Miss Neeru Varshney and Director General Anti-Profiteering, Indirect Taxes & Customs, Versus M/s. Lifestyle International Pvt. Ltd.,
GST
2018 (9) TMI 1640 – NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (19) G. S. T. L. 92 (N. A. P. A.)
NATIONAL ANTI-PROFITEERING AUTHORITY – NAPA
Dated:- 25-9-2018
08/2018
GST
SH. B. N. SHARMA, CHAIRMAN, SH. J.C. CHAUHAN, TECHNICAL MEMBER, AND MS. R. BHAGYADEVI, TECHNICAL MEMBER
Present:-
None for the Applicant No. 1.
Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal Assistant Director (Costs) for the Applicant No. 2.
Sh. Jagdish Solanki, AVP-Group Tax, Sayam Bandopadhyay, SVPAccounts and Taxation, Sh. Sparsh Bhargava, Advocate, Sh. Tarun Gulati, Advocate and Ms. Jayashree Parthasarathy, Consultant for the Respondent.
ORDER
1. This report dated 02.04.2018 has been received from the Applicant No. 2 i.e. Director General of Safeguards (DGSG), now re-designated as Director General of Anti-Profiteering (DGAP) under
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ding Committee on Anti-Profiteering and was referred to the DGAP, vide the minutes of it's meeting dated 29.11.2017 for detailed investigations under Rule 129 (1) of the CGST Rules, 2017.
3. The DGAP had called upon the Respondent to submit his reply on the allegation levelled by the Applicant No. 1 and also to suo moto determine the quantum of benefit which he had not passed on during the period between 15.11.2017 to 31.01.2018 on the product to its buyers. The Respondent was also requested to provide copy of the Balance Sheet, GST Returns and details of outward taxable supplies etc. by the DGAP.
4. The Respondent had submitted replies to the notice issued by the DGAP vide his communications dated 12.01.2018, 24.01.2018, 09.02.2018, 28.02.2018 and 12.03.2018. After examination of the replies submitted by the Respondent the DGAP has informed that the Respondent had contended that the label on the product showed Maximum Retail Price (MRP) of Rs. 550/- and the sale price of the product
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count of 11.66% on the MRP which was more than what he was required to pass on consequent to the reduction in the rate of tax w.e.f. 15.11.2017.
6. The DGAP has further intimated that after the investigation he had found that though the Respondent had no direct influence over the revision of MRP of external brands but still he was liable to revise his retail selling price as he had taken the benefit of Input Tax Credit (ITC) on the purchase of the product, therefore he was required to reduce the Retail Selling Price (RSP) to pass on the benefit of reduction in the rate of GST from 28% to 18% w.e.f. 15.11.2017 to his customers. It was also found by the DGAP that earlier the MRP of the product was Rs. 550/- which was revised to Rs. 575/- post 20.06.2017 and the RSP of the product was decided by the Respondent within the MRP which was printed on the back of the product.
7. The DGAP has further stated that the Respondent had sold 46 units of the product carrying MRP of Rs. 550/- during t
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rther maintained that on one unit of the product RSP of which was Rs. 500/- per unit, profiteering of Rs. 16/- per unit (Rs. 500 – Rs. 484) on that single unit was also made by the Respondent. He has also stated that 4 units the RSP of which was Rs. 488/- per unit, profiteering of Rs. 4/- per unit (Rs. 488 – Rs. 484) and profiteering of Rs. 16/- on total 4 units (Rs. 4×4=16) had been made by the Respondent which amounted to total profiteering of Rs. 811/- on all the 24 units (Rs. 779+ Rs. 16+ Rs. 16= Rs. 811).
8. The DGAP has further stated that the Respondent had sold 485 units of another shade of the product which were having MRP of Rs. 575/- per unit between 01.11.2017 to 14.11.2017, in which the basic price per unit was increased from Rs. 449/- to Rs. 487/- and as a result of which the retail selling price charged Inclusive of 18% GST had remained unchanged at Rs. 575/-. He has also claimed that if the reduction in the GST rate from 28% to 18% had been taken into consideration the
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r the interested parties (Applicants and the Respondent). The Applicant No. 1 did not appear inspite of service of the notice. The Applicant No. 2 was represented by Sh. Akshat Aggarwal, Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs). The Respondent was represented by Sh. Jagdish Solanki, AVP-Group Tax, Sh. Sayan Bandopadhyay, SVP-Accounts and Taxation, Sh. Sparsh Bhargava, Advocate, Sh. Tarun Gulati, Advocate and Ms. Jayashree Parthasarathy, Consultant.
10. The Respondent has filed his first written submissions on 03.05.2018 in which he has stated that the minutes of the meeting of the Standing Committee held on 29.11.2017 showed that there were two complaints filed by the Applicant No. 1. He has also submitted that it was recorded by the Standing Committee that the complaint mentioned at Serial No. 1 of the Annexure attached to the minutes had only tax invoice attached with it and hence the complaint was returned on the ground that not enough information
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. He had therefore, sought a copy of the complaint on the basis of which the entire proceedings were initiated.
11. The Respondent has also filed further submissions on 18.05.2018 in which he has stated that Rule 126 of the CGST Rules, 2017 empowered the National Anti-Profiteering Authority to prescribe the methodology and procedure for determination whether any reduction in the rate of tax or benefit of ITC had been passed on by a registered person by way of commensurate reduction in the prices or not. He has also claimed that since no guidelines had been framed as prescribed under Rule 126 thus a registered person could not be held being non-compliant. He has further stated that in the absence of any prescribed methodology, a methodology which was reasonable and consistent with the objectives of the statutory provisions deserved to be accepted and since the Respondent had adopted a methodology that was reasonable and consistent with the objectives, the entire proceedings needed to b
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ord, “commensurate” which showed that the intent was to take the overall facts and circumstances into consideration, as otherwise the word “equivalent” would have been used to mandate exact measurement of benefit to be passed on. He has further argued that Article 19 (1) (g) of the Constitution granted him right to carry on trade or business and to fix prices and earn profits which could not be subjected to unreasonable restrictions under Section 171. He has also contended that there was no bar on considering the change in the rate / GST benefit accruing to a registered person as a whole where the registered person was engaged in supply of different goods / services and an individual product or service could not be isolated to determine compliance with the above provisions. He has further contended that the alleged benefits arising on an individual product could not be seen in isolation and the same were to be considered in terms of the regime introduced, the overall costs of GST imple
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plainant/recipient, product or dealer and hence, the extension of scope of investigation to panIndia registrations and sales of the product was without jurisdiction and not permitted under the law. He has further pleaded that in the event it was held that the term 'the recipient' did not refer to the complainant but the recipients of goods in general, it supported his claim that the reduction in prices generally and offering the same to the recipients of goods in general was in compliance with the above provisions. He has also claimed that he had sold the pre-GST and post-GST stock of the product at the average per unit price of Rs. 483/- and Rs. 523/- respectively which was lower than the price of Rs. 484/- and Rs. 530/- calculated by the DGAP and hence he had not profiteered. He has further claimed that he being a retailer operated on the basis of 'net realization' as the MRP on all the external brands was fixed by the brand owner and he was entitled to margin which was derived by wo
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be at Rs. 3,66,47,019 in which an amount of Rs. 1,98,46,438/- might not have been passed on to the individual buyers but an amount of Rs. 10,06,42,391/- had been passed on to the customers subsequently.
13. The Respondent has also claimed that the DGAP's findings in paras 14 to 17 of the Report were based on an erroneous presumption that the base price had been increased and hence the benefit of rate reduction had not been given which had no factual or legal basis as the DGAP had completely ignored the actual cost of goods and the net margin earned by the Respondent prior to the introduction of GST which alone could determine the so called base price. He has further claimed that as the Respondent was holding substantial pre-GST stock, it was necessary to compare the net margin earned by him prior to the introduction of GST and on the sales made after the reduction in the GST rate. He has also alleged that the Report did not take cognizance of the fact that the Respondent was incurrin
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– and not Rs. 550/- were charged from the Applicant No. 1, therefore, even if the MRP had been increased to Rs. 550/- the sale had been made only at the price of Rs. 525/- by the Respondent and hence he had suo moto passed on the GST benefit by lowering his RSP. He has further maintained that in Para 15 of the Report, it had been observed that as per the record which was uncontested by the Respondent he had sold 46 units of the product carrying MRP of Rs. 550/- during the period between 01.11.2017 to 14.11.2017 wherein the basic price per unit excluding GST was Rs. 410/- and the retail selling price charged inclusive of 28% GST was Rs. 525/- and therefore, the ideal price should have been Rs. 410/- + 18% GST i.e. Rs. 410/- +Rs. 74 =Rs. 484/-, however, the DGAP had ignored the sales made below Rs. 484/- arbitrarily but assessed profiteering of Rs. 811/- on the 24 units sold by the Respondent above the RSP of Rs. 484/-. He has also submitted that the methodology adopted by the DGAP was i
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hen at the net margin level he had made a lower margin and hence there was no question of profiteering. He has also contended that similar wrong presumptions had been made by the DGAP in Para 16 of the Report in respect of the product which was being sold at the MRP of Rs. 575/- which were completely wrong.
14. The Respondent has also stated that in Para 17 of the Report it had been observed that he had contended that the total no. of units of the product sold were 797 on which a total discount of 11.66% of the MRP which was more than what was required to be passed on as a result of reduction in rate of tax had been offered, however, from the details of outward taxable supplies submitted by him it had been observed by the DGAP that the total number of units sold during the period between 15.11.2017 to 31.01,2018 was 2604 out of which the Respondent had sold 370 units by increasing the basic price excluding GST. In reply to Para 17 the Respondent has claimed that he had only submitted
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was well settled that the Rules could only provide for procedural provisions and could not create substantive liabilities on their own in the absence of specific sanction under the provisions of the Act. He has also referred to Section 164 of the CGST Act, 2017 and stated that this Section only allowed Rules to be framed for carrying out the provisions of the Act. He has also argued that In the case of Kunj Behari Lal & Ors. v. State of H.P. 2000 (3) SCC 40 it was held that the legislature could not create any substantive rights or obligations or disabilities through general rule making powers unless the same was specifically contemplated by the provisions of the Act under which such powers were exercised. He has further argued that in the case of Petroleum and Natural Gas Regulatory Board v. Indraprastha Gas Limited & Ors. (2015) 9 SCC 209 it had been held that if on reading of the statute in entirety, a power did not flow, a delegated authority could not frame a regulation as that wo
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of the complaint was not available hence the Committee had returned the enclosures to the DGAP by recording that enough information had not been provided and the complainant was free to file fresh complaint with adequate evidence. The Committee has also informed that the second complaint mentioned at Sr. No. 30 of the proceedings filed by the above Applicant had her full name, email address, product label, bill and gist of the complaint alleging that she had bought one unit of the product from the Respondent for Rs. 525/-, the MRP of which was Rs. 550/- and the Respondent had not passed on the benefit of reduction of GST from 28% to 18% to her. The Committee has informed that since the complaint had all the details and it prima-facie appeared to be genuine it was forwarded to the DGAP for investigation.
16. Vide it's reply dated 19.06.2018 the DGAP has intimated that Form APAF-1 had not been prescribed when the complaint was filed by the above Applicant and hence there was no questio
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e RSP of Rs. 525/- Before 15.11.2017. The Respondent was selling this product at the basic price of Rs. 410/- and charging GST @ 28% and hence an amount of Rs. 525/- per unit was being charged by him. However, when the rate of GST was reduced to 18% w.e.f. 15.11.2017 the Respondent had increased the basic price to Rs. 445/- and charged 18% GST and hence he had continued to realise RSP of Rs. 525/- per unit which he was charging before 15.11.2017. Had the Respondent not increased the basic price of Rs. 410/- per unit; the RSP of the product would have been Rs. 484/- per unit including GST of 18%. There was no reason for the Respondent to increase the basic price exactly equal to the amount by which the rate of tax had been reduced. This change in the basic price was also done by him w.e.f. 15.11.2017 the day from which the rate of tax was reduced. Therefore, there is no doubt that the whole exercise of increasing the basic price was done by the Respondent with malafide intention of not
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Rs. 488/- on which profiteering of Rs. 16/- was realised and thus the Respondent had resorted to profiteering of Rs, 811/- on the sale of 24 units of the product.
18. Further, it is also apparent from the record that the Respondent had sold 485 units of another shade of the product which was having MRP of Rs. 575/- per unit during the period between 01.11.2017 to 14.11.2017, wherein the basic price per unit excluding GST of the product was Rs. 449/- and the RSP charged inclusive of 28% GST was Rs. 575/-. After the reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017 and taking into consideration the basic price per unit excluding GST the ideal RSP inclusive of 18% GST would have been Rs. 530/- per unit. Although there was a reduction in the GST rate from 28% to 18%, the basic price per unit excluding GST was increased by the Respondent from Rs. 449/- to Rs. 487/- per unit so that the RSP inclusive of 18% GST had remained unchanged at Rs. 575/- per unit, resulting in profiteerin
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P. The name and address of the above Applicant and the nature of the complaint was also not mentioned and hence the Committee had rightly refused to take cognizance of this complaint and returned it to the DGAP for filing fresh complaint. However, in the second complaint mentioned at Sr. No. 30 of the minutes there was a written application with full name, email address, product label, invoice and gist of the allegation and hence this complaint was rightly considered by the Committee and sent to the DGAP for investigation. A copy of this complaint was also supplied to Sh. Sayan Bandhopadhyay representative of the Respondent on 06.01.2018 as is clear from the receipt issued by him and hence the allegation made by the Respondent that he was not supplied copy of the complaint on the basis of which the present proceedings had been launched is not correct. It is also apparent from the reply filed by the DGAP on 19.06.2018 that no APAF-1 form had been prescribed when the above Applicant had
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which has accrued as a result of tax reduction. The Respondent has not suggested any alternate reasonable and consistent methodology to pass on the benefit except for making far-fetched claims which cannot be accepted. Provisions of Section 171 are very clear which state that any reduction in the rate of tax or the benefit of ITC has to be passed on to the recipient which means that every citizen who is a recipient of supply of goods or services has to get the benefit and hence this benefit has to be calculated on each and every product. The Respondent has no discretion to provide benefit on certain class of products and deny the same in respect of the other products. Denial of benefit as per the convenience of the Respondent is not permissible as it is hit by the provisions of the above Section and hence he cannot argue that the benefit was not required to be passed on all the products as a consumer may buy a particular product and may not buy another. His claim that fixation of price
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trade or fix prices of the products being sold by him. The Respondent must remember that the Government has thought is appropriate in the public interest to reduce the rate of tax on the products being sold by him by sacrificing its own revenue and therefore, he is bound to pass on this benefit to his customers and by no stretch of imagination he can pocket this reduction to the detriment of the ordinary consumer.
21. The Respondent has also claimed that he was not supplied copy of the complaint and was also not heard by the DGAP however, both these claims are not borne out from the facts of the present proceedings and hence they cannot be accepted as the Respondent has been provided copy of the complaint and the DGAP has afforded him due opportunity of defending himself and hence the principle of audi alteram partum has not been violated. The Respondent has also objected to the pan India investigation against him. The objection raised by the Respondent in this behalf is frivolous as
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spondent has also submitted that his net realisation had decreased after coming in to force of the GST and he was suffering losses and hence working of the profiteered amount from the notional retail sale price was incorrect. However, this contention of the Respondent is not logical as he cannot be allowed to top up his margins from the amount of tax reduction which he is legally required to pass on to his customers. The Respondent has also claimed that his costs had increased by 16% during the year 2017-18 as compared to the year 2016-17 which had not been taken in to account by the DGAP. However, the Respondent had not increased his prices by 16% but has increased them exactly equal to the amount by which the tax had been reduced and that also on 15.11.2017 when the rate of tax was reduced from 28% to 18% and hence the claim made by the Respondent is hollow. The contention of the Respondent that he had sold the product below the ideal price calculated by the DGAP and had thus passed
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ovisions of Section 171 of the above Act. It is also established that the Respondent had issued incorrect invoices while selling the product to his customers as he had not correctly shown the basic price which he should have legally charged from them which is an offence under Section 122 (1) (i) of the CGST Act, 2017 and hence he is liable for imposition of penalty under the above Section. Rule 133 (3) (d) of the CGST Rules, 2017 also makes it clear that the penalty has to be imposed as per the provisions of the Act and since it is proposed to impose penalty under the Act there is no question of creating substantive liability under the Rules as there is specific sanction under the above Act to impose penalty. Similarly the CGST Act, 2017 also provides for imposition of interest under the Act and therefore, the same can be levied in the present proceedings. The Respondent cannot claim that since the amount of profiteering was miniscule no penalty should be imposed as each breach of the
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profiteering of Rs. 15,820/- deposited in the Consumer Welfare Fund of the Central and the Concerned State Govt. as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 along with interest @ 18% till the amount is paid. Any amount ordered to be refunded or to be deposited shall be refunded or deposited within a period of 3 months by the Respondent from the date of receipt of this order failing which the same shall be recovered by the DGAP as per the provisions of the CGST Act, 2017 and shall be refunded or deposited as has been directed vide this order.
Notice may also be issued to the Respondent to show cause as to why penalty as per the provisions of Section 122 of the CGST Act, 2017 read with Rule 133 (3) (d) of the CGST Rules, should not be imposed upon him.
24. The Respondent has himself admitted in para 27 of his submissions dated 18.05.2018 that an amount of Rs. 1,98,46,438/- might not have been passed on to the individual buyers by him, therefore, the DGAP is direc
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