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TMI Blog2024 (7) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... 133 (3) (a) of the CGST Rules. 2017. the Respondent is directed to reduce the prices of his tickets, keeping in view the reduction in the rate of tax so that the benefit would be passed on to the recipients The Respondent is also directed to deposit the profiteered amount of Rs. 48,25,970/- along with the interest, which is to be calculated @ 18% from the date, when the above amount was collected by him, from the recipients. The Respondent is directed to deposit the amount of profiteering in two equal parts, of Rs. 24.12.985/- in the Central Consumer Welfare Fund and Rs. 24,12.985/- In the Telangana State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with interest@ 18%. The above amount shall be deposited within a period of 3 months from the date of receipt of this Order failing which the same shall be recovered by the jurisdictional Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017. Penalty - HELD THAT:- The Respondent has denied benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 161.32 2. Regular Seats 150 28 117.19 150 18 127.12 117.16 138.28 b. The Applicant No. 1 had enclosed copies of tickets pre post 01.01,2019, copy of letter dated 27.03.2019 of the Respondent confirming non-reduction of the prices of tickets alongwith his application In Anti-Profiteering Application Form ( APAF-1 form). c. The above application was examined by the Standing Committee on Anti-profiteering and was forwarded to the DGAP to conduct a detailed investigation in the matter Accordingly, the DGAP decided to initiate an investigation and collect evidence necessary to determine whether the benefit of reduction in rate of tax had been passed on by the Respondent to the recipients in respect of supply of Services by way of admission to exhibition of cinematography films supplied by the Respondent. d. The DGAP issued a Notice on 08.07.2019 under Rule 129 of the CGST Rules, 2017 to the Respondent calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in rate of tax had not been passed on to the recipients by way of commensurate reduction in vices and if so to suo moto determine the quantum thereof and indicate the same in his reply to the Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eats and Rs. 44,62,671/- for Regular seats . The total amount of net higher sale realization due to increase in the base price of the movie ticket, despite the reduction in GST rate from 28% to 18% or in other words. the profiteered amount comes to Rs. 48,25,970/-. The details of the computation are given in the Table B below:- Table- B Sr. No. Admission Ticket 01.01.2019 to 30.06.2019 Base Price charged (Rs.) Commensurate Base Price (Rs.) Excess amount Charged per ticket (Rs.) Excess tax Charged per ticket @ 18% Profiteering per unit (Rs.) Oty. Sold Total Profiteering (including tax @18%) in Rs. A B C D E=(C-D) F(E*18%) G=(E+F) H I=(H*G) 1. Premium Seats 148.31 136.72 11.59 2.09 13.68 28657 383299 2. Regular Seats 127.12 117.19 9.93 1.79 11.72 380774 4462671 Grand Total Rs. 48,25,970 2. The DGAP has concluded that the allegation of profiteering by way of increasing the base prices of the tickets (Services) and by way of not reducing the selling prices of the tickets (Services) commensurately. despite the rate reduction In GST rate on Services byway of admission to exhibition of cinematography films where price of admission ticket was above one hundred rupees was reduced from 28% t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telangana being Writ Petition (civil) No. 1946/2014 vide order dated 31 10.2016 , quashed the GO Ms. 100 dated 26.04.2013 and also allowed theatre owners to charge a higher price on cinema tickets after informing the concerned authorities about the hiked prices Pursuant to the said the Hong High Court. the Respondent increased the prices of tickets from Rs. 125 to Rs. 150 for Regular Seats and from Rs. 150 to Rs. 175 for Premium Seats after informing the same to the Commissioner of Police who was the licensing authority. Thereafter. The Government of Telangana issued a GO Ms. 75 dated 23.06.2017 wherein the maximum rates for movie tickets was fixed at Rs. 200 for Regular seats and Rs. 300 for Premium seats Inclusive of all taxes. The prices determined by the Government of Telangana included an Entertainment Tax of 15% for Telugu films and 18% for non-Telugu films. c. That the DGAP while arriving at the profiteered amount had compared the base prices of the tickets with Vie point of reference being the date from which the GST Rate was reduced from 28% to 18% However it was pertinent to also take into consideration the lack of change in base price from the period when GST was introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Screening Committee on Anti-Profiteering, Kerala vs. Ramraj Handlooms (2019) (NAA), it was held that there was no reduction in the rate of tax on the product with effect from 01.07.2017 and that the rate of tax in the post-GST era has also been increased from CST at the rate of 2 per cent to IGST at the rate of 5 per cent therefore. the allegation of profiteering is not sustainable in terms of section 171 as there has been no reduction in the rate of tax . i. The DGAP failed to appreciate that your goodselves in the case of State Level Screening Committee on Anti-Profiteering Kerala vs Panasonic India Pvt. Ltd. (2019) 20 GS7L 375 have held that when the rate of tax in the post-GST era has been increased from 26.79% to28%. the allegation of profiteering would not be sustainable in terms of Section 171 of the CGST Act, 2017. j. The DGAP failed to appreciate that in the following orders. NAA had held a similar view that Section 171 could not be said to be attracted when the pre-GST rate of tax was lesser than the GST rate: i. Kerala Stale Screening Committee on Anti-Profiteering vs. Sudersans (2019) 103 taxmann.com 68 (NAA) ii. Kerala State Screening Committee on Anti-Profiteering vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 was effective tom 1.01.2019 and therefore was applicable w.e.f. 01.01.2019 only. Hence, this contention of the Respondent did not hold any merit d. That the case pertains to the reduction of rate in GST regime. Thus there was no comparison of Pre and Post GST tax rate and hence not applicable in the instant case. Therefore. the case law of Kerala Screening Committee on Anti-Profiteering v. M/s Saint Gobain India Pvt Ltd case no. 32/2019 referred by the Respondent is of no help to the Respondent. e. That the instant case pertains to the reduction of rate of tax from 28% in 18% in the GST regime. Whereas in the case cited above there was no reduction of rate of tax wef 01.07.2017 end therefore there was no question of passing on the benefit of reduction of tax rate on supply of goods or services Hence, the case laws of ANV Co V., State Level Screening Committee on Anti-Profiteering V. Ram Raj Handlooms referred by the Respondent are of no help to him. f. For the averment made by the Respondent that the price at which the ticket had been sold has been maintained constant throughput the pre-GST and post-GST era, the DGAP submitted that the Respondent ought to have reduced the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. (2). The Control Government may, on recommendations of the Council. by notification, constitute an Authority. or empower an existing Authority constituted under any law for the time being in tome, to examine whether ITC availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction hi the price of the goods or services or both supplied by him. (3). The Authority referred to in sub-section (2) shall exorcise such powers and discharge such functions as may be prescribed: (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comas to the conclusion that any registered person has profiteered under sub-section (1). such person shall be liable to pay penalty equivalent to ten percent of the amount so profiteered: PROVIDED that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the Order by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 31.10.2016 allowed theatre owners to charge a higher price on cinema tickets after informing the Concerned authorities about the hiked prices. The Respondent has also contended that the DGAP failed to take into consideration that the prices being charged by the Respondent is within the maximum permissible limit set by the Regulating Authority. The Commission finds that the licensing authority only fixes the maximum price at which a movie ticket can be sold. Levy of GST is fixed by the GST Council which is a Constitutional body and all the State Governments are part of the GST Council. Section 171 of the CGST Act 2017 and Rules made thereunder is limited to the extent of passing of benefit of rate reduction which the Respondent has to comply with. The fixing of the prices by the State Government or the licensing authority does not grant a waiver from applicability of the GST Act. The reliance on the judgement of Competition Commission of India v. Bharti Airtel Ltd. Ors . by the Respondent is completely misplaced as the facts and circumstances of the said case are different and distinct from facts of the case at hand. In the said judgement the Hon ble Supreme Court has ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent has also averred that the DGAP has misconstrued the scope and ambit of Section 171 of the CGST Act, 2017. In this regard. the Commission finds that Section 171 of the CGST Act, 2017 mandates that any benefit of reduction in the rate of taxor the benefit of ITC which accrues to a supplier must be passed on to the recipients of supply, as both are concessions given by the Government and the suppliers are not entitled to appropriate such benefits by increasing their profit margin at the cost of the consumers. Such benefit must go to the consumers. The DGAP has to adopt a mathematical methodology to arrive at the amount profiteered. An amount which ought to have been charged by the supplier from the recipient after factoring the benefit of ITC or reduction in rate of tax, is to be determined by the DGAP in the course of such calculation of profiteered amount Therefore, in view of the above, the DGAP has not misconstrued the ambit of Section 171 of the CGST Act, 2017. For the above contention the Respondent retied upon the decision of the Hon ble High Court of Delhi in the case of Reckitt Benckiser India Private Limited Ors. v. Union of India Ors. However, the Respondent has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere price of ticket was one hundred rupees or above, from 28% to 18% wef. 01.01.2019. From the Table B above, it was evident that the base prices of the admission tickets was indeed increased. as a result of which the benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in prices charged The total amount of profiteering covering the period of 01.01.2019 to 30.06.2019 is Rs. 48,25,970/-. 18. This Commission, based on the facts discussed above, finds that the Respondent had resorted to profiteering by way of either increasing the base price of the service while maintaining the same selling price or by way of not reducing the selling price of the service commensurately, despite a reduction in GST rate, on Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees from 28% to 18% wef. 01.01.2019 upto 30.06 2019. On this account, the Respondent profiteered to the tune of 48,25,970/- (including GST) from the recipients. Thus the profiteered amount was determined as Rs. 48.25.970/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 Further, as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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