2018 (11) TMI 1073 – NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (19) G. S. T. L. 511 (N. A. P. A.) – Profiteering – reduction of rate of tax – Restaurant Services – rate of tax reduced from 18% to 5% w.e.f. 15.11.2017 – it is alleged that though the rate of GST on Restaurant Services had been reduced from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the prices of the products which were being sold by him and had maintained the same price which he was charging before the above reduction – contravention of the provisions of Section 171 of the CGST Act, 2017.
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Held that:- It is established beyond any doubt that the Respondent had increased the base prices on the intervening night of 14/15th November, 2017 by an average of 10.45% in respect of 1,730 products out of the 1,844 products which comes to about 93.82% which clearly shows that he had deliberately in conscious disregard of the provisions of Section 171 of the above Act had resorted to profiteering as he had no g
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e in this case the Respondent is further directed to deposit the above amount as per the provisions of Rule 133 (3) (c) in the ratio of 50:50 in the Central or the State CWFs of all the 10 States mentioned in para 12 above, along with the interest @ 18% till the same is deposited, within a period of 3 months.
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Penalty – Held that:- The Respondent has resorted to profiteering by charging more price than that he could have charged by issuing incorrect tax invoices. 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 prices were deliberately enhanced exactly equal to the amount of reduced tax and benefit of ITC and thus he had denied the benefit of ITC and reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017 – a SCN may be issued to the Respondent to explain why penalt
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vide their emails dated 15.11.2017 and 17.11.2017 respectively had filed complaints alleging that though the rate of Goods and Services Tax (GST) on Restaurant Services had been reduced from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the prices of the products which were being sold by him and had maintained the same price which he was charging before the above reduction. They had also 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 applications were examined by the Standing Committee on Anti-Profiteering and were referred to the DGAP vide the minutes of it's meetings dated 29.11.2017 and 20.12.2017 for detailed investigation under Rule 129 (1) of the CGST Rules, 2017. 3. The DGAP had called upon the Respondent to submit reply on the allegation levelled by the Applicants No. 1 to 4 and also to suo moto determine the qu
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That he was operating quick service restaurants under the brand name "McDonald's" in the Western and Southern regions of India and was registered as a supplier under the GST in 10 States. He had also stated that he was running three tiers of restaurants depending upon the locality, the targeted customers, local competition etc. and was selling the same items at different prices based on the tier of the restaurant. b. That the rate of GST on the Restaurant Services was reduced to 5% w.e.f. 15.11.2017 with the condition that the ITC on the goods or services used in supplying the restaurant services would not be available. He has further stated that as per Section 33 of the CGST Act, 2017 the amount of tax formed part of the price. He has also claimed that the price lists of the food and the beverages published by him for each tier of restaurants clearly show that prior to 15.11.2017, the GST was being charged @ 18% and w.e.f. 15.11.2017 it had been levied @ 5% on the taxabl
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C which had constrained him to increase the base prices to negate this impact and such increase was also not commensurate with the increase in the costs. He has also contended that the cost of the restaurant services had gone up by at least 15%. He has further contended that he could not avail ITC worth ₹ 8.70 Crores for the months of July to October, 2017 and could avail it only after 15.11.2017. He has also submitted that the quantum of ITC not shown in the GSTR 3B would increase from ₹ 8.70 Crores to ₹ 9.33 Crores and would further increase by 50 Lakhs after all the inward supplies were accounted for which would prove that he had not profiteered. He has further contended that prices of some premium products had been reduced from 11% to 22%. e. That the rent for the restaurants in the shopping malls was charged on fixed or variable or semi-variable basis which was approximately 3.5% of the incremental turnover and was payable at the end of the year and since the bil
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DGAP has stated in his report that the contention of the Respondent that provisions of Section 171 were not applicable in his case was not correct as they would be attracted as soon as there was reduction in the rate of tax or the benefit of ITC was available and they would not be dependent on whether the contract for supply was entered in to before such reduction or availability of ITC had come in to force and hence provisions of Section 64 A of the Sale of Goods Act, 1930 were not applicable. He has also stated that the argument of the Respondent that the provisions of Section 171 amounted to controlling the prices and thus infringed his right to trade under Article 19 (1) (g) of the Constitution was also not correct as this Section nowhere provided for control on the prices and it's mandate was limited to the extent of ensuring that the benefits of tax reduction and ITC were passed on to the consumers by way of commensurate reduction in the prices. The DGAP has further stated t
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nefit which had become due to them. 8. The DGAP has made detailed calculation of profiteering vide Annexure37 of his report. He has also compared the ITC which was available to the Respondent till 14.1 1.2017 with the outward taxable supplies made till the above date. He has calculated the ITC from the period from 01.07.2017 to 31.10.2017 as the details of the closing stock as on 14.1 1.2017 and the ITC on such stock were not available in the GSTR-3B return of November, 2017 filed by the Respondent. The DGAP has also intimated that date wise outward taxable turnover was also not supplied by the Respondent up to 14.1 1.2017. The DGAP while determining the ITC as a ratio of the total taxable turnover of the Respondent has taken into account the ITC for the period from July, 2017 to October, 2017, as was shown in the GSTR3B, which has been adjusted by adding the amount of ITC which was availed in the month of November, 2017 as per GSTR-3B return and by excluding the amount of tax which wa
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to ₹ 1.54 Crores, which had not been considered while calculating the ITC, was available to the Respondent till 31.10.2017, comprised of: (i) ITC of ₹ 0.82 Crore availed in December, 2017 and subsequently, (ii) estimated credit of ₹ 0.50 Crore, invoices of which were not received by the Respondent and ITC was not availed in November, 2017 as per GSTR 3B return and (iii) ₹ 0.22 Crore on account of rent for which bills were to be raised in March, 2018. 10. The DGAP has also informed that on the scrutiny of the GSTR-I, GSTR3B returns and the ITC registers produced by the Respondent it was found that the ITC amounting to ₹ 33.96 Crores was available to the Respondent during the period between July, 2017 to October, 2017 which was approximately 9.11% of the taxable value of service of ₹ 372.62 Crores supplied by the Respondent during the same period excluding the inter-unit branch transfers. The rate of tax on the restaurant services was reduced from 18%
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benefit of reduction in the rate of tax from 18% to 5% as he had increased the base prices by more than 9.11% to 10.45% i.e. more than the denial of ITC in respect of 1,730 items out of total 1,844 items i.e. 93.82% of the total items supplied by him before and after 15.11.2017. 12. The DGAP has also stated that on the basis of the pre and post reduction in the GST rates, the impact of the denial of ITC and the details of the outward supplies made during the period between 15.11.2017 to January, 2018, as per the GSTR-I or GSTR-3B returns of the Respondent, the amount of net higher sale realization due to increase in the base prices of the services, despite the reduction in the GST rate from 18% to 5%, with denial of ITC, the profiteered amount came to ₹ 7.49 Crores as per the following Table and therefore, the Respondent has contravened the provisions of Section 171 of the above Act:- S. No. State (Place of Supply) Profiteering (In Rs.) 1 Andhra Pradesh 8,36,602 2 Chhattisgarh 3,
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n rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. He has claimed that the DGAP has conceded in his Report that the Respondent had charged GST @ 5% to his consumers and therefore, commensurate benefit had been passed on to them. It has also been claimed by the Respondent that the DGAP had admitted that there was no incremental ITC available and therefore no benefit was to be passed on by the Respondent. He has further claimed that despite admission that Section 171 nowhere aimed at price regulation and it's purpose was only to ensure that benefit of reduction in the rate of tax or ITC was passed on to the recipients by way commensurate reduction in the prices, the DGAP had gone in to the computation of base price by invoking the marginal note, i.e. "Anti-Profiteering Measure" which was illegal. He has further claimed that as per the settled law pronounced on th
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ral construction of the statue was ambiguous or absurd and since the provisions of Section 171 were unambiguous and explicit hence the marginal note was irrelevant and therefore, any attempt to examine and assess the base price was beyond the scope of Section 171. 15. The Respondent has also claimed that the word "profit" in common parlance was understood as under:- MEANING SOURCE Advantage or gain in money or in money's worth Prem & Saharay's Judicial Dictionary of Words and Phrases The excess of revenues over expenditures in a business transaction Black's Law Dictionary The word profit connotes the idea of pecuniary gain Ravanna Subanna vs G.S. Kaggeerappa (AIR 1954 SC 653) The financial gain in a transaction or enterprise; the excess of returns over outlay Shorter Oxford English Dictionary The Respondent has also contended that the DGAP had only considered the impact of ITC denial and had failed to consider other factors such as increase in the electricity
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10.45%, which could not be taken as profit accruing to the Respondent as there was increase in the (a) Royalty, as the Respondent was paying royalty to M/S McDonald's India Pvt. Ltd. which was 3.99% of the restaurant turnover and amounted to incremental royalty of 99,00,540/- on the incremental turnover attributed solely to the price increase during the year 2017-18 (b) Variable rent, which was 3.29% of the restaurant turnover, whereby he had paid an incremental rent of 81 ,63,604/- on the incremental turnover attributed solely to price increase during the above year and (c) Other variable expenses like payments made to various service providers and during the year 201718, such expenses were 0.96% of the restaurant turnover and he had paid incremental expenses of 23,82,085/- on the incremental turnover attributable solely to the price increase. He has further pleaded that on the incremental revenue of 24,81,33,857/-, he had incurred incremental cost of 2,21 hence the profit worked
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in excessive profits, one who is given to making excessive profits Law Lexicon The taking advantage of unusual or exceptional circumstances to make excessive profits Black's Law Dictionary Make or seek to make an excessive profit Shorter Oxford English Dictionary Profiteering would mean taking advantage of unusual or exceptional circumstances to make excessive profits. Islamic Academy of Education vs State of Karnataka The Respondent has further pleaded that he had not made excessive and/ or unreasonable profit as he was hardly making a profit, as the tax incremental cost computed by the DGAP was 9.11% as against the incremental price margin of 9.43%. and hence he had benefited only by 0.32%. He has also averred that the increased tax cost warranted revision in the prices to offset the tax cost and in case he increased the prices by ? 100, he would only get 00.28 after paying out royalty, variable rent and the outside services and therefore, the prices must be at least increased by
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nder the VAT regime no credit was availed of/carried forward as he was availing the Composition, therefore, as all future procurements would suffer GST, for calculating the impact of the denial of GST, the months of July and August should not be considered. He has also submitted that the ITC availed of in the month of October 2017 was 13.82% and the ITC for the months of September and October 2017 was 12.28% and therefore the ITC for the month of October 2017 only or the average of September 2017 to October 2017 being 12.28% should be considered for evaluating impact on cost due to denial of ITC. The Respondent further submitted that he had provided complete details of the ITC which he had availed in the months of December 2017 till March 2018 for the supplies received during the period between July – October 2017 which worked out to be 1,15,88,010/- which had been disallowed by the DGAP causing huge disadvantage to him. He has also claimed that the DGAP had disallowed ITC of 85,27,917
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and thus, he had paid additional GST of 56,31 ,954/- on inward supplies which had been denied to him by the DGAP. He has also alleged that the period of investigation had been arbitrarily taken from 1 July 2017 to 31 October 2017 On the ground that the break-up of the closing stock of inputs and the ITC on the closing stock as on 14 November 2017 was not available in the GSTR-3B of November 2017 and the date wise outward taxable turnover for the month of November 2017 was not provided by the Respondent to compute the taxable turnover for the period between 1 November 2017 – 14 November 2017. The Respondent has claimed that he had supplied the ITC Register w.e.f. 01.07.2017 to 30.11.2017 on 19.01.2018 and 22.03.2018, the Stock Statement as on 30.06.2017 and 14.11.2017 on 09.03.2018 and the details of the Stock Keeping Unit (SKU) wise sales w.e.f. 01.11.2017 to 14.11.2017 and 15.11.2017 to 30.11.2017 on 10.04.2018 and hence the allegation of not providing these details was incorrect. He
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st which needed immediate price revision. He has also stressed that the methodology adopted by the DGAP has left significant amount of tax unaccounted for therefore the correct tax cost analysis due to ITC denial could be made only on the basis of the audited financials which have been taken in to account by the Respondent for the year 2016-17 to forecast incremental tax cost as per the following table:- Particulars ncrease in price post 14-Nov-17 as per DGA 10.45% 10.45% Increase in recovered price due to increase in sales prices 9.43% 9.43% Impact due to denial of ITC 12.24% 10.10FIO.3 Net marginal Gain/(Loss) (2.81%) (0.6T0.87%) 21. He has also argued that the calculation of the profiteered amount of ₹ 7.49 Crores was not correct as the DGAP has ignored the reduction in the price made by him which had led to reduction in the profiteered amount and also due to the reason that the DGAP had calculated the profiteered amount @ 105%, i.e. base price + 5% GST when the 5% GST had alr
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absence of machinery provisions for computation of the profiteered amount as per the law settled in the cases of CIT v. B. C. Srinivasa Shetty (1981) 2 SCC 460 and Commissioner of Central Excise v. Larsen & Toubro Ltd. (2016) 1 SCC 170. He has further pleaded that the above Act did not provide for a mechanism of computation or any guidelines and had left framing of methodology and computation to the Authority which was illegal as it was settled that legislature could not delegate it's authority under a statute without appropriate guidelines as per the law pronounced in the case of Indian Aluminium Co. Ltd. and Anr. v. The State of Bihar and Ors. 1994 (1) PLJR as the antiprofiteering provisions placed an unbridled discretion in the hands of the Authority and hence the present proceedings were not maintainable. 23. The Respondent has also stated that it was not clear whether the price alteration was required to be done at the entity level, State level, locational level, product l
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ed for availment of the ITC up to a period of one year and hence he was entitled to claim the above ITC. He has also stated that the receipt of the goods and services had to be determined under the provisions of Section 12 and 13 of the CGST Act, 2017 as per which earlier of the date of issue of the invoice or the date of the receipt of payment was to be considered as time of supply and since the Respondent had claimed credit of ITC in respect of all such invoices which were dated on or before 14 November 2017 but accounted in the books of account on or after 14 November 2017, he should be allowed to avail the same. He has further stated that he was barred from taking benefit of ITC on inward supplies received after 14 November 2017 as per Section 12 and 13 of the CGST Act, 2017 which could not be construed as curtailing his vested right of availing the ITC for the inward supplies received on or before 14 November 2017. He has also cited the cases of (i) Eicher Motors Ltd. v. Union of
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9.11% was nothing but a direct restriction on the prices of the services offered by the Respondent. 26. The Respondent has also claimed that prior to 15 November 2017, the input tax paid on inward supplies other than those listed under Section 17(5) of the CGST Act, 2017 was not cost and therefore, it was not factored in the price however after 15 November 2017, the input tax paid had become a cost which needed to be factored in the price. He has further claimed that the transitional credit of ₹ 5,18,17,311/- was also required to be included in the month of July 2017 as per the comments dated 09 August 2018 of the DGAP for working out the ratio of ITC versus the taxable turnover which would then be 10.50% and hence he cannot be held to have profiteered. 27. The Respondent has also submitted that the DGAP had claimed that as per Section 171 determination of profiteering was required to be done in absolute terms, then the entire investigation was vitiated as it had been done on agg
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rate reduction price. He has also submitted that Respondent had carried forward Transitional Credit of ₹ 5.18 Crore on 1 st July, 2017 for the stock held on 30.06.2017 and also ITC of ₹ 4.61 Crore availed in the months of Sep. and Oct. 2017 pertained to the period prior to the month in which the credit was availed. He had also calculated ratio of denial of Input Tax Credit to the net outward taxable turnover which came to be 9.81% considering only the months of September-October, 2017. The DGAP has further submitted that the ITC in respect of the inter-unit branch transfers was not considered because the output tax liability on outward taxable turnover had also been excluded from the period between 1-14 November, 2017. He has also claimed that the Respondent had submitted SKU wise summary of supplies and not B2C invoices for outward taxable supplies and random check of the invoices revealed that in some cases, ITC was availed by him without being in possession of the invoi
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ernment and the suppliers were not entitled to appropriate them and in case the consumers were not identifiable, the amount so collected by the suppliers was required to be deposited in the Consumer Welfare Fund (CWF). He has also argued that commensurate reduction could obviously only be in absolute terms, so that the final price payable by a consumer got reduced. He has further argued that Section 171 did not provide a supplier any other means of passing on the benefit of ITC or reduction in rate of tax to the consumer. He has also pleaded that the increase in the cost of inputs including royalty, variable rent and other expenses was a factor in the determination of the price but it was independent of the output GST rate and hence it could not be claimed that the elements of cost unrelated to GST where affected by the change in the output GST rate and therefore, the increase in the cost of inputs as claimed by the Respondent had not been be considered. 30. The DGAP has also submitted
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ement for availing ITC and w.e.f. 15.11.2017, the Respondent was not allowed to avail ITC in terms of Notification No. 46/2017- Central Tax (Rates) dated 14.11.2017, therefore, he was not eligible to take benefit of ITC w.e.f. 15.11.2017 on the strength of invoices received after 15.11.2017. The DGAP has also claimed that the ITC of ₹ 85,27,917 was not disallowed but was not considered while computing the ratio of denial of ITC to net turnover as this credit pertained to the period prior to implementation of GST which had no bearing on the supplies made during the period from July, 2017 to October, 2017. He has further stated that as the Respondent had received the tax invoices after 15.11.2017 hence he was not eligible to avail the ITC in terms of the Notification dated 14.11.2017, therefore the same could not be considered for computation of denial of Input Tax Credit to net turnover ratio. The DGAP has also maintained that as the Respondent had already availed ITC on the origi
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heck of the invoices on which ITC was availed in November, 2017, the credit was taken by the Respondent without being in possession of these invoices on the date of availing ITC, in contravention of the provisions of Section 16 (2) (a) of the CGST Act, 2017 and therefore, the ITC pertaining to the invoices issued on or after 1 st November 2017 and availed during 1-14 November 2017 had been left out. He has also intimated that the net turnover for the above period had also been left out and therefore, this had no bearing on computation of denial of ITC ratio to the turnover during the period from 1 st July 2017 to 31 st October 2017. The DGAP has also claimed that the law did not provide a supplier any flexibility to suo moto decide on any other modality to pass on the benefit of ITC or reduction in rate of tax to the recipients except by commensurate reduction in the price and hence computation of the marginal gain/loss as per the financial statements could not be considered in view of
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ion in the rate of tax on any supply of goods or services or (ii) the benefit of ITC shall be passed on to the recipient by way of (iii) commensurate reduction in prices. Since there has been reduction in the rate of tax in respect of the above services as per the Notification dated 14.11.2017 the benefit of reduction was required to be passed on to the consumers. Similarly the benefit of ITC availed by the supplier was also to be passed on to the recipients. Mere charging of GST @ 5% w.e.f. 15.11.2017 does not amount to passing on the benefit of the above reduction as has been claimed by the Respondent. The Respondent had also claimed benefit of ITC as per TRAN-I statement as well as per his GST-3B returns filed for the period between 01.07.2017 to 14.11.2017 which was also required to be passed on to the consumers. Perusal of the Report filed by the DGAP nowhere shows that he had gone in to computation of the base price fixed by the Respondent as he has neither sought details of the
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e-Tax v. Ahmedbhai Umarbhai & Co. 1950 AIR 134, N. C. Dhoundial v. Union of India AIR 2004 SC 1272, Sarabjit Rick Singh v. Union of India 2008 (2) SCC 417 and R. Krishnaiah v. State of Andhra Pradesh AIR 2005 AP 10 is not applicable in the facts of the present case as no strict interpretation of the provisions of Section 171 is required as they are simple and clear, their meaning and message is absolutely unambiguous and hence no weightage is required to be given to the marginal note. The intent of legislature shows that it proposes to hold the suppliers accountable for passing on both the above benefits as they have been given out of the public exchequer and any breach of the same will fall foul of the above Section. 33. The Respondent has also claimed that the provisions of Section 171 were applicable only in the case of the contracts of sale which had been entered in to prior to the change in the rate of tax or grant of benefit of ITC and both the parties had agreed to such chan
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by the Respondent in this regard are farfetched and untenable in view of the specific provisions of Section 171. 34. It is also clear from the definition of 'profit' given by the Respondent in his submissions that it is the advantage or gain derived in a legal business transaction but the same cannot be considered as profit if it is illegally derived by appropriating the benefits which are granted by the Government from the public funds to the consumers. The contention of the Respondent that the increase in the prices of food article, electricity, fuel, variable rent, royalty and commissions etc. was not considered by the DGAP while calculating the profiteered amount is untenable because the DGAP has mandate to only examine whether the benefit of tax reduction or ITC has been passed on or not. The order passed in the Case of Kumar Gandharv v. KRBL Ltd. on 04.05.2018 by this Authority pertains to Basmati in the case of which the GST was increased from 0% to 5% and hence there h
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ount of profiteering. Since he has earned incremental revenue he should also have made arrangements for meeting the above expenses from the revenue earned by him. 36. The Respondent has also tried to define 'profiteering' as a conduct or practice for making excessive profits. The present conduct of the Respondent squarely falls in the definitions mentioned by the Respondent himself as he had not only realised his usual margin of profit which he was charging but had also pocketed the amount which he was bound to pass on to his customers due to reduction in the rate of tax and benefit of ITC. The Respondent must remember that the benefit of reduction in the rate of tax as well as the benefit of ITC have been given by the Central as well as the State Government by sacrificing their own revenue in favour of the general public and the Respondent has no right to appropriate them. The Respondent has himself admitted that the DGAP had calculated the ratio of denial of ITC to total taxa
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appears to be that the Respondent wants to hide the fact that he had increased his prices more than the denial of benefit of ITC. The Respondent cannot claim ITC after the Notification issued on 14.11.2017 for the supplies made during the months of July to October, 2017 during the months of December 2017 to March 2018 and hence the DGAP has rightly denied him the benefit of ITC of ₹ 1,15,88,010/-. He has further rightly denied him the benefit of ITC of ₹ 85,27,917/- as the tax invoices in respect of the supplies made during the period of July to October, 2017 were received by the Respondent late. The Respondent must have been prudent enough to make necessary provisions for payment of rent to avoid loss of ITC which he had failed to do. 38. It is also revealed from the Report of the DGAP that the output tax liability on inter-unit branch transfer turnover had been excluded from the ITC on the one hand and the inter-unit branch transfer turnover has been excluded from the out
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which could only be done on the basis of the audited financial statements. This contention is absolutely wrong as the Respondent had overnight increased the prices w.e.f. 15.11.2017 the day from which the rate of tax was reduced. Further, the increase was exactly equal to the amount by which the tax had been reduced and the same MRP which was being charged on 14.11.2017 was also charged on 15.11.2017. Perusal of the tax invoice dated 07.11.2017 enclosed with the complaint shows that the Respondent had charged ₹ 120.34/- as base price for one piece of Regular Mccafe Latte and ₹ 21.66/- as 18% CGST+SGST and thus an amount of ₹ 142/- was charged for the above item. Vide invoice dated 15.11.2017 the base price was increased by ₹ 14.90/- to ₹ 135.24/- and ₹ 6.76/- were charged as CGST+SGST @ 5% and the above product was supplied at the same MRP of ₹ 142/-. Therefore, it is clear that the base price was increased by 12.38% which is more than the rat
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rease was based on the audited statements. 40. The Respondent has also claimed that no methodology has been prescribed under the CGST Act or the Rules which can be followed by the suppliers in order to comply with the anti-profiteering measures and this Authority had also not notified such methodology under Rule 126 of the CGST Rules, 2017. In this connection it would be pertinent to mention that this Authority in exercise of the powers conferred on it under Rule 126 of the above Rules has already promulgated the "Methodology and Procedure" vide it's Notification dated 28.03.2017 which has been prominently displayed on it's website. It is regrettable that the Respondent is raising this issue without consulting the website. The Respondent has also claimed that the provisions of Section 171 and Rules 122-137 could not be enforced in the absence of machinery provisions which also proves that the Respondent has not read the above provisions carefully. As discussed above t
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164 of the Act on the recommendation of the GST Council which is a body established under the Constitution. It is humbly submitted that the judgement passed in the case of Indian Aluminium Co. Ltd. and Anr. v. The State of Bihar and Ors. 1994 (1) PLJR is not being followed as the delegation has been made in accordance with the provisions of the CGST Act, 2017. It would also be appropriate to mention here that the computation of the profiteered amount under Section 171 has to be done on the basis of the facts of each case and hence no general methodology and procedure can be prescribed for the same. Moreover, the word used in Rule 126 is to 'determine' and not to 'prescribe' the methodology and procedure. The basic aim is to ensure that both the benefits of reduction in the rate of tax and the ITC are passed on to the consumers by commensurate reduction in the prices. During the hearing the Respondent was repeatedly asked to put forth his own methodology and procedure i
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lem in settling the issue of commensurate reduction which can be calculated after taking in to account the reduction in the rate of tax or grant of benefit of ITC both of which can be easily determined in the absolute figures and hence there should be no difficulty in reducing the prices commensurately, therefore, there is no question of it's assessment as a trend or in percentage terms. The provisions of Section 171 are only concerned about passing on the above two benefits and have no connection with the fixing of the price of the product and hence the issues of market conditions, demand and supply and rising/falling input costs are not required to be taken in to account while determining the amount of profiteering. The Respondent cannot raise these issues by arbitrarily raising his prices on the intervening night of 14/15th November, 2017 by 10.45% on an average on the eve of the reduction in the rate of tax. He could have very well raised his prices on the basis of the above fa
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by an average of 10.45% in respect of 1,730 products out of the 1,844 products which comes to about 93.82% which clearly shows that he had deliberately in conscious disregard of the provisions of Section 171 of the above Act had resorted to profiteering as he had no ground whatsoever to increase his prices on the eve of tax reduction. The cases of Commissioner of Income Tax v. Vadilal Vallubhai (1972) 86 ITR 2 (SC) and State of Punjab v. Gurdial Singh AIR 1980 SC 319 are of no help to him as the same are not relevant in the facts of the present case. The allegation of the Respondent that he had been directed to increase his prices by 9.11% only amounted to restriction on his right to fix the prices is misplaced as no such direction has been passed by the DGAP as the Respondent has himself revised the prices and while doing so he has deliberately pocketed the benefits which he was required to pass on to his customers in addition to his regular margins which being in contravention of the
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same can be fully relied upon. The calculation of ratio of denial of ITC has been worked out as 10.27% by the Respondent in the Table submitted by him, however, the same cannot be accepted as it includes the ITC to which the Respondent was not entitled and also the inter unit branch transfers which have not been taken in to account by the DGAP. 46. In view of the above discussion the quantum of denial of benefit due to the reduction in the rate of tax and the benefit of ITC availed by the Respondent which was required to be passed on to the customers or the amount of profiteering done by the Respondent is determined as ₹ 7,49,27,786/- as per the details mentioned in para 12 supra under the provisions of Rule 133 (1) of the CGST Rules, 2017 as the Respondent has failed to pass on both the above benefits to his customers. The above amount is inclusive of the extra GST which the Respondent had forced the customers to pay due to wrong increase in his basic prices otherwise the price
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e that the amount due is got deposited from the Respondent along with interest and in case the same is not deposited necessary steps shall be taken by them to get it recovered from the Respondent as per the provisions of the CGST/SGST Acts under the supervision of the DGAP. They are further directed to submit report in compliance of this order within a period of 4 months. Since the present investigation is only up to 31.01.2018 the DGAP is directed to investigate the quantum of denial of both the above benefits till the Respondent reduces/had reduced his prices commensurately and submit his Report. 48. As per the above narration of the facts it is clear that the Respondent has resorted to profiteering by charging more price than that he could have charged by issuing incorrect tax invoices. 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 prices were deliberately enhanced exactly equal to the
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