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TMI Blog2022 (5) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... with him or his Dealers as on 15-11-2017 and thus passed on the benefit of tax reduction on it? (iii) Whether the Respondent has charged 18% GST after rate reduction on the impacted SKUs after rate reduction? (iv) On which grounds the Respondent has increased the base prices of his products in the month of November, 2017 immediately after the tax reduction on 15-11-2017? (v) What evidence regarding increase in the prices of Crude Oil is available on the basis of which it has been claimed that the Respondent has increased his prices due to the increase in the prices of the Crude Oil? (iv) Whether the Respondent has violated the provisions of section 171 of the Act and if so what is the quantum of profiteering? - SHRI AMAND SHAH, CHAIRMAN, PRAMOD KUMAR SINGH AND HITESH SHAH, MEMBERS (T) ORDER The present Report dated 15-12-2021, has been received from the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 of the Central Goods and Services Tax (CGST) Rules, 2017. The brief facts of the case are that a reference was received by the DGAP on 24-1-2020 from the Standing Committee on Anti-profiteering, on the basis of the lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls, which were incomplete. Therefore, again letters dated 13-8-2020 8-9-2020, were sent to the Respondent to submit the complete details/documents. However, the Respondent filed a Nirma Ltd. v. National Anti-Profiteering Authority [Writ Petition (Civil) No. 6758/2020 before the Hon'ble High Court of Delhi at New Delhi on the ground that the Notice dated 7-2-2020, issued by DGAP was not in compliance with rule 129 (3) (a) (b) of the CGST Rules, 2017 due to the reason that as per sub-rule (3) of rule 129, every investigation was to be preceded by a notice to the interested parties containing inter alia the information on the following matters: (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 were based. The DGAP has also intimated the Hon'ble Delhi High Court in its Order dated 30-9-2020 disposed the petition by ordering that (a) the Notice dated 7-2-2020, impugned in this petition stood withdrawn (b) with liberty to the DGAP to issue a fresh notice in accordance with law; and (c) granting liberty to the Respondent to challenge the fresh notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 17-7-2021. 8. The DGAP has also mentioned that the time limit to complete the investigation was 23-7-2020. However, in terms of Notification No. 55/2020-Central Tax dated 27-6-2020, which was further amended vide Notification No. 65/2020-Central Tax dated 1-9-2020 and Notification No. 91/2020-Central Tax dated 14-12-2020, the time limit for compliance was extended up to 31-3-2021. Further, the Hon'ble Supreme Court of India vide its Order dated 8-3-2021 passed in suo motu Writ Petition (Civil) No. 3/2020, Cognizance for Extension of Limitation, In re [2021] 125 taxmann.com 151, has ordered that in cases where the limitation would have expired during the period between 15-3-2020 till 15-3-2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15-3-2021. In the event the actual balance period of limitation remaining, with effect from 15-3-2021, is greater than 90 days, that longer period shall apply. The above relief has been extended and the period from 14-3-2021 till further orders also stands excluded in computing the limitation period as per the Hon'ble Supreme Court's Order dated 27-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced as under: Recipient of supply of goods or services or both, means- (a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay the consideration; (b) Where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) Where no consideration is payable for the supply of a service, the person to whom the service is rendered And any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied. (iv) That this Authority vide its various decisions has held that if the rate reduction of GST had been passed on to the recipient, it could not be alleged that there was any profiteering as it amounted to compliance of the conditions mentioned in Section 171 of the CGST Act, 2017. The relied upon cases were cited as under: Sl. No. Order No. Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/2020 04-3-2020 Bajaj Electricals Ltd. Mumbai 22011/NAA/69/Bajaj/2 019/1353-56 04-3-20 The Respondent based on his above had stated that in his case, there was no profiteering, hence he requested to close the proceedings initiated against him. (v) That he had a system of reviewing the cost vis-a-vis selling price of his products, normally on half yearly basis i.e. March/April and September/October unless there were some major factors affecting the cost of the products where immediate necessary changes in the selling prices of the products were to be made e.g. there was an increase in the rates in the month of December, 2017. He had also informed that the key and major components effecting the cost of Detergent including Scouring Bar were petroleum products, (a) The price of Crude Oil which governed the prices of petroleum products was at USD 52 per Barrel in April, 2017 which was substantially increased to USD 60 per Barrel in November, 2017 (b) the cost of advertisements, transportation and other overheads had also been increased substantially and (c) he had also increased the prices of detergent cake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch reduction in GST rate to the recipients, in terms of section 171 of the Central Goods and Services Tax Act, 2017. 12 . The DGAP has also mentioned that on scrutiny of letter dated 18-4-2019 of this Authority received through the Standing Committee, he had observed that the Respondent had furnished a list dated 6-8-2018, wherein details of impacted products were given. Further, in the Minutes of the Meeting of the Standing Committee dated 10-1-2020, the remark given in respect of the Respondent was that there was non-reduction of prices commensurate with reduction in GST from 28% to 18%, whereas in the said list there was no indication of prices at which the products were sold by Respondent to his recipients (distributors). There was only a reference of pre-rate reduction MRP and post-rate reduction MRP, effective rate of change in MRP, quantity sold at old MRP and sales value of quantity sold at old MRP. In this regard, the DGAP has submitted that section 171 of the CGST Act, 2017 does not specifically talk about the reduction in MRP, however, it stipulates that the benefit of reduction in the rate of tax should be passed on commensurately by the supplier to the recipients b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST was reduced from 28% to 18% w.e.f. 15-11-2017. The following Table- A reflects the base prices of all the products of the Respondent which were impacted vide Notification No. 41/2017-Central Tax (Rate), dated 14-11-2017. The table indicates that the base prices of all the impacted products were not changed after rate reduction. It also indicates that the base prices in some cases were revised and in some case were not revised at all. Table-'A' No. Product Details Pre-rate reduction Post-rate reduction Period from which the product rates are revised Invoice No./Date Basic Price Per Kg/Box invoice No./Date Basic Price Per Kg/Box - Rs. Rs. - A B C D E F G 1 Nirma Yellow Powder, 1 kg 701052TI17000945 dated 30-10-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.40 901009T117001290 dated 15-11-2017 26.40 8-6-2018 Nirma Yellow Powder, 120 Gms - - 901009T117001623 dated 28-12-2017 26.40 Sold Only in Post-rate reduction period Nirma Yellow Powder, 105 Gms - - 901002T119009958 dated 5-1-2019 29.87 Sold Only in Post-rate reduction period 6 Nirma Yellow Powder, 18 Gms 701018TI17001577 dated 17-10-2017 27.85 701018TI17001895 dated 25-11-2017 27.85 Rates not revised Nirma Yellow Powder, 15 Gms 701022TI17001517 dated 14-11-2017 31.25 901002T117007583 dated 15-11-2017 31.25 11-2-2019 Nirma Yellow Powder, 17 Gms - - 901002T117008007 dated 28-11-2017 31.25 Sold Only in Post-rate reduction period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction period 9 Nirma Advance Detergent, 500 Gms 701031TI17000311 dated 9-11-2017 34.00 701031 Tl 17000324 dated 17-11-2017 34.00 Rates not revised 701134TI17001088 dated 14-11-2017 33.90 701035T117001705 dated 15-11-2017 33.90 29-5-2018 (07-5-2019 for 25kg packing) - - 901004T117003796 dated 20-11-2017 33.50 Sold Only in Post-rate reduction period 10 Nirma Advance Detergent, 500 Gms + BSP70 701053T117000996 dated 13-11-2017 39.20 701025T117000211 dated 22-11-2017 39.20 Rates not revised Nirma Advance Detergent, 500 Gms + BSP75 901008TI17002049 dated 14-11-2017 39.20 701026T117001132 dated 15-11-2017 39.20 Rates not revised - - 701053T117001068 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Active Powder, 1 kgs 701006TI17002123 dated 10-11-2017 27.15 701006T117002167 dated 16-11-2017 27.15 Rates not revised 901002T117007577 dated 15-11-2017 28.25 701035TI17001691 dated 14-11-2017 28.25 31-5-2018 - 901002TI17008829 dated 26-12-2017 28.90 Sold Only in Post-rate reduction period 16 Nirma Active Powder, 2 kgs - - - - Product Not found 17 Nirma Active Powder, 500 Gms 701035TI17001691 dated 14-11-2017 27.00 701035TI17001714 dated 16 11.2017 27.00 25-12-2017 901002T117007546 dated 14-11-2017 28.15 901002T117007593 dated 15-11-2017 28.15 01-6-2018 18 Nirma Active Powder, 230 Gms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 Nirma Bartan Bar, 200 Gms (2+1 Free) - - 901004TI19004023 dated 21-1-2019 310.60 Sold Only in Post-rate reduction period 26 Nirma Clean Cake, 200 Gms (2+1 Free) 701024T117001055 dated 11-10-2017 358.05 701024TI17001273 dated 16-11-2017 358.05 Rates not revised Nirma Clean Cake, 175 Gms (3+1 Free) - - 901002TI19011415 dated 23-2-2019 322.10 Sold Only in Post-rate reduction period 27 Nirma Bartan Bar, 125 Gms (2+1) 12 Kg 701051 Tl 17000830 dated 12-11-2017 286.15 701032TI17001144 dated 17-11-2017 286.15 Rates not revised Nima Bartan Bar, 110 Gms (2+1) 10.560 Kg 701134T117001085 dated 14-11-2017 270.95 701032TI17001144 dated 17-11-2017 270.95 Rates not revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the rates in the month of December, 2017. Further, the DGAP has also submitted that the Respondent had increased the prices of non-impacted products namely Detergent Cakes (HSN Code 34012000) in December, 2017 where there was no reduction in rate of GST vide Notification No. 41/2017 dated November, 2017. The DGAP has further claimed that from the submissions of the Respondent the major components affecting the cost of detergent including scouring bar were variations in the prices of petroleum products, especially, the price of Crude Oil which governed the prices of petroleum products. It was at USD 52 per Barrel in April, 2017 which was substantially increased to USD 60 per Barrel in November, 2017. From the above, the DGAP has concluded that the Respondent had not increased the base prices in respect of the impacted products immediately after reduction in GST rate but only afterwards on account of aforementioned factor of increase in the price of crude oil or as per his price reviewing system twice in year. The DGAP has also claimed that the Respondent's submission had been corroborated by the fact that he had also issued Circular dated 15-11-2017, mentioned above to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in tax rate the Respondent had communicated it to his distributors through circular dated 15-11-2017. 20. The DGAP has also mentioned that the Standing Committee had forwarded the case against the Respondent with the following remark: Non-reduction of prices in commensurate with reduction of GST from 28% to 18% The Standing Committee had also sent the sheet submitted by the Respondent containing the details of impacted products, his pre- post-rate reduction MRP etc. However, no Anti-Profiteering Application Form (APAF) or any actual invoice was forwarded by the Standing Committee. The DGAP has further stated that while investigating the case, it was observed that section 171 of the CGST Act, 2017 did not specifically stipulate that there should be a reduction in MRP. However, it envisaged that the supplier had to pass on the benefit of rate reduction to his recipients by way of commensurate reduction in prices. The DGAP has also claimed that the said section, referred to the recipient and not to the end-customer. As there was no actual invoice on record in this case, it could not be established whether the end customer was commensurately benefitted by the rate red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (emphasis supplied) It is clear from the plain reading of the above provision that whereas it refers to any supply in a singular manner, it does not refer to the price in the same manner but refers to the prices in plural term for one supply. Had the intention been only to reduce one price, the word 'prices' would not have been mentioned in the above section in respect of one item of supply. Therefore, it is clear that all prices fixed by a manufacturer/supplier, in respect of each SKU, have to be reduced commensurately and not only the base price. It is well established that, a SKU may have different prices due to the legal provisions, pricing strategy adopted, geographical reasons, availability of tax benefits in a particular State or provision of transport, electricity, capital or other subsidies by the Central or the State Governments. Therefore, a supplier may fix different prices for the same SKU all of which he is required to be reduced due to tax reduction as per the above provision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be withdrawn by another. Accordingly, the finding recorded by the DGAP that the Respondent has not increased his base prices and passed on the benefit of tax reduction on the impacted SKUs is not substantiated and hence it cannot be accepted. It is also apparent from the letter dated 18-4-2019, addressed to the Standing Committee by this Authority, which was sent to the DGAP by it on 24-1-2020 for detailed investigation that the information supplied by the Respondent pertained to the pre-and post-15-11-2017, rate reduction MRPs of the impacted SKUs being sold by the Respondent. It was specifically mentioned that the data received may involve some profiteering. Again vide letter File No. 22011/NAA/39/Nirma/2018/5886, dated 6-11-2020, detailed information pertaining to the Respondent was again supplied to the DGAP by this Authority which does not appear to have been properly examined as it is apparent from the information supplied by the Respondent that he had refixed the MRPs but not w.e.f. 15-11-2017. Keeping in view the observations of this Authority mentioned above, it was obligatory on the DGAP to investigate whether the Respondent had commensurately reduced his MRPs or not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and immediately after tax reduction and the ultimate consumer had got the benefit of tax reduction. Accordingly, the claim made by the DGAP in this regard cannot be accepted. 29. In view of the above findings, the law settled by this Authority vide Order No. 11/2020, dated 4-3-2020, in the matter of M/s Bajaj Electricals Ltd., Order No. 21/2018, dated 24-12-2018, in the matter of M/s Asian Granito India Ltd., Order No. 28/2018, dated 27-12-2018, in the matter of M/s Ahuja Radios., Order No. 13/2019, dated 1-3-2019, in the matter of M/s Velbon Vitrified Tiles Pvt. Ltd., Order No. 19/2019, dated 13-3-2019, in the matter of M/s Somany Ceramics Ltd., Order No. 18/2019, dated 13-3-2019, in the matter of M/s Asian Paints Ltd. and Order No. 24/2019, dated 3-4-2019, in the matter of M/s Rosata Vitrified Pvt. Ltd. does not apply to the facts of the present case. 30. The DGAP has also contended that, no Anti-Profiteering Application Form (APAF) or any actual invoice was sent by the Standing Committee. In this connection it would be relevant to mention that the APAF and invoice as per Rule 128 is required by the Standing Committee and once it is satisfied that prima facie there is deni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the above claim cannot be accepted. 34. Based on the above findings, the Report of the DGAP stating that the Respondent has not violated the provisions of Section 171 of the above Act cannot be accepted and accordingly, the same is rejected and the DGAP is directed to reinvestigate the case as per the provisions of rule 133 (4) of the CGST Rules, 2017 on the following issues and submit a fresh Report as per the provisions of Rule 129: (i) Whether the Respondent has reduced, refixed and displayed the MRPs of the impacted SKUs commensurately w.e.f. 15-11-2017, after the rate of tax was reduced on them and conveyed the same to his Dealers i.e. Distributors/Wholesalers/Retailers by whatever name known? (ii) Whether the Respondent has affixed stickers or stamped or online printed the reduced MRPs on the stock lying with him or his Dealers as on 15-11-2017 and thus passed on the benefit of tax reduction on it? (iii) Whether the Respondent has charged 18% GST after rate reduction on the impacted SKUs after rate reduction? (iv) On which grounds the Respondent has increased the base prices of his products in the month of November, 2017 immediately after the tax reduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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