2018 (9) TMI 625 – THE NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (19) G. S. T. L. 497 (N. A. P. A.) – Profiteering Activity – Benefit of reduction in the rate of tax – it was alleged that Respondent had not passed on the benefit of reduction in the rate of tax by lowering the price of Vaseline VTM 400 ml, which he had purchased from the respondent, when the Goods and Services Tax (GST) was reduced from 28% to 18% on this product on 15.11.2017 – Rule 129 (1) of the CGST Rules, 2017.
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Held that:- Respondent has himself admitted through the Table submitted by him vide his submissions dated 23.4.2018 that prior to the reduction in the GST on the product from 28% to 18% w.e.f. 15.11.2017 it was being purchased by the Respondent at the base price of ₹ 158.66/- per unit with GST of ₹ 44.42/- @ 28% and the total purchase price was ₹ 203.08/ per unit and it was being sold by him on the price of ₹ 213.63/per unit after adding his margin @ 4.06% of ₹ 10.55/-.
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d that the HUL had changed the base price in its software and hence he was bound to charge the increased base price at the time of issuing invoices.
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However, the Respondent being a registered dealer having GSTIN 08AAEFS7072EIZ4 under the CGST/SGST Acts 2017 was fully aware of the reduction in the rate of tax of the product issued vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017, with effect from 15.11.2017 and Section 171 of the above Act and hence he was legally bound not to charge the enhanced base price resulting in negation of the effect of reduction in the rate of tax and thus he cannot escape his accountability of passing on the benefit of the reduction in the rate of tax to his customers.
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The Respondent has also averred that Section 171 of the Act did not provide for any methodology for determining the commensurate reduction in the prices – Held that:- Section 171 only stipulates that any benefit of reduction in the rate of the tax or the ITC which
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to reduce the sale price of the product immediately commensurate to the reduction in the rate of tax as was notified on 14.11.2017 and pass on the benefit of reduction in the rate of the tax to his customers.
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Penalty – Held that:- It is clear from the facts of the present case that the Respondent was fully aware of the Notification dated 14.11.2017 whereby the rate of GST was reduced on the above product from 28% to 18%. He was also fully aware of the provisions of Section 171 of the above Act whereby he was bound to pass on the benefit of reduction in the rate of tax by commensurate reduction in the price of the above product. However, the Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and dishonest – Accordingly, it is proposed to impose penalty on the Respondent under Section 122 of the CGST Act, 2017 read with Rule 133 (d) of the CGST Rules, 2017. However, before the penalty is imposed the Respondent
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ction in the rate of tax by lowering the price of Vaseline VTM 400 ml. , (here-in-after referred to as the product) which he had purchased from the respondent, when the Goods and Services Tax (GST) was reduced from 28% to 18% on this product on 15.11.2017. He had also alleged that he had bought the above product from the Respondent @ ₹ 213.63/- per unit vide tax invoice No. GSA25066 on 26.09.2017 which included GST @ 28% and the Respondent had charged the same price when he had purchased the above product vide tax invoice No. GSA37782 on 15.11.2017 when the GST had been reduced to 18%. He had thus claimed that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. 2. The above application was examined by the Standing Committee on Anti-Profiteering and was referred to the DGAP, vide minutes of it's meeting dated 29.11.2017 for detailed investigation under Rule
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to the supply of goods and therefore, it did not fall under the ambit of Section 171 of the above Act. The DGAP has also informed that the Respondent had also contended that the peak sale period for the above product was during winters and before coming into force of the GST it was being sold under various Consumer Promotion Schemes (CPS) during the lean season by offering additional quantity or along with some additional products and such CPS were usually withdrawn during the winters. He has further informed that the Respondent had also submitted that the Scheme launched during the month of September, 2017 by offering additional quantity of the product was not withdrawn in November, 2017 and the MRP was retained at ₹ 235/- for 400 ml. of Vaseline which was the MRP for 300 ml. and thus the benefit of reduced rate of tax was passed on to the recipients through the additional quantity of 100 ml. The DGAP has also stated that the Respondent had claimed that the product was sold @ &
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he time of supply of the goods and services and any future event related to that supply would not render the transaction of original supply infructuous. The DGAP has also reported that the GST rate on the product had been reduced from 28% to 18% vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, with effect from 15.11.2017 and hence the benefit of tax reduction was required to be passed on by the Respondent. He has further reported that the claim made by the Respondent that the benefit of GST rate reduction had been passed on by increasing the quantity of Vaseline from 300 ml. to 400 ml. without any increase in the MRP was not tenable as the Respondent was not competent to either increase the quantity of the product or to reduce the MRP w.e.f. 15.11.2017 as it was not in his stock and on which full Input Tax Credit (ITC) of 28% had been availed by him. The DGAP has also submitted that the base price of the product, at the time of GST rate reduction w.e.f. 15.11.2017, wa
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/- per unit, which showed that the unit base price was enhanced by ₹ 14.15/- (Rs. 181.05-Rs. 166.90) and therefore, profiteering to the extent of ₹ 14.15/- per unit was proved against the Respondent. The DGAP has also stated that the Applicant No. 1 had again purchased 11 units of the product vide invoice No. GSA42046 dated 28.11.2017 from the Respondent on which the same net price of ₹ 213.63/- inclusive of GST was charged thus, profiteering of ₹ 14.15/- per unit was established against him. 6. The DGAP has concluded by stating that the Respondent had profiteered to the extent of ₹ 5,50,370/- from November, 2017 to January, 2018 which included the profiteering of ₹ 184/- made by him from the Applicant No. 1 on the sale of the 11 units of the product on 28.11.2017. He has further stated that the Respondent had profiteered an amount of ₹ 2,41 ,922/- @ ₹ 16.69/- including GST @ 18% per unit on the sale of 14,495 units and ₹ 3,08,448/-
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etailed written submissions on 10.4.2018 as well as additional written submissions on 23.4.2018 in which it was submitted that the Respondent was a distributor of HUL and he was bound to follow the price pattern and other sale policies decided by the HUL. He has also explained the entire chain of purchase of the product made by him from the HUL and it's subsequent sale to the retailers during the period prior to 15.11.2017, from 15.11.2017 to 07.12.2017 and from 08.12.2017 to 31.01.2018 as per the table given below in which the Respondent has been mentioned as the Noticee:- 8. The Respondent has stated that before 15.11.2017, the product was purchased by him from the HUL @ ₹ 158.66/- per unit on which tax at the rate of 28% i.e. ₹ 44.42/- was paid by him which was subsequently availed as ITC and thereafter, the product was sold at ₹ 213.64/- inclusive of GST and 4.06% margin. He has also stated that on 14.11.2018 he had 1288 units of the product in his stock, whic
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he HUL. Therefore he has further stated that profit, if any, was made by the HUL and not by him, as the excess amount of ₹ 18,217.90/- stood debited from his account on 26.02.2018 to the HUL for the 1288 units of the product which were in his stock as on 14.11.2017. He has also furnished a copy of The Bank Certificate and the Chartered Accountant's Certificate in this behalf. He has further contended that the cumulative benefit of reduction in the tax available on all the Stock Keeping Units (SKU) of which the product was part of, which came to ₹ 5,18,443.74/-, had been debited on 26.02.2018 to the account of the HUL; and the Respondent had not profited in any manner with the reduction in the rate of tax from 28% to 18% on 15.1 1.2017. 9. The Respondent has also submitted that during the period w.e.f. 15.11.2017 to 07.12.2017, he had bought the product from the HUL at the higher rate of ₹ 172.77/- and paid CST, i.e. ₹ 31.10/which was availed by him as ITC. H
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diary in the supply chain and had not profited due to the reduction in the rate of tax. 10. The Respondent has also argued that the notice dated 29.12.2017 and the Report by the DGAP dated 16.03.2018 were void ab-initio as the product bought by the Applicant No. 1 had been returned by him and therefore he had not suffered any loss. He has further argued that the term 'supply' was defined in Section 7 (1) (a) of the CGST Act, 2017 and under Section 34 (1) of the above Act, where the goods were returned, the supplier was required to issue a credit note and mention the details of the credit note in the GST return filed for the month in which such note was issued and hence it was evident that there was a provision in the Act itself for negating a supply transaction and since it was not in dispute that the transaction stood annulled by the Applicant No. 1 himself on 15.12.2017 therefore, no profiteering could be alleged by him. He has also relied upon the law settled by the Hon'
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passed on to the recipient by way of commensurate reduction in prices however there was no mechanism mentioned in the CGST Act on the factoring of commensurate reduction in the prices and the Act did not provide any methodology for determining the meaning of the term "commensurate reduction in prices." He has further averred that the Act also did not provide any time period/ time frame within which such commensurate reduction in prices was to take place in the absence of which a reasonable time period was required to be given to any registered person to bring about the necessary reduction in prices in view of the reduction in the GST rate since there were various practical issues as also various legal requirements which were required to be complied with. He has further averred that it was impossible to change the entire pricing mechanism, labelling and packaging overnight as it was settled that the law could not force a person to do a thing which was impossible as was enshrin
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₹ 14.15/- had been calculated by the DGAP by presuming that the difference between the original base price and the increased base price was earned by the Respondent, which was not correct as the base price was increased by the HUL post the change in the rate of tax, and this increase in base price was also earned by the HUL, therefore, profiteering, if any, could not be attributed to the Respondent. 14. During the course of the proceedings the HUL was also asked to clarify the claims made by the Respondent in respect of the increase in the base price, recovery of excess ITC and the deposits made by it in the CWF. The HUL vide its reply dated 03.05.2018 had admitted that it had asked its Redistribution Stockist to credit the excess ITC to its account and also that it had deposited the same in the CWF after recovering the same from them. 15. The DGAP vide his reply received by the Authority on 03.07.2018 on the letter dated 03.05.2018 of the HUL has stated that the profiteered amo
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8377; 9.77/- per unit and the product was sold by him at the price of ₹ 213.64/-. Therefore, it is clear that there was no reduction in the sale price charged by him although the rate of GST was cut by 10%, rather the base price was increased by ₹ 14.11/- per unit by the Respondent. The same price was charged by him on all the transactions made by him between 15.11.2017 to 7.12.2017. The base price was reduced by ₹ 2/- w.e.f. 8.12.2018 by the HUL after which sale price of ₹ 211.82/was charged by the Respondent whereby there was excess realisation of ₹ 12.11/- per unit. The Respondent has further admitted that he had sold 10 units of the product to the Applicant No. 1 vide invoice No. GSA25066 dated 26.9.2017 on which the base price was charged as ₹ 166.90/- and the sale price including the GST @ 28% was realised as ₹ 213.63/-. It is also acknowledged by the Respondent that he had sold 20 units of the product to the above Applicant vide invoice
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nsurately reducing the price of his product rather the base price was increased by him exactly by the same amount by which the tax had been reduced. The Respondent has claimed that the HUL had changed the base price in its software and hence he was bound to charge the increased base price at the time of issuing invoices. However, the Respondent being a registered dealer having GSTIN 08AAEFS7072EIZ4 under the CGST/SGST Acts 2017 was fully aware of the reduction in the rate of tax of the product issued vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017, with effect from 15.11.2017 and Section 171 of the above Act and hence he was legally bound not to charge the enhanced base price resulting in negation of the effect of reduction in the rate of tax and thus he cannot escape his accountability of passing on the benefit of the reduction in the rate of tax to his customers. The Respondent has also not produced any evidence to show that he had objected to the increase made by
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5.11.2017 had been returned by him on 15.12.2017 and accordingly the transaction of supply had become infructuous and hence no profiteering could be alleged against him. However, this contention of the Respondent is not correct as the supply of goods stood completed on 15.11.2017 as soon as the tax invoice was issued by him after receipt of entire consideration and delivery of the goods was made to the above Applicant. This transaction was admittedly reflected by Respondent in his return for the month of November, 2017. The goods were returned by the above Applicant on 15.12.2017 on which the Respondent had issued a credit note in favour of the above Applicant vide which the cost of the goods as well as the GST charged was refunded to the above Applicant, which was again mentioned by him in his return for the month of December, 2017 as per the provisions of section 34 of the CGST Act, 2017. In case the transaction made on 15.11.2017 had been negated there was no question of its having
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for any methodology for determining the commensurate reduction in the prices. The argument advanced by the Respondent appears to be frivolous as it involves only mathematical calculation of the amount by which the tax had been reduced i.e. by 10% and after subtracting the same from the existing Maximum Retail Price (MRP), the MRP was to be re-fixed as per the provisions of the Legal Metrology (Packaged Commodities) Rules, 2011. It was also mandatory for the Respondent to declare the reduced MRP by affixing additional sticker or stamping or online printing as per the letter No. WM-10(31 )/2017 dated 16.11.2017 issued by the Ministry of Consumer Affairs, Food and Public Distribution. Govt. of India which he has failed to do. The GST law requires that the commensurate benefit as a result of reduction in the rate of tax or ITC has to be passed on to the recipients on each and every product which the Respondent has not done. It would also be pertinent to mention here that this Authority has
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t does not belong to them. The Respondent has made no effort to pass on the benefit which had become due after reduction in the rate of tax to his customers rather he had increased the base price and had infact illegally collected an amount equal to the reduction which had accrued due to the change in the rate of tax. He has also not followed the 2011 Rules supra citing his practical and logistical problems, which does not appear to be correct and hence he has contravened the provisions of the Section 171. The Respondent was at no stage required to perform an impossible act and hence the doctrine of "Lex non cogit ad impossibilia" does not apply in his case. 19. The Respondent has also claimed that the HUL had enhanced the quantity of Vaseline from 300 ml. to 400 ml. and charged the same MRP of ₹ 235/- after the tax was reduced and hence the benefit of reduction had been passed on to the customers. The contention of the Respondent made in this regard is completely unten
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equal to the amount of reduction in the rate of tax and hence any subsequent deposit of such excess amount in to the CWF cannot absolve him of the allegation of profiteering. 21. It is clear from the narration of the facts stated above that the Respondent has indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction of tax as per the Notification dated 14.11.2017 supra in respect of the above product to his customers and therefore, he is liable for action under Rule 133 of the CGST Rules, 2017, the relevant provisions of which state as under:- "133. x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-xx-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x (3) Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order – (a) red
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ion in the rate of tax as was notified on 14.11.2017 and pass on the benefit of reduction in the rate of the tax to his customers. 23. Since the price of the product and the GST charged by him from the above Applicant in respect of the tax invoice issued on 15.11.2017 has been returned by him to the Applicant No. 1 the amount of profiteering is not being determined however, in respect of the tax invoice issued by him to the above Applicant on 28.11.2017 the amount of profiteering is determined as ₹ 184/-as has been mentioned in para 16 supra which shall be returned by him to the Applicant No. 1 with interest @ 18% w.e.f. 28.11.2017 till the same is paid. Based on the details of the supplies made by the Respondent to the other recipients who are not identifiable the amount of profiteering is determined as ₹ 5,50,186/excluding the amount of ₹ 184/-, which shall be deposited by him along with interest @ 18% to be calculated from the first of the subsequent month in which
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y aware of the Notification dated 14.11.2017 whereby the rate of GST was reduced on the above product from 28% to 18%. He was also fully aware of the provisions of Section 171 of the above Act whereby he was bound to pass on the benefit of reduction in the rate of tax by commensurate reduction in the price of the above product. However, the Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and dishonest. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoices in which the base price was deliberately enhanced exactly equal to the amount of reduced tax and thus he had denied the benefit of reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers. Accordingly he has committed offence under Section 122 (1) of the CGST Act, 2017 which states as under:- "122. Penalty for certain offences (1) Where a taxable perso
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