methodology for calculating profiteering. Therefore, the methodology adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;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 Applicant No. 1 was requested to visit DGAP's office in Delhi on 09.10.2020 to 12.10.2020 (during office hours) to inspect the non-confidential information furnished by the Respondent. F. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions 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 of the Respondent was an afterthought. The Respondent might like to approach the appropriate forum settling such a dispute. However it was emphatically stated that never could the Govt. tax be over charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 video conferencing in the matter was held on 04.03.2021. Same was attended by Shri Sunil Deshpande, Applicant No. 1 in person and Shri Reji V. Mathew, Chartered Accountant, Shri Aditya Chatterjee and Shri Sumer Dev Seth, Advocates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice 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, protest or dispute about the price of the goods while accepting the delivery between August to October 2017. Thus, the contention/ argument of the Applicant No. 1 that he had objected to the additional taxation at the time of sale/ delivery was blatantly fals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resentatives 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 Offer date from M/s Anutone/Respondent 29/11/2016 Work order date 20/12/2016 Work commencement date 30/12/2016 Purchase Order to M/s Anutone/Respondent 18/02/2017 Date of completion of supply 04/11/2017 E. That the rates as per the Applicant No. 1's Purchase Order were firm for the entire project with no provision for escalation on any account. Purchase Order was placed during VAT/ pre-GST regime and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 brands of companies which follow ethical and good business practices. Thanks and Regards, Deshpande Constructions" I. That consequent to the above e-mail even the Respondent's executive met the Accounts Officer of GSIDC Ltd. on 03.06.2019 and understood the process. However, the Respondent replied that he had charged taxes at prevailing GST rate. Therefore, after exhausting all the means, as a last resort the Applicant No. 1 approached this Authority for justice vide his application dated 11.06.2019. J. Because of overcharging by the Respondent and reduction in rate by GSIDC Ltd. the Applicant No. 1 suffered heavy financial losses. The Applicant No. 1 also pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Applicant No. 1 whether there was any escalation or otherwise in the import prices. Needless to mention that standard businesses were accustomed to such kind of price variations. For that matter it was normal business practice to provide a cushion to absorb such price variations. L. Further, this Authority raised a specific query that whether the Applicant No. 1 did not come to know about overcharging before purchase:- In this regard the Applicant No. 1 stated that he had already explained the same in the above paras about the chain of events and how the Applicant No. 1 came to know about the concept of profiteering and such a forum as this Authority. M. Further the Applicant No. 1 requested this A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ITC in the GST regime was required to be passed on by the supplier to the recipients by way of commensurate reduction in price, the Respondent had not contested that there was no additional benefit of ITC available to him. The Report submitted by the DGAP was based on the submission made by the Respondent. C. Further for the Respondent's contentions that the DGAP's Report erred in assuming that non-reduction of base price amounted to "profiteering"; ITC had accrued to the Applicant No. 1's benefit through non-increase of base price, the DGAP has submitted that while arriving at profiteering in terms of Section 171 of the CGST Act, 2017, the costs or escalations were not considered. The only point which was exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st-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 interest and hence the suppliers are not required to pay even a single penny from their own pocket and hence, they have to pass on the above benefits as per the provisions of Section 171 (1) of the CGST Act, 2017. Moreover, profiteering was not a tax as had been interpreted by the Respondent but it was a benefit which had accrued to him on account of additional ITC which he needed to pass on to the eligible customers. The CGST Rules have provided an elaborate mechanism for determination of the benefits and hence there is sufficient machinery to implement the anti-profiteering provisions. F. The DGAP further submitted that his Report dated 29.10.2020 had provided the methodology and procedure regarding the computation of profiteering amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 exact detailed description of the 'false ceiling materials' was found only while scrutinising the documents and thereafter a Notice was issued with the correct description on 30.10.2019 under Rule 129(3). In fact, the DGAP was well aware of the "detailed description of the goods" from the very inception of the proceedings as the same were expressly mentioned by the Applicant No. 1 in his purported complaint to the State Screening Committee/ Standing Committee on Anti-Profiteering along with documents submitted by him. Therefore, despite the specific description of the goods involved being well within the DGAP's knowledge, only a vague reference to "false ceiling materials" was made in the Alleged Notice. Pertinently, the Respondent whose business primarily involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.02.2017 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 goods at a heavily discounted prices of 32%, though the same were not valid beyond February 2017 and the raw material price of aluminium in the international market had increased significantly. E. That this Authority in the case of Kumar Gandharv v. KRBL Ltd. [Case No. 3 of 2018, Date of Decision-04 05 2018], had accepted the contention of the Respondent therein that increase of purchase price of paddy led to an increase in the sale price of Basmati Rice. It was submitted by the Respondent therein that the cost of price of paddy, which amounted to 75% of the cost of production, had increased by more than 30% in the FY2017 as compared to the FY 2016. The Respondent therein submitted that because of the stiff competition in the market, they couldn't pass on the increased cost enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aluminium goods listed in SO 002 (which was already a discounted price) since the natural increase in price had been absorbed by the ITC. On the contrary, in the entire aforesaid transaction, a benefit of approximately Rs. 75,76,925.30/- had accrued to the Applicant No. 1 due to the special discount and unchanged purchase price of the goods. H. In response to the Paragraph F, it was submitted that the DGAP had failed to apply/use the correct methodology and procedure to compute the alleged profiteering amount of Rs. 12,79,304/-. It was submitted that any alleged "profiteering" had to be considered on the market price of the goods in question (non-discounted price) and not the discounted price of the goods in question. Further, the DGAP must also consider the change or escalation in the cost price of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 the Respondent. As per this Authority in GST any reduction in rate of tax on any supply of goods, the benefit of ITC should have been passed on to the recipient by way of commensurate reduction in prices. This had led to increase in the price of the items purchased by the Applicant No. 1. c. That the claim of the Applicant No. 1 was duly supported by concrete evidence, copies of invoices relating to goods purchased from the Respondent as per Purchase Order, before GST regime and the details are given below:- Sr. No. Invoice No. Date Taxable Value CST @ 2% Total invoice value 1 1720057 15/06/2017 Rs. 14,16,447.48 Rs. 28,328.93 Rs. 14,44776/- 2 1720056 15/06/2017 Rs. 14,67,443.40 Rs. 29,348.87 Rs. 14,96,792/- Total Rs. 28,83,890.88 Rs. 57,677.80 Rs. 29,41 ,568/- d. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch otherwise would have to be borne by the Applicant No. 1. Thus the net deduction had been worked out to around 9% of the quoted prices as stated above. The amount quoted by the Applicant No. 1 was reduced by around Rs.54 lakhs by GSIDC. i. That various requests were made to the Respondent via email, telephonic calls, personal meetings with the Respondent's dealer and his local company representative and letters to reduce the prices to the extent of reduction in taxes like Customs Duty, Excise Duty etc. in the basic quoted price but there was no positive response from the Respondent. j. That profiteering has occurred on the part of the Respondent beyond doubt, the said amount needs to be paid to the Applicant No. 1. Interest @18% had to be recovered from the Respondent and paid to the Applicant No. 1 as per Rule 127 of the CGST Rules, 2017 . k. An order may be passed directing the Respondent to return the amount of Rs. 12,79,304/- as mentioned in the DGAP's Report being the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent from the date of collection of higher amount till the date of return of such amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of import to the Respondent in the pre GST period, hence, the incidence of such tax was factored into the price quoted by the Respondent. However, both import and supply were made, by the Respondent, during the GST regime. Hence, 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 Additional Duty of Customs (referred as CVD) which was factored into the price quoted by the Respondent. 45. With respect to the 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, prices of which were quoted for sale and supply by the Respondent to the Applicant No. 1, it was found that an amount of Rs. 12,79,304/- equivalent to the amount of Additional Duty of Customs (referred as CVD above) to be paid at the time of import by the Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C availed by the supplier to the recipients by way of commensurate reduction 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. 47. It has also been contended by the Respondent that there was no 'profiteering' on their part as the ITC had accrued to the Applicant No. I's benefit through non-increase of base price. The Respondent has submitted that, the purchase order was received prior to introduction of GST and supplies had to take place subsequent to the introduction of GST and consequently though there was increase in cost of raw materials supplied, such increase in cost had been absorbed by them by not increasing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the price. Therefore, the submission made by the Respondent has no basis in law. 49. The Respondent also stated that the DGAP's Report had incorrectly considered the discounted price offered to the Applicant No. 1 instead of the market price while making its calculations. According to the Respondent, if the market price was considered, it could be shown that there was no profiteering and in fact the Applicant No. 1 had benefited hugely. In this context, this Authority finds that, Section 171 of the CGST Act, 2017 requires passing of the benefit of tax reduction or availability of ITC by commensurate reduction in prices only. The above mentioned discounts had been offered by the Respondent in the prices quoted by them in the pre GST period after factoring into the said price the incidence of Additional Duty of Customs (referred as CVD) of which no credit was then available. Hence, the Authority finds that, the Respondent has no basis to claim that, the 32% trade discount given to the Applicant No. I was in any way related to the benefit of ITC the Respondent ought to have passed on to the Applicant No. 1. This Authority also finds that, such discounts were offered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent had been forwarded to the Applicant No. 1. In this regard, it is to mention that the Applicant No. 1 vide his letter dated 19.02.2021 requested for a copy of consolidated written submissions filed by the Respondent before hearing. In this regard it is to mention that as per this Authority's Order dated 23.02.2021 only copy of the Respondent's written submissions dated 15.02.2021 was supplied to the Applicant No. All the Annexures marked as the "Confidential" were not supplied to the Applicant No. 1. 53. The Respondent has also cited the decision of this Authority in the case of Kumar Gandhatv v. KRBL Ltd., the Hon'ble Supreme Court's decision in Islamic Academy of Education v. State of Kamataka, (2003) 6 SCC 697 and in Man Realty Ltd. and Another vs. Union of India and Others [W.P. (C) 997/2021], which was pending before the Hon'ble Delhi High Court. In this regard it is to mention that the facts of the above cases referred by the Respondent are different from his case and are of no help to the Respondent. 54. It is clear from a plain reading of Section 171 (1) cited above that, it deals with two situations i.e. one relating to the passing on the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as correct. 55. In view of the discussions and findings above, this Authority finds that the Respondent has profiteered by an amount of Rs. 12,79,304/- during the period of investigation i.e. 01.07.2017 to 30.09.2019. The above amount of Rs.12,79,304/- (including 18% GST) that has been profiteered by the Respondent from Applicant No. 1, shall be refunded by him, alongwith interest @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. 56. This Authority, in terms of Rule 136 of the CGST Rules 2017, directs the jurisdictional Commissioners of CGST/SGST, State of Karnataka to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to the Applicant No. 1. A Report in compliance of this order shall be submitted to this Authority by the said Commissioners of CGST /SGST within a period of 4 months from the date of receipt of this order. 57. This Authority finds it pertinent to mention that the Hon'ble Supreme Court, vide its Order dated 23.03.2020, while taking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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