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TMI Blog2024 (7) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Rule 133 (1) of the CGST Rules, 2017. Further, as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, the Respondent is directed to reduce the prices of cinema tickets, keeping in view the reduction in the rate of tax so that the benefit would be passed on to the recipients. However, as observed by the DGAP during its investigation that w.e.f. 06.02.2019, the Respondent had revised the selling price of tickets from Rs. 150/- to Rs. 138/- which depicts commensurate passing on of the benefit of reduction in rate of tax from 28% to 18%. 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 the above Act. However, perusal of the provisions of Section 171 (3A), under which liability for penalty arises for the above violation, shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.01.2019 to 05.02.2019 when the Respondent had committed the above violation. Hence, the penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.09.2019. Vide e-mail dated 30.12.2019, the Applicant was also afforded an opportunity to inspect the non-confidential documents/reply during 06.01.2020 to 07.01.2020, which were furnished by the Respondent. However, the Applicant did not avail the opportunity. e) The period covered by the current investigation was from 01.01.2019 to 30.06.2019. f) The main issues to be looked into were:- (i) whether the rate of GST on the Services by way of admission to exhibition of cinematography films where price of admission ticket was above one hundred rupees was reduced from 28% to 18% w.e.f. 01.01.2019 and Services by way of admission exhibition of cinematograph films where price of admission ticket was one hundred rupees or less was reduced from 18% to 12% w.e.f. 01.01.2019, if so, (ii) whether the benefit of such reduction in the rate of GST was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. g) There was basically one class of tickets in the Respondent s Multiplex, namely, Platinum . For the purpose of determination of profiteering, the number of tickets sold during the period 01.12.2018 to 31.12.2018 (pre-GST rate reduction) was taken and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (01.12.2018 to 31.12.2018) Post Rate Reduction (01.01.2019 to 05.02.2019) Post Rate Reduction (06.02.2019 to 30.06.2019) 1. Multiplex Name Category A Gold Spot (Platinum) Leonia (Platinum) 2. Ticket MRP B 150/- 150/- 138/- 150/- 150/- 138/- 3. Total No. of tickets sold C 82,011 91,963 2,78,848 18,423 27,309 66,443 4. Total taxable value (after Discount, if any) D 96,10,049 1,16,90,211, 3,26,02,327 21,77,70,864 34,71,470 77,70,864 5. Average base price (without GST) E=D/C 117.18/- 127.12/- 116.92/- 117.18/- 127.12/- 116.96/- 6. GST Rate F 28% 18% 18% 28% 18% 18% 7. Actual Selling price (post rate reduction) (including GST) G=E*(I+F) 150/- 150/- 138/- 150/- 150/- 138/- 8. Commensurate Selling price (post Rate reduction) (including GST) H=118 % of E 138.27/- 138.27/- 138.27/- 138.27/- 9. Excess amount charged or Profiteering per Ticket I=G-H 11.73/- - 11.73/- - 10. Total Profiteering J=C*I 10,78,726 - 3,20,335 - 11. Total Profiteering (Both Theatre) (K) Rs. Rs. 13,99,061/- The Respondent has increased the base prices during the period from 01.01.2019 to 05.02.2019 to maintain the same selling price (or MRP) resulting in the customers to pay the same price for the tickets which they we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net price. e) The Respondent was incurring loss for an amount of Rs. 199.97 cr while in operation for the F.Y. 2017-18 and similarly, in the F.Y. 2018-2019 he was again in loss to a similar tune. Therefore, w.e.f. 01.01.2019 when taxes were reduced, the Respondent had to increase his base price on tickets from Rs. 117.19/- to Rs. 127.12/- as per market dynamics. f) The Regulations of the land where Respondent was stationed were such that its gross receipt against ticket was capped to Rs. 150/-. Even though the Respondent was continuously incurring losses he couldn t further increase price of tickets. g) That w.e.f. 05.02.2019, even though the Respondent was incurring losses he had to reduce base price of tickets from Rs. 127.12/- to Rs. 116.95/- due to peer market pressure on such business. h) If the Respondent would not have increased the base price of the ticket and charged tax at the reduced rate of 18% for one week and would thereafter increase the base price and charged tax @ 18% on the said price, then it would not have amounted to evasion. i) The inward price of the cinematographic film was also increased by the distributor in the instant case therefore as the inward price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and such reduction can obviously be in money terms only, so that the final price payable by a consumer gets reduced. Keeping the same selling price by increasing the base price and charging the reduced rate of tax cannot be termed as complying with the provisions of Section 171 of the Act. e) For the contention raised by the Respondent that they are a loss making company, the DGAP has submitted that this contention had already been countered in Para 16 of its report dated 07.02.2020. f) The Respondent himself admitted that he had to increase the base price of tickets from Rs. 117.19/- to Rs. 127.12/-, which resulted in denial of benefit of reduction in rate of tax and had been profiteered by the Respondent. g) It is evident that the provision of Section 171 of the CGST Act, 2017 has obligated the Respondent to reduce the prices commensurately and pass on the benefit of reduction in rate of tax to the consumer. Thus, the intention of the law is achieved. 4. The Commission granted hearing to the parties on 04.04.2024 and 27.06.2024. However, the Respondent vide reply emails dated 02.04.2024, 06.06.2024 and 25.06.2024 stated that the National Company Law Tribunal (NCLT) Mumbai vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts had reduced the rates of GST on Services by way of admission to exhibition of cinematograph films where the price of admission ticket was above one hundred rupees from 28% to 18% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018, the benefit of which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the above Act. 7. The Commission finds that, one of the contentions of the Respondent was that the Applicant No. 1 has no locus standi to make the application alleging profiteering by the Respondent under Section 171 of CGST Act, 2017. In this regard, the Commission holds that it has been entrusted with the task of ensuring that the benefit of reduction in rate of tax or availability of ITC must be passed on by a registered supplier to his recipients. The Authority finds that, under Rule 129 (2) of the above Rules, the DGAP is required to investigate a complaint filed by an interested party/person whether a registered person has passed on the benefit of tax reduction or ITC to the recipients or not and hence during the course of investigation if it comes to the notice that the benefit has not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged from 28% to 18% w.e.f. 01.01.2019 and that the ticket which was purchased by the Applicant clearly spelt out the net ticket price as well as GST (CGST as well as SGST) of 18% being charged on the net price. In this regard the Commission finds that as per Section 171 of the Act, benefit of GST rate reduction shall be passed on to the recipients of service by way of commensurate reduction in prices and such reduction can obviously be in monetary terms only, so that the final price payable by a consumer gets reduced. Keeping the same selling price by increasing the base price and charging the reduced rate of tax cannot be termed as complying with the provisions of Section 171 of the Act. Therefore, the contention raised by the Respondent is not tenable and denied. 11. The Respondent averred that he was incurring loss during F.Y. 2017-18 and F.Y. 2018-2019. Therefore, w.e.f. 01.01.2019 when taxes were reduced, the Respondent had to increase base price of his movie tickets from Rs. 117.19/- to Rs. 127.12/-. In this regard, the Commission finds that the contention of the Respondent that they are a loss making company cannot form the basis for not passing on the benefit of subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; xxx xxx xxx (4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. The Hon ble Supreme Court in case of S.V Kondaskar vs. VM Deshpande and Anr. (1972) 1 SCC 438 , inter alia has held that:- we have not been shown any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining the amount of tax payable by the company which is being wound up Further, the Hon ble Supreme Court in the case of Sundaresh Bhatt, Liquidator of ABG Shipyard vs. Central Board of Indirect Taxes (2023) 1 SCC 472 , inter alia has held that:- 48. From the above discussion, we hold that the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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% w.e.f. 01.01.2019 upto 05.02.2019. On this account, the Respondent profiteered to the tune of Rs. 13,99,061/- (including GST) from the recipients. Thus the profiteered amount is determined as Rs. 13,99,061/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. 17. Further, as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, the Respondent is directed to reduce the prices of cinema tickets, keeping in view the reduction in the rate of tax so that the benefit would be passed on to the recipients. However, as observed by the DGAP during its investigation that w.e.f. 06.02.2019, the Respondent had revised the selling price of tickets from Rs. 150/- to Rs. 138/- which depicts commensurate passing on of the benefit of reduction in rate of tax from 28% to 18%. 18. The Respondent is directed to deposit the profiteered amount of Rs. 13,99,061/- along with the interest, which is to be calculated @ 18% from the date, when the above amount was col ..... X X X X Extracts X X X X X X X X Extracts X X X X
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