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TMI Blog2022 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of GST. Thus, the provisions of Section 171 of the CGST Act, 2017 are not applicable on supply of such goods. Further, there was reduction in the rate of tax applicable on only 13 manufactured goods and 14 traded goods in the GST-regime as per the DGAP s Report and its Annexures (i.e. in comparison to the consolidated tax rate of tax i.e. CENVAT/Central Excise + VAT applicable in pre-GST regime). It is also noted that the Respondent had not dealt in 13 of such 14 traded goods on which the rate of tax was decreased in post-GST regime. Hence, the DGAP s has calculated profiteering in respect of 13 manufactured goods and 01 traded goods (on which rate of tax was decreased with the introduction of GST) in which the Respondent has dealt post-GST. The Authority finds that, the Respondent s contention to consider rate price rather than transaction value for computation of profiteering is not sustainable as the transaction value is the base value (taxable value) upon which all the taxes are levied and paid to the Government. Therefore, to pass on the benefit of any rate reduction in terms of Section 171 of the CGST Act, 2017, the Supplier has to reduce the base value commensurately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total pre-GST tax rate applicable i.e. Excise duty @12.5% and VAT @ 14.5%. The Applicant No. 1 also alleged that the Respondent had not passed on the benefit of reduction of rate of tax to the consumers by way of commensurate reduction in base price of the products manufactured and sold by him as stipulated in Section 171 of the CGST Act, 2017. 2. In the DGAPs Report dated 26.02.2021, it was inter-alia submitted that:- (i) On receipt of the reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the Rules was issued by the Director General of Anti-profiteering on 01.07.2020, calling upon the Respondent to reply as to whether he admitted that the benefit of rate reduction and additional ITC available, had not been passed on to the recipient by way of commensurate reduction in price and if so, to suo-moto determine the quantum there of and indicate the same in his reply to the Notice as well as to furnish all documents in support of his reply. Vide the said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period 13.07.2020 to 15.07.2020. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity. (b) That a list of products dealt by the Respondent pre-GST and post-GST as bifurcated into manufacturing and trading was tabulated in Table-1 below: Table-1 Particulars Reference Manufactured Goods Traded Goods Total Remarks Total no. of products dealt by the Respondent in pre-GST era (A) 582 18 600 Products included in (A) but not sold in pre-GST era (B) 68 3 71 Out of Anti-profiteering purview since these products were not sold during the period April-June 2017 Products discontinued in GST i.e. w.e.f. 01 July 2017 (C) 11 11 Out of Anti-profiteering purview since these products were sold in post-GST regime. Products in GST era in which Respondent was dealing which existed in pre-GST era also (D=A-B-C) 503 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent and thus, these cannot be compared pre and post-GST for ascertaining profiteering. The Respondent relied upon the decision of this Authority itself in the matter Kerala State Screening Committee on Anti-profiteering Vs. Asian Paints Ltd. (v) The DGAP has also informed that vide the aforementioned letters/e-mails, the Respondent submitted the following documents/information. (a) List of GSTIN registrations in 15 States and ISD certificate. (b) Invoice-wise details of outward supplies of the 490 manufactured products for the period 01.04.2017 to 30.09.2017, on which GST @ 28% was applicable from 01 July 2017 (on sample basis). (c) Total Invoice-wise details of outward supplies of the 13 manufactured products for the period 01.04.2017 to 30.06.2020, on which GST @ 18% was applicable from 01 July 2017. (d) Purchase details of traded goods on which excise duty cost for the period April, 2016 to June, 2017 and Invoice wise details of outward taxable supplies of such traded goods for the period from 01.07.2017 to 30.06.2020. (e) Invoice-wise details of outward supplies of the traded goods for the period 01.06.2017 to 30.06.2017, on which GST @28%/18% was applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DGAP submitted that the rate of tax increased from 21.16% to 28% post GST. Thus, the products which fall under this category, where the rate of tax increased from 21.16% to 28% post-GST implementation, were out of the purview of investigation. The Respondent had submitted, sales data of such 18 other products (on sample basis) to the DGAP, where the rate of tax applicable in pre-GST era ranged from 18% to 25% (depending on the VAT rate applicable and MRP of the products), that increased to 28% with introduction of GST. Thus, provisions of Section 171 were not applicable on sale of such goods. From the outward supply of the goods, as submitted by the Respondent, the DGAP Submitted that there were 490 such products which were dealt by the Respondent in the post-GST era. (iv) The Respondent s reliance on the judgement of the Authority in the matter of Kerala State Screening Committee on Anti-profiteering vs. Asian Paints Ltd, to Consider rate price rather than transaction value for Computation of profiteering, Was not correct, as the transaction value was the base value (taxable value) upon which all the taxes was levied and paid to the Government. Therefore, to pass on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Respondent had also been arrived in similar way. The Respondent had also submitted that he sold the goods to his dealers located in each state who in turn sell goods to end consumers and the price for dealer in one state might differ from the price of another dealer in another state. Therefore, the profiteering had been computed by considering each state as a separated category. Following the similar methodology, the total profiteering amount on account of reduction in rate of tax, comes out of Rs.1,15,96,899/-. (vi) Apart from the manufacturing activity, the Respondent was also engaged in trading activity. It was pertinent to note that during the pre-GST period, the Respondent was not eligible to take the credit of the Central Excise Duty paid on the traded goods and the same was embedded in the cost. But, in the post-GST period, the Respondent was eligible to take credit of the GST paid on the traded goods. Thus, the Respondent received the benefit of the ITS in the post GST period. This additional benefit of ITC also needed to be passed on by the Respondent by way of commensurate reduction in prices. The Respondent had informed the DGAP that generally, he was engaed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the GST charged on the increased base prices. (viii) As per the outward sales data submitted by the Respondent, the DGAP claimed that all the transactions of the Respondent were B2B customers. Therefore, each of the customers was identifiable. Therefore, the profiteered amount was required to be returned to all such recipients. (ix) In this case, the allegation of profiteering against the Respondent that he had not passed on the benefit of reduction of rate of tax and additional ITC available, to the consumers by way of commensurate reduction in the prices of the products manufactured and sold by him was correct as the Respondent had increased the base prices (excluding tax) of the goods manufactured/traded and sold by him although there was a reduction in the rate of tax after the introduction of GST w.e.f. 01.07.2017 and benefit of additional ITC available to him. From the details furnished as mentioned above, the DGAP claimed that the base prices of the goods manufactured and sold/traded by the Respondent were increased after 01.07.2017. Thus, by increasing the base prices of goods consequent to the introduction of GST, the commensurate benefit of implementation of GST was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP vide his Report dated 26.02.2021 were not tenable. Rate price must be considered wile computing profiteering instead of transaction value as alleged in DGAP s report dated 26 February, 2021. The Respondent further submitted the DGAP, vide Para 13 of his Investigation Findings in the Report dated 26.02.2021, had rejected Respondent s submissions to adopt rate price as correct basis/comparison to compute profiteering of the Respondent. In this regard, he submitted that there were following rates of commodity sold by the Respondent :- MRP say Rs. 1,000/- which was maximum retail price of commodity, required to be declared as per the relevant Act and above which said commodity could not be sold. Rate price say Rs. 800/- which was the actual price on which goods were sold by the Respondent to his customers; Transaction Value, after deducting Discount given to recipient which was shown in the invoice itself, say Rs. Rs. 600 (Rs. 800 or Rate price less discount Rs. 200); and Net effective sale price, after deducting Discount given to the recipient post sale in the form of issuance of credit note(s), say Rs. 550 (Rs. 600 transaction value less Rs. 50 post sale dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that whatever GST had been charged in excess by him from his customers, as alleged to be recovered as amount of profiteering, had been duly deposited by the Respondent with Government treasury on regular intervals and was not retained by the Respondent. Therefore, such amount, which represents GST portion should not be alleged to be profiteered by the Respondent and ordered to be recovered, as such amount was already deposited with Government treasury. The Respondent further stated that, even if, amount of excess GST charged by him and deposited with Government exchequer had to be regarded as amount of profiteering by the Respondent and recovered in pursuance thereof, the claimed that refund to that extent, which represents GST portion should be allowed to the Respondent by way of express mention in this Authority s final order. (f) That the penalty proposed to be levied under sub-section (3A) of Section 171 of the Act was introduced inserted by the Finance (No. 2) Act, 2019 w.e.f. 01 January, 2020 and reads as- (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 reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the increased base price. Further, it was submitted that due to increase in base price, the customer had to bear not only the increased base price but also the GST levied on such increased base price. Hence, the same was incorporated by the DGAP for the purpose of calculation of profiteering amount. This methodology adopted by DGAP was consistent uniform in all his reports involving allegation of profiteering in similar cases and had been upheld by the NAA. The Respondent had collected profiteered amount in the form of excess price and GST on it. As the additional GST amount was a part of profiteered amount, it could not be removed. Therefore, the contention of the Respondent that the GST portion should not be alleged to the profiteered by the Respondent was incorrect. 7. The above clarifications of the DGAP were supplied to the Respondent to file his rejoinder. Consequently, the Respondent filed his rejoinder dated 14.07.2021 which is summarized as follow :- (a) That the Respondent, being honest tax payer and to avoid litigation and peace of mind, undertook to return the amount alleged to be profiteered to recipients, as may be finally determined by this Authority vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arguments advanced by the Respondent. It is clear from the plain reading of Section 171(1) of the CGST Act, 2017, that it deals with two situations one related to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of ITC. As regards the issue of reduction in the rate of GST. It is pertinent to mention that the Central Government, on the recommendation of the GST Council, had levied 28% tax on the HSN 32141000 vide S. No. 24 of Schedule IV to the Notification No. 01/2017-Central Tax (Rate) dated 28-06-2017 and 18% GST on the HSN 38244090 vide S. No. 97 of the Schedule III to the above mentioned Notification. Further, for the goods traded by the Respondent, under HSN 39259090 vide S.No. 110 of the Schedule III to the same Notification. GST applicable was 18% Now, the issues to be decided by the Authority are as under :- (a) Whether there was any violation of the provisions of Section 171 of the CGST Act, 1017 in this case? (b) If yes, them what was the quantum of profiteering ? 11. Section 171 of the CGST Act provides as under :- (1) Any reduction in rate of tax on any supply of goods or services or the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not dealt in 13 of such 14 traded goods on which the rate of tax was decreased in post-GST regime. Hence, the DGAP s has calculated profiteering in respect of 13 manufactured goods and 01 traded goods (on which rate of tax was decreased with the introduction of GST) in which the Respondent has dealt post-GST. 14. The Authority finds that, the Respondent s contention to consider rate price rather than transaction value for computation of profiteering is not sustainable as the transaction value is the base value (taxable value) upon which all the taxes are levied and paid to the Government. Therefore, to pass on the benefit of any rate reduction in terms of Section 171 of the CGST Act, 2017, the Supplier has to reduce the base value commensurately. 15. The Respondent has contended that profiteering has also been computed for excess GST charged by him and the same has been deposited with the Government Exchequer. In this regard. the Authority finds that, due to increase in base price, the customer had to bear not only the increased base price but also the GST levied on such excess valve Such amount needs to be included while determining the profiteered amount The Authority finds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2,37,088/- for the traded goods) under the provision of Rule 133(1) of the CGST Rules. 19. Based on the above facts, the profiteered amount is determined as Rs. 1,18,33,987/-. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133(3)(a) of the CGST Rules, 2017. As per the outward sales data submitted by the Respondent, it is gathered that all the transactions of the Respondent are B2B customers. Therefore, each of the customer is identifiable. Hence, we order that the profiteered amount of Rs. 1,18,33,987/- shall be passed on/refunded along with interest @ 18% (from the date of receipt of the profiteered amount by the Respondent up till the date of passing on/refund of such profiteered amount to the recipients) by the Respondent as per Annexure-A and B to this Order within a period 3 months from the date of this order. 20. The concerned jurisdictional CGST/SGST Commissioner is directed to ensure compliance of this Order. It may be ensured that the benefit of rate reduction and ITC has been passed on to each recipient as per this Order along with interest @ 18% as prescribed under Rule 133(3)(b) of the CGST Rules, 2017. In this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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