2018 (12) TMI 472 – NATIONAL ANTI-PROFITEERING AUTHORITY – TMI – Profiteering – benefit of tax reduction not passed on – Johnson & Johnson Baby Shampoo 100 ml. – Johnson & Johnson Baby Powder 200 Gms – It was also alleged that instead of reduction, the base prices of the above two products were increased on and thus the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017.
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Held that:- There is no doubt that the Respondent had increased the base prices of the products w.e.f. 15.11.2017, whereas he was required not to increase them and after charging GST @ 18%, he was legally bound to charge the reduced prices so as to pass on the benefit of reduced tax rate to his customers and hence he has indulged in profiteering.
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The Respondent had increased the base prices of 130 products which were supplied by him during the period between 15.11.2017 to 31.032018 and by doing so he had resorted to profiteering on account of inc
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escape the legal obligation which was imposed upon him by the above Notification by shifting his accountability on this ground.
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The Respondent has also not produced any evidence to show that he had made any correspondence with J & J to inform it that he was bound to reduce the prices due to reduction in the rate of tax and J & J should either not increase the base prices or compensate him for the benefit he was bound to pass on to his customers, therefore, it is quite apparent that he had deliberately charged the enhanced prices with an intention to pocket the amount which he was bound to pass on to the recipients.
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The Respondent is directed to reduce the prices of all the above products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017 by making commensurate reduction in their prices keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients – The Respondent is also directed to deposit the profiteered amount of 
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sessee. – Case No.16/2018 Dated:- 6-12-2018 – SH. B.N. SHARMA, CHAIRMAN SH. JC CHAUHAN, TECHNICAL MEMBER, MS. R BHAGYADEVI, TECHNICAL MEMBER Present:- Sh. Akshat Aggarwal, Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs) for the Applicant, Sh. Ankit Khandelwal, Proprietor and Sh. Anand Kumar Garg for the Respondent. ORDER 1. This report dated 31.072018, has been received from the Director General of Anti-Profiteering (DGAP) under Rule 129 (6) of the Central Goods and Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the Standing Committee vide the minutes of it s meeting dated 13.042018 had requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 on the allegation that the Respondent had not passed on the benefit of tax reduction from 28% to 18%, granted by the Central and the State Governments w.e.f. 15.11.2017 by maintaining the same Maximum Retail Prices (MRPs) which he was charging before the above
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e Respondent to submit his reply on the allegations levelled above and also to suo moto determine the quantum of benefit which he had not passed on during the period between 15-11,2017 to 31.032018 on the above products. The Respondent was also requested to provide a copy of the audited Balance Sheet, GST Returns, Tran-1 Returns and the details of the outward taxable supplies etc. 3. The Respondent had submitted replies to the notice issued by the DGAP on 24.05-201B vide his letters dated 08.06.2018 and 22.06.2018, The DGAP has informed that the Central Government on the recommendations of the GST Council had reduced the GST rate on the above products from 28% to 18% w.e.f. 15,11.2017 vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 in consequence of which the Respondent was required to sell the above goods on the base prices which were being charged by him before 1511.2017 and levy GST so that the benefit of reduction in the rate of tax could be passed on to the custo
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l the above products at the base prices which were prevalent before 15.11.2017 and he should have charged GST @ 18% on such base prices to pass on the benefit of reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017. He has further intimated that since the Respondent was a supplier registered under the CGST/SGST Act, 2017 vide GSTI No. 07AWPPK4876R1ZC, he was legally bound to pass on the benefit of reduction in the rate of GST to his customers immediately w.e.f. 15.11.2017. 5. The DGAP has also submitted that by increasing the base prices of the above products and having maintained the pre-GST rate reduction MRPs, the benefit of GST rate reduction was not passed on to the customers by the Respondent. 6. The DGAP has also stated that from the Price Lists submitted by the Respondent, it was revealed that he had raised the base prices of both the above products during the period between 15.11.2017 to 18.11.2017. He has also informed that the base price of Baby Shampoo 100 ml. was
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134 products comprising of 14 HSN codes were affected by the reduction in the rate of GST from 28% to w.e.f. 15.11.2017, the details of which have been mentioned in Annexure-8 by the DGAP. The DGAP has further observed that out of the above 134 products impacted by reduction in the rate of GST, Il products were not supplied during the period between 01.11.2017 to 14, 11.2017. He has also informed that out of the above 11 products, the prices for calculating the profiteered amount in the case of 9 products had been taken from the price list submitted by the Respondent whereas 2 products had been launched in December, 2017. The DGAP has further informed that in the case of rest 123 products, it was observed that the base prices of 121 products were increased after 15.11.2017 and in the case of 2 products, the base prices were reduced after 1511.2017. Therefore the DCAP has concluded that in respect of the above 130 products, supplied by the Respondent during the period between 15.11.2017
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nted materials other than the Manual, and any online or electronic documentation. He has also claimed that the contract also required him not to use the above software in case he did not agree to the terms of the above agreement. The Respondent has also maintained that the contract stated that the ownership of the licensed software at all times would be with J & J. He has further alleged that through this agreement, he had been given a very limited right of using the software solely for the business of the above company and take prior consent of the concerned officer in case he wanted to use this software for any other business. He has also claimed that the title and full ownership rights of the above software were with J & J and he was required to handover the above software to J & J in case of termination of the agreement. Therefore, he has claimed that once the base prices had been increased by J & J with effect from 15.11.2017 in the software, he had no option excep
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. The Respondent has also filed further submissions on 06.09.2018 in which he has stated that he had deposited the due tax which he had charged from the customers at the rate of 18% and had not misused the Input Tax Credit (ITC) availed off as had been calculated by the DGAP. He has further added that he was only an intermediatory between the Company and the customers and was ready to pay the difference of tax if any but no penalty should be imposed since the circumstances were beyond his control and he had no intention to retain the profit on revised rates, He has further submitted that the calculation of the profiteered amount should be done on the stock which was lying on 14.11.2017 only. instead of the total sales made from 15.11.2017 to 31.03.2018. The Respondent has also submitted that as per the calculation sheet prepared by him on the basis of the stock lying on 14.11-2017, the profiteered amount came out to be ₹ 47,333.03/- only. 13. Clarification was sought from the DGA
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o Retailer Retailer to consumers Upto 14 November 2017 17th November onwards Upto 14 November 2017 17th November onwards Upto 14 November 2017 17th November onwards Base Price 74.76 79.74 80.82 86.21 93.75 100.00 Tax 20.93 14.35 22.63 15.52 26.25 18.00 Invoice Price 95.69 94.09 103.45 101.72 120.00 118.00 JB NMT Shampoo (TBP) 100 ml. Particular J&J to Distributor Distributor to Retailer Retailer to consumers Upto 14 November 2017 17th November onwards Upto 14 November 2017 17th November onwards Upto 14 November 2017 17th November onwards Base Price 52.95 54.06 57.25 58.45 66.41 67.80 Tax 14.83 9.73 16.03 10.52 18.59 12.20 Invoice Price 67.78 63.79 73.28 68.97 85.00 80.00 16. We have carefully considered the material placed before us and it has been revealed that the Central Govt. vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 28% to in respect of the above two products with effect from 15.11.2017, the benefit of which was require
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uced prices so as to pass on the benefit of reduced tax rate to his customers and hence he has indulged in profiteering. 17. It is also revealed from the perusal of Annexure-8 submitted by the DGAP that between the period w.e.f. 15.11.2017 to 31.03.2018, the Respondent had sold 223 products manufactured by J & J out of which rate of tax was reduced in respect of 134 products from 28% to 18% w.e.f 15.11.2017. It is further revealed that out of the above 134 products, 11 products were not supplied during the period between 01.11.2017 to 14.11.2017 and hence for calculating the profiteered amount in respect of 9 products, the prices had been taken from the price list submitted by the Respondent whereas 2 products had been launched in the month of December, 2017. It is also apparent from the record that in respect of the rest 123 products, the base prices of 121 products were increased after 15.11.2017 and in the case of remaining 2 products, the base prices were reduced after 15.11.20
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apparent from the record that the Respondent is duly registered under the CGST/SGST Act, 2017 and he was hence bound to follow the Notification dated 14.11.2017 mentioned above vide which the rate of GST was reduced from 28% to 18% on 130 products which he was selling, He cannot escape the legal obligation which was imposed upon him by the above Notification by shifting his accountability on this ground, The Respondent has himself admitted during the course of the hearing that he was aware that he was required to pass on the benefit of the reduced rate of tax to his customers and therefore also he cannot deny his legal liability. The Respondent has also not produced any evidence to show that he had made any correspondence with J & J to inform it that he was bound to reduce the prices due to reduction in the rate of tax and J & J should either not increase the base prices or compensate him for the benefit he was bound to pass on to his customers, therefore, it is quite apparent
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fiteering should be calculated on the basis of the stock which was lying with him as on 14.11.2017 instead of the sales made between 15.11.2017 to 31.03.2018 and therefore, the total amount of profiteering would be ₹ 47,333.03/-, However, this argument of the Respondent is fallacious as he had made illegal profit on all the supplies which he had made w.e.f. 15.11.2017 to 31.03,2018 as he had charged increased prices on all the 130 products although he was bound not to do so as per the Notification dated 14.11.2017. Hence the amount of profiteering calculated by the DGAP is correct. 21. The Respondent has also claimed that he had deposited the due tax and had not misused the ITC and he was willing to pay the balance tax if any and no penalty should be imposed on him. However, it is apparent from the record that the Respondent had increased the base prices illegally and also forced his customers to pay additional GST on the increased prices otherwise there would have been further r
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,646/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from his customers till the above amount is deposited. Since the recipients in this case are not identifiable the DGAP is directed to get the amount of profiteering of ₹ 5,01,646/- along with interest deposited from the Respondent in the Consumer Welfare Fund of the Central and the concerned State Govt. as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. The above amount shall be deposited within a period of 3 months by the Respondent from the date of receipt of this order failing which the same shall be recovered by the DGAP as per the provisions of the CGST Act, 2017 and shall be deposited as has been directed vide this order, Since the present investigation in to the issue of not passing on the benefit of reduction in the rate of tax by the Respondent has been conducted w.e.f. 15.11.2017 to 31.032018 only, the DGAP is directed to further investigate the
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