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TMI Blog2024 (7) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... . 54,44,642/- as per the provisions 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. The Respondent is also directed to deposit the profiteered amount of Rs. 54,44,642/- along with the interest, which is to be calculated @ 18% from the date, when the above amount was collected by him, from the recipients, till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering in two equal parts, of Rs. 27,22,321/- in the Central Consumer Welfare Fund and Rs. 27,22,321/- in the Telangana State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with interest. 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, perusa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in rate of tax had not been passed on to the recipients by way of commensurate reduction in prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all supporting documents. Vide the said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/information during 22.05.2019 to 24.05.2019, which were furnished by the Applicant, which the Respondent availed on 25.09.2019. Vide e-mail dated 06.01.2020, the Applicant was also afforded an opportunity to inspect the non-confidential documents/reply during 09.01.2020 to 10.01.2020, which were furnished by the Respondent. However, the Applicant did not avail. e) The period covered by the current investigation was from 01.01.2019 to 30.04.2019. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Value (including GST) K 16,000 12. Actual Selling price (post rate reduction) (including GST) L=K/J 500/- 13. Excess amount charged of Profiteering M=L-H 39.07/- 14. Total Profiteering N=J*M 1,250/- From the above table 'A', it is clear that in the said instance, the Respondent did not reduce the selling price commensurately for the 'Movie Tickets', when the GST rate was reduced from 28% to 18% w.e.f. 01.01.2019, vide Notification No. 27/2018 Central Tax (Rate) dated 31.12.2018 and hence profiteered an amount of Rs. 39.07/- per ticket and thus the benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017. On the basis of above calculation as illustrated in table 'A' above, profiteering in case of all the categories of tickets of the Respondent has also been arrived in similar way. The details of the unique combinations formed by the DGAP on the basis of various categories of movie tickets submitted by the Respondent is provided in Annexure- A'. i) From the session wise sale register made available by the Respondent it appeared that the Respondent increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the provision of Section 171 in passing on to the recipient by way of commensurate reduction in prices. c) The price of movie ticket are market driven and are controlled dynamically on certain factor i.e. class of ticket, rating of movie, location, movie type, weekdays/weekends, statutory regulations applicable to such business. Further, total number of movies which were being screened were 17 in numbers. Out of which 11 nos. were discontinued projection in January 01.01.2019. Therefore, only 6 nos. were being continued for screening. From 01.01.2019 onwards 13 nos. of new films were being screened. The price of these 13 films were being screened were as per market driven dynamics. So, the collection made on account of these films should not be considered while calculating profiteering under Section 171 of the CGST Act. d) The Respondent reduced tax being charged from 28% to 18% w.e.f. 01.01.2019. The ticket which was purchased by the Applicant No. 1, clearly spelt out the net ticket price as well as GST (CGST as well as SGST) of 18% being charged on the 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 si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty. In this regard it is submitted that the profiteering, if any, has been arrived at by comparing average selling prices for each of the 'unique combination of the above factors' such as Blockbuster Non-3D EBONY Friday to Sunday Day Show screened during the period 01.12.2018 to 31.12.2018 (latest month), and the prices post 01.01.2019 for the movies ticket with the similar 'unique combination of the above factors' in each aspect. c) For the averment made by the Respondent that he has reduced tax being charged from 28% to 18% w.e.f. 01.01.2019. 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 the DGAP stated that as per Section 171 of the Act, benefit of GST rate reduction shall be passed on to the recipient of service by way of commensurate reduction in prices 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. d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... output GST rates. Therefore, in terms of Section 171 of the CGST Act, 2017, the claim made by the Respondent of increase in the inward price of cinematographic films could not be considered being extraneous to the passing on of the benefit. It could not be said that input costs went up on the same day on which the GST rates were reduced. There was no reason to increase the base prices of the ticket on the eve of the tax reduction and hence the above contention of the Respondent is frivolous and not bona fide which had been made with the ulterior motive of appropriating the benefit of tax reduction. 4. The Respondent vide his letter dated 12.05.2024 filed his additional written submissions. The Respondent also reiterated its earlier submissions made on 28.01.2021. A summary of the additional submissions has been provided as under:- a) Wrong computation of alleged profiteered amount that the DGAP has erred in calculating the amount profiteered, in the instant case, by considering the all the films screened influenced with different screening timings, cost of inputs, fame earned, ratings, etc. external factors at the same level. It is common practice of the industry which had differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loose rice was justified. In this case, the Department had merely proceeded on the presumption that any increase in base price was on account of profiteering without ascertaining as to whether there were any other genuine factors for increase in the price, which was not correct. 5. 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 vide order dated 14.07.2023, the National Company Law Tribunal (NCLT), Mumbai has ordered commencement of Corporate Insolvency Resolution Process (CIRP) against the Respondent by appointing Interim Resolution Professional (IRP) and also stated that in view of suspended powers of the Board of Directors of the Company, you are requested to approach the Resolution Professional (Sh. Ashok Kumar Gulla) regarding any claim against the Company . 6. This Commission has carefully perused all the submissions and the documents placed on record, and the arguments advanced by the Respondent. The Commission needs to determine as to whether there was any reduction in the GST rate and whether the benefit of reduction in the rate of tax was passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 been passed on to any recipient, including those who had not filed complaint against the registered person, the DGAP is legally bound to investigate the same and bring the facts before this Commission for determination of those benefits to the eligible recipients. It is also clear that the above benefit has accrued to the Respondent due to the concession given by the Government out of the public exchequer, therefore, the DGAP is bound to investigate to ascertain whether the Respondent has misappropriated the benefit of rate reduction which he was required to pass on to the buyers. The DGAP cannot overlook commission of an offence which has occurred under Section 171 (1) of the above Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 171 of the Act. Therefore, the contention raised by the Respondent is not tenable and denied. 12. 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 its base price from Rs. 390.63/- to Rs. 423.73/-. 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 GST rate reduction w.e.f. 01.01.2019. Further, the Respondent in his submissions himself has admitted that he has increased the base price of his movie tickets from Rs. 390.63/- to Rs. 423.73/- and has not passed the benefit of rate reduction to the ticket buyers and thus contravened the provisions of Section 171 of the Act. Therefore, the contention of the Respondent is not tenable. 13. The Respondent also conteded that movie X influenced by factors such as category of movies (Blockbuster Regular), movie type (3D Non-3D), ticket type (GOLD EBONY), weekdays (Monday to Thursday), weekends (Friday to Sunday), show timings (Morning, Day Night) etc. could never stand to compare with m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides as under:- Section 14. Moratorium (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined as Rs. 54,44,642/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. 19. 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. The Respondent is also directed to deposit the profiteered amount of Rs. 54,44,642/- along with the interest, which is to be calculated @ 18% from the date, when the above amount was collected by him, from the recipients, till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering in two equal parts, of Rs. 27,22,321/- in the Central Consumer Welfare Fund and Rs. 27,22,321/- in the Telangana State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with interest 20. It is also evident from the above narration of facts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COMPLIMENTARY Monday to Thursday Morning Show 25 Blockbuster Non-3D GOLD COMPLIMENTARY Monday to Thursday Night Show 26 Blockbuster Non-3D GOLD Friday to Sunday Day Show 27 Blockbuster Non-3D GOLD Friday to Sunday Morning Show 28 Blockbuster Non-3D GOLD Friday to Sunday Night Show 29 Blockbuster Non-3D GOLD Monday to Thursday Day Show 30 Blockbuster Non-3D GOLD Monday to Thursday Morning Show 31 Blockbuster Non-3D GOLD Monday to Thursday Night Show 32 Regular 3D GOLD COMPLIMENTARY Friday to Sunday Day Show 33 Regular 3D GOLD COMPLIMENTARY Friday to Sunday Night Show 34 Regular 3D GOLD Friday to Sunday Day Show 35 Regular 3D GOLD Friday to Sunday Morning Show 36 Regular 3D GOLD Friday to Sunday Night Show 37 Regular 3D GOLD Monday to Thursday Day Show 38 Regular 3D GOLD Monday to Thursday Morning Show 39 Regular 3D GOLD Monday to Thursday Night Show 40 Regular Non-3D EBONY Friday to Sunday Day Show 41 Regular Non-3D EBONY Friday to Sunday Morning Show 42 Regular Non-3D EBONY Friday to Sunday Night Show 43 Regular Non-3D EBONY Monday to Thursday Day Show 44 Regular Non-3D EBONY Monday to Thursday Morning Show 45 Regular Non-3D EBONY Monday to Thursday Night Show 46 Regular Non-3D GO ..... 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