Sh. Jijrushu N. Bhattacharya And Director General Anti-Profiteering, Central Board of Indirect Taxes & Customs, New Delhi Versus M/s. NP Foods (Franchisee M/s Subway India)
GST
2018 (10) TMI 1338 – NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (17) G. S. T. L. 627 (N. A. P. A.)
NATIONAL ANTI-PROFITEERING AUTHORITY – NAPA
Dated:- 27-9-2018
Case No. 9/2018
GST
Sh. B. N. Sharma, Chairman, Sh. J. C. Chauhan, Technical Member And Ms. R. Bhagyadevi, Technical Member
For The Applicant : Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs)
For The Respondent : Sh. Smit P. Shah
ORDER
1. The present Report dated 1 1.05.2018 has been received from the Director General of Safeguards (DGSG) now Director General Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the case are that an application dated 01.01.2018 was filed by the Applicant N
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after reduction in the rate of tax. The Respondent had submitted replies vide e-mails dated 09.03.2018, 17.03.2018, 06.04.2018 and 01.05.2018 and stated that the Government of India had disallowed Input Tax Credit (ITC) on the purchase of material used in the restaurant service w.e.f. 15.11.2017 and hence he had increased the base price of his products after the change in the GST rate from 18% with ITC to 5% without ITC. He had also submitted copies of the bills, audited balance sheet, GSTR-I & GSTR-3b and sales register in support of his contention.
4. The DGAP has confirmed in his report that the rate of GST on the restaurant service had been reduced from 18% to 5% with the condition that ITC on the goods and services used in supplying the service will not be allowed vide Notification No. 46/2017-Central Tax (Rate) dated 14.1 1.2017 with effect from 15.11.2017. The DGAP has also stated that on scrutiny of the GSTR-I, GSTR-3b and the ITC Register submitted by the Respondent, it was o
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average output taxable value (base price) by 12.14% to neutralize the denial of ITC of 11.80%. The DGAP has further submitted that the Respondent had sold 32 number of different items on 14.11.2017 in one of his outlets at Karelibaug at the increased base prices and collected Rs. 452/-, where he had actually charged 18% GST on the said items. He has also contended that this was evidently done to compensate for the denial of ITC that was to take place one day later w.e.f. 15.11.2017. The DGAP has also intimated that the increase in the base prices of the products sold by the Respondent on 14.11.2017 on account of denial of ITC was unjust as the ITC was available to him on 14.1 1.2017 since the GST rate was reduced from 18% to 5% and the ITC was denied on the restaurant service supplied by the Respondent only w.e.f. 15.11.2017. He has further intimated that the Respondent had increased the base price to include the cost of input tax and also subjected the customers to GST at the higher
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licant on 29.05.2018 however, the Applicant did not appear during the course of the hearings. M/S Subway Systems India Private Limited the owners of the 'Subway' Brand which had appointed the Respondent as it's franchisee were also associated during the hearings. S/Sh. Nihal Kothari and Mayank Jain Advocates who appeared on behalf of M/S Sunway submitted that it worked on the franchisee based model, and no consideration was taken from the franchisee expect the royalty on the net turnover. They also submitted that M/S Subway was not involved in fixing of the price of the products and it was solely the call of the franchisee to fix the prices of the products. They further submitted that no ITC was being passed on by M/S Subway as the franchisee was free to buy the raw material from the local sources. They also stated that only the ingredients and the products to be served were decided by M/S Subway.
6. The DGAP was also asked to file reply on the ITC aspect of the pre and po
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alleged to have been charged from the customers on 14.1 1.2018 in the DGAP's Report was due to the system error in the night of 14.11.2018 and the Respondent had no intention of overcharging. He also submitted that he had increased the rates due to denial of ITC and the Report had not alleged any profiteering on his behalf and hence the present proceedings should be dropped.
8. We have carefully heard both the parties and have also considered the material placed before us and following two points pertaining to the allegation of profiteering made against the Respondent need to be decided as per the provisions of Sec. 171 of the CGST Ac, 2017:-
i. Whether there was reduction in the rate of tax on the restaurant service after 14.11.2017 and whether the benefit as emanating from such reduced tax rate has not been passed to the Applicant No. 1 in terms of the commensurate reduction in the price of the product purchased by him?
ii. Whether profiteering of Rs. 452/- was made by
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the Respondent had increased the average base price by 12.14% to neutralize the denial of ITC of 11.80% and such increase is commensurate with the increase in the cost of the product on account of denial of ITC. Therefore, the allegation of not passing on the benefit of rate reduction is not established against the Respondent. As far as the issue of profiteering of Rs. 452/- made on the supply of the products on 14.1 1.2017 is concerned the same can not be termed as profiteering in terms of section 171 of CGST Act, 2017 as there was no rate reduction on 14.11.2017 as the same had occurred w.e.f. 15.11.2017 only.
10. Based on the above facts it is clear that the Respondent has not contravened the provisions of Section 171 of the CGST Act, 2017 and hence there is no merit in the application filed by the Applicant No. 1 and the same is accordingly dismissed. A copy of this order be sent to both the Applicants and the Respondent free of cost. File of the case be consigned after completion
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