Shri Ravi Charaya, Shri Chandranath Sarkar, Shri Shreepad Shende, Shri Jayasankar Venkatramani Versus M/s Hardcastle Restaurants Pvt. Ltd.
GST
2018 (11) TMI 1073 – NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (19) G. S. T. L. 511 (N. A. P. A.)
NATIONAL ANTI-PROFITEERING AUTHORITY – NAPA
Dated:- 16-11-2018
Case No. : 14/2018
GST
Sh. B. N. Sharma, Chairman, Sh. J. C. Chauhan, Technical Member, Ms. R. Bhagyadevi, Technical Member And Sh. Amand Shah, Technical Member
For The Applicant : Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal Assistant Director (Costs)
For The Respondent Sh. Suresh Lakshminarayan, Chief Finance Officer, Sh. Dinesh Agarwal, CA and Sh. Mayank Jain, Advocate from M/S Khaitan & Co
ORDER
1. This report dated 15.06.2018 has been received from the Applicant No. 5 i.e. the Director General of Safeguards (DGSG), now re-designated as Director General of Anti-Profiteering (hereinafter referred to as the DGAP) under Rule 129 (6) of
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r 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 quantum of benefit which he had not passed on to the consumers during the period between 15.11.2017 to 31.01.2018. The above Applicants were given an opportunity to inspect the non-confidential evidences/reply furnished by the Respondent between 24.05.2018 to 25.05.2018. However, the Applicants did not avail of this opportunity.
4. The Respondent had submitted his reply on 05.01.2018 vide Annexure11 and denied the allegations levelled against him and claimed that the benefit of reduction in the rate of tax had been neutralised due to withdrawl of Input Tax Credit (ITC) to him. The Respondent had furnished the required information/documents to the DGAP vide his letters dated 12.01.2018, 17.01.2018, 22.01.2018, 24.01.2018, 29.01.2018, 07.02.2018, 09.02.2018, 16.02.2018, 22.02.2018, 23.02
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e 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 taxable value and thus, the
commensurate benefit arising out of the reduction in the rate of tax had been passed on to the customers.
c. That the price revision made by him w.e.f. 15.11.2017 did not fall within the purview of Section 171 of the above Act as this provision applied in only those cases where the contract of supply/sale had been entered in to prior to the change in the rate
of tax or ITC. He has also claimed that any such change did not amount to automatic change in the price unless it was agreed to by both the parties as per Section 64 A of the Sale of Goods Act, 1930. He has further claimed that any attempt to regulate the sale price of the products being sold by him would violate his right to carry on trade as per Article 19 (1) (g) of the Constitution and the provisions o
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aurants 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 bills for the same would be raised only at the year-end, he would not be eligible to claim ITC on such variable rent and he would suffer an estimated loss of Rs. 22.78 Lakhs.
f. That for the computation of availability of ITC, additional ITC for the period from July, 2017 to 14.11.2017 should be a minimum of Rs. 10 Crores. The Respondent has also claimed that the transitional credit mentioned in TRAN-I statement filed by him was not the correct indicator of the tax incurred as (i) credit of CENVAT was not available on the Central Excise Duty, (ii) his restaurants were operating under the Composition Scheme under which ITC on VAT was not allowed (iii) expenses on Petroleum were outside the GST and (iv) most of the inputs were taxable at higher rates. He has further claimed that he had reverse
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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 that the Central Govt. on the recommendation of the GST Council vide it's Notification No. 26/2017-Central Tax (Rate) dated 14.11.20171 had reduced the rate of tax on restaurant services from 18% to 5% w.e.f. 15.11.2017 with the condition that the benefit of ITC would not be available on this service.
7. The DGAP has also submitted that the Respondent was selling 1,844 products and after comparing the price lists published before and after 15.11.2017 when the rate of tax was reduced, which was indicated in Annexure-32, the Respondent had increased the base price in respect of 1,774 (96.20%) products. He has further submitted that although the Respondent had charged GST @ 5% on and after 15.11.2017 but due to increase in the base price the customers were forced to pay the same price which was being c
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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 was paid on inter unit branch transfers as per sale registers and the input tax credit pertaining to the period before July 2017 which was availed during the period between July, 2017 to October, 2017 as per the GSTR-3B returns. The amount of ITC pertaining to the period before 01.07.2017 which was availed during July to October, 2017 was also excluded.
9. The DGAP has also mentioned that the Respondent had claimed that the ITC of Rs. 9.33 Crores approx. availed in November, 2017 and subsequently was on account of the invoices issued during the period of July, 2017 to October, 2017 and for ITC of Rs. 0.72 core, the invoices were not in the possession of the Respondent. The DGAP has intimated that out of the above claim, ITC of Rs. 8.51 Crores pertaining to the invoices issued from July, 2017 to October
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pplied 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% to 5% w.e.f. 15.11.2017 and the benefit of ITC was not available to the Respondent w.e.f. the above date. The DGAP has calculated the ratio of denial of ITC as under:-
11. On the basis of the analysis of the details of the item-wise outward taxable supplies made during the period between 15.11.2017 to 31.01.2018, the DGAP had found that the Respondent had increased the base prices of the various items supplied by him to neutralise the effect of denial of ITC after the rate reduction. The DGAP had compared the pre and post GST rate reduction prices of the items sold during the period between 15.11.2017 to 31.01.2018 and after taking into account the entire quantity of the products sold during the above period, had found that the Respondent had increased the average output taxable value i.e. the base price by 10.45% to offset the deni
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avened 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
3,99,904
3
Goa
8,29,314
4
Gujarat
88,48,919
5
Karnataka
1,18,30,563
6
Kerala
13,34,341
7
Madhya Pradesh
9,68,540
8
Maharashtra
3,96,68,520
9
Tamilnadu
43,19,803
10
Telangana
58,91,280
Total:
7,49,27,786
13. The above report was considered by the Authority in its sitting held on 05.07.2018 and it was decided to hear the interested parties by granting hearing on 24.07.2018 during which the Applicants No. 1 to 4 did not appear. The DGAP was represented by Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupinder Goyal Assistant Director (Costs). Sh. Suresh Lakshminarayan, Chief Finance Officer, Sh. Dinesh Agarwal, CA and Sh. Mayank Jain, Advocate from M/S Khaitan & Co. appeared for the Respondent.
14. The Respondent has filed detailed written submissions on 24.07.2018, 09.08.2018, 16.08.2018 and 22.08.
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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 the interpretation of the statutes, marginal notes were considered as internal aid to construction and while construing such provisions, the first and the foremost rule was of literal construction and in case the provision was unambiguous and the legislative intent was clear, the other rules of construction were not be called into aid since they were to be called for aid only when the legislative intention was not clear. The Respondent has also cited the law settled in the cases of Commissioner of income Tax v. Calcutta Knitwears (2014) 6 SCC 444, Union of India v. National Federation of the Blind (2013) 10 SCC 772, Commissioner of Income-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
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onary
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 bills, fuel costs, variable rent, royalty and commissions etc. He has further contended that as per WPI, prices of food articles had risen by 6.32% and that of fuel & power by 4.69% during the same period, however, only the impact of ITC was considered. The Respondent has also claimed that the increased input prices were considered as a mitigating factor in the order dated 4 May 2018 passed by this Authority in the case of Kumar Gandharv v. KRBL Limited, but in spite of furnishing evidence no other factor was taken in to consideration. He has further claimed that while determining cost of a product, tax was just one component and the other factors had been ignored and therefore, the entire exercise undertaken by the DGAP needed to be dismissed as the DGAP had lost sight of the true meaning of the wor
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butable 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 out to be 9.43% as against 10.45% computed by the DGAP as per the following table:-
DESCRIPTION
AMOUNT IN e
AMOUNT IN
A
Revenue for 15 November to 31 January 2018 on price before revision
237,46,157
B
Revenue for 15 November to 31 January 2018 on after price revision
262,28,18,014
C
Incremental revenue due to price revision [B – A]
24,81,33,857
D
incremental royalty due to price revision [3.99% x C]
3.99%
99,00,541
E
Incremental rent due to price revision [3.29% x C]
3.29%
81,63,604
F
Other expenses due to price revision [0.96% x C]
0.96%
23,82,085
G
Incremental tax cost [(D+E+F) x 18%]
36,80,321
H
Total incremental cost due
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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 10.09% [9.11*100/0.902] and not 9.11% as had been calculated by the DGAP to recover the tax cost. He has further averred that the profiteering had to be due to excessive profit which was not the case in the present proceedings as the increased realisation was extremely minuscule, and therefore, the inevitable conclusion was that he had passed on the commensurate benefits and he had not violated the provisions of Section 171 of the CGST Act, 2017.
18. The Respondent has also stated that the
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7 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/- pertaining to period prior to July 2017 but availed of during the period between July-October 2017 as the invoices were issued by the supplier late which must be given to him. He has further claimed that the GST liability on variable rent would be accounted for either on a monthly or yearly basis, although it was accruing daily which constituted 3.29% of the restaurant turnover which the Respondent would be denied.
19. The Respondent has also pleaded that during the period between JulyOctobe
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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 has further claimed that perusal of Annexure 36 (Columns G & H and J & K) and Annexure 37 (Columns I & J and L & M) of the Report framed by the DGAP provided SKU wise turnover in terms of units and price for the period between 01-14 November and for the period of 15-30 November 2017 and hence the above allegation was wrong. He has also asserted that if the period of investigation was considered as 01 July 2017 to 14 November 2017, the tax cost resulting from denial of ITC would jump to 10
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ease 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 Rs. 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 already been deposited in the Government account and not retained by him and hence, no profiteering could be alleged. He has also admitted that on the basis the above submissions, the amount of alleged profiteering stood reduced to Rs. 3, 17,03,988/-.
22. The Respondent has also contended that the relevant provisions of the CGST Act, 2017 or the CGST Rules, 2017 did not prescribe the methodology to be followed by the registered suppliers in order to comply with the anti-pro
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egate 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 level, category level or SKU level, each of which would bring about a different result in the pricing. There was also no indication whether a “commensurate” change in pricing would be assessed as a trend or in percentage terms. He has further stated that there was no recognition of various non-GST factors like market conditions, demand and supply, rising/ falling input costs, each of which might independently warrant a reduction or increase in prices and how in respect of common
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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 India 1999 (1) SCR 295 (ii) Samtel India Ltd. v.Commissioner of Central Excise (2003) 11 SCC 324 and (iii) Binani Cement Ltd v. Commissioner of Central Excise 2002 (143) E.L.T. 577 (Tri. – Del.) in his support.
25. The Respondent has also alleged that the DGAP had claimed that since the gross price has remained identical for the period up to 14 November 2017 and w.e.f. 15 November 2018 therefore, he had resorted to profiteering however, It was an undisputed fact that the Respondent had
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credit of Rs. 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 aggregate or consolidated data and the DGAP should have determined each and every factor against each and every product for determining profiteering. The respondent has also calculated the ratio of denial of ITC a under:-
He has also claimed that the net effect of the denial of ITC was 10.27% to 12.24% whereas the net incremental revenue was only 9.43% and hence there was no profiteering.
28. The DGAP in his replies dated 08.08.2018 and 20.08.2018 filed in response to the subm
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er-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 invoices on the date of availing of ITC which was in contravention of the provisions of Section 16 (2) (a) of the CGST Act, 2017 and thus was not allowed. The DGAP has also claimed that he was justified in applying the anti-profiteering provisions at the product/SKU level, in the absence of invoice-wise outward taxable supplies data as the Respondent had failed to provide the same.
29. The DGAP has also contended that Para-13 on page 6 of the Report explained the rationale for rejectin
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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 that full ITC was allowed after implementation of the GST w.e.f. 01.07.2017 on the purchase of Inputs, Input Services and Capital Goods which the Respondent had availed. He has further submitted that the Respondent had informed that he carried the same level of inventory on 30th June 2017 & on 31 st October 2017 and therefore, for computing the ratio of denial of ITC to the taxable turnover, the ITC for the period from July, 2017 to October, 2017, as furnished by him in the GSTR
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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 original purchase of inputs, the same had been considered in the computation of denial of ITC to net turnover. He has further maintained 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 outward taxable turnover on the other hand which neutralised the impact of branch transfer transactions on the computation. He has also informed that there was r
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n 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 the statutory provisions. He has further claimed that a supplier did not have discretion to pass on the benefit of input tax credit or reduction in the rate of tax on one product, by reducing the price of another product. He has also contended that price included both basic price and also the tax charged on it and therefore, any excess amount collected from the recipients amounted to profiteering which must be returned to the recipients or deposited in the CWF.
31. We have
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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 cost of the inputs used by the Respondent nor of his profit margins and therefore, the allegation of computation of base price by the DGAP made by the Respondent is completely wrong. The DGAP has only tried to investigate whether the benefits of reduction in the rate of tax and the ITC have been passed on to the customers by the Respondent or not as per the provisions of Section 171 or not. It is absolutely clear even from a cursory perusal of the provisions of Section 171
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ginal 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 change as per the provisions of Section 64 A of the Sale of Goods Act, 1930. Perusal of the above Section shows that it's provisions are not applicable in view of the specific provisions of Section 171 which stipulate that both the benefits have to be passed on as and when they are given to the customers by the Government out of its own revenue which has nothing to do with the contract between the two parties. Therefore, the contention of the Respondent made in this regard is
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on 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 has been no reduction in the rate of tax and therefore, the provisions of Section 171 were not attracted as is the case in respect of the Respondent.
35. The Respondent has wrongly claimed that the DGAP had assessed that the Respondent had made a profit of Rs. 24,81,33,857/- due to the average increase in the base price by 10.45%. The claim made by the Respondent is incorrect as the DGAP has taken the above amount as additional sale realisation made by the Respondent on accou
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d 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 taxable turnover as 9.11% whereas it was 9.43% as per his own assessment and hence he had profiteered by 0.32% which demolishes his entire defence of having not profiteered. The amount of profiteering assessed by the DGAP cannot be described as miniscule as it has been earned by fleecing millions of customers.
37. It is also apparent from the record that the DGAP has calculated the ratio of ITC to the total taxable turnover pertaining to the period between July, 2017 to October, 2017 as 9
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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 outward taxable turnover on the other hand which had neutralised the impact of branch transfer transactions on the computation of ratio of ITC to total taxable turnover and hence amounts of Rs. 49,26,86,384/- and Rs. 47,15,04,275/- had rightly not been included in the calculation. Perusal of the Annexure-36 and 37 attached with the Report show that they have been framed by taking in to account the information pertaining to the period between 01.11.2017 to 30.11.2017 and hence the co
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e Respondent had charged Rs. 120.34/- as base price for one piece of Regular Mccafe Latte and Rs. 21.66/- as 18% CGST+SGST and thus an amount of Rs. 142/- was charged for the above item. Vide invoice dated 15.11.2017 the base price was increased by Rs. 14.90/- to Rs. 135.24/- and Rs. 6.76/- were charged as CGST+SGST @ 5% and the above product was supplied at the same MRP of Rs. 142/-. Therefore, it is clear that the base price was increased by 12.38% which is more than the ratio of denial of ITC of 9.11%. The Respondent had not only compelled his customers to pay extra base price of Rs. 3.94/- per item and he had also forced them to pay extra GST of Rs. 0.20/- and thus the benefit or Rs. 4.14/- per piece had been denied to the customers. Had the Respondent not increased the price of the above product the same would have been supplied at the MRP of Rs. 137.86/- only and the customer would have got the benefit of Rs. 4.14/- in the MRP. Perusal of Annexure-32 further proves that the Respo
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y 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 the provisions of Section 171 and the above Rules are very clear and unambiguous under which a comprehensive machinery comprising of the State specific Screening Committees, Standing Committee, Directorate General of Anti-Profiteering and Commissioners of Central GST and State Tax have been constituted/established under the above provisions to take cognizance of the complaints made on profiteering, their investigation and for enforcement of the orders passed by this Authority. The law settled in the cases of CIT v. B. C. Srinivasa Shet
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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 in case he was not satisfied with the course of action adopted by the DGAP while assessing his liability for profiteering but the Respondent has failed to do so and therefore, all the objections raised by him in this behalf are frivolous and cannot be accepted.
41. The Respondent has also pleaded that he was not aware at what level the price was to be reduced. In this connection the provisions of Section 171 are very clear which state that both the benefits have to be given in the case of every supply. Therefore, the benefit i
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ing 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 factors anytime between 01.04.2017 to 14.11.2017 which he had not done.
42. The Respondent has also suggested that this Authority should provide for appropriate machinery for recovery of ITC of Rs. 22 Lakhs which he could not avail. In this connection it is made clear that the Authority is not the appropriate forum before which such issue can be raised. The Respondent can always approach the competent forum to redress his grievance of denial of ITC as per the provisions of Section 12, 13 and 16 of the above Act. He
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t 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 provisions of Section 171 of the above Act is liable to the consequences prescribed under Rule 133 of the above Rules.
44. The Respondent has also claimed that after 15.11.2017 the input tax paid by him had become a cost which needed to be factored in the price. This contention of the Respondent is frivolous as he had no details of the input tax available to him on 15.11.2017 when he had increased the prices. The Respondent has been duly given the benefit of transitional credit and therefore, he should not have an
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quired to be passed on to the customers or the amount of profiteering done by the Respondent is determined as Rs. 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 prices to be paid by them should have further got reduced by the amount of the GST illegally charged from them. Depositing of the extra GST in the Govt. account can not absolve the Respondent of the allegation that he had compelled them to pay more price than what they should have paid and hence it amounts to denial of benefit under Section 171 of the above Act.
47. Accordingly, the Respondent is directed to reduce his prices by way of commensurate reduction keeping in view the reduced rate of tax and the benefit of ITC
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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 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. Therefore, a show cause notice may be issued to the Respondent to explain why penalty under the provisions of the above Section should not be imposed on him.
49. A copy of this order may be supplied to all the Applicants, the Respondent and the concern
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