DIRECTOR GENERAL ANTI-PROFITEERING, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS Versus M/s. RAJ & COMPANY
GST
2019 (1) TMI 22 – NATIONAL ANTI-PROFITEERING AUTHORITY – TMI
NATIONAL ANTI-PROFITEERING AUTHORITY – NAPA
Dated:- 27-12-2018
Case No. 25/2018
GST
SH. B. N. SHARMA, CHAIRMAN SH. J.C. CHAUHAN, TECHNICAL MEMBER MS. R. BHAGYADEVI, TECHNICAL MEMBER
Present:-
Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs).
Sh. Mukesh Malik, Proprietor for the Respondent
ORDER
1. This report dated 08.08.2018, has been received from the Directorate General of Anti-Profiteering (DGAP) under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the present case are that on the receipt of a reference dated 27.02.2018, where a complaint was filed with the Secretary National Anti-Profiteering Authority (NAA), alleging that certain major manufacturers of Fast Moving Goods Consumer Goods (FMCGs) including
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
In this connection the following invoices issued by the Respondent were also submitted to the DGAP for further investigation:-
Sr.No.
Invoice No. and date
Description of products
MRP (in Rs.)
Discounted Base price (in Rs.)
Rate of GST
Price charged (inclusive of GST) (in RS.)
1.
LCBL039761702884 11.10.2017
Garnier Nat Shade 3
35
24.41
28%
31.25
2.
LCBL039761704221 30.11.2017
Garnier Nat Shade 3
40
26.48
18%
31.25
2. The DGAP vide notice dated 30.05.2018 had called upon the Respondent to submit his reply on the allegation levelled and also to suo moto determine the quantum of benefit which he had not passed on during the period between 15.11.2017 to 31.03.2018 on the above product. The Respondent was also requested to provide copy of the audited balance Sheet, Price List for the products sold after 15.11.2017 but not sold during 01.11.2017 to 14.1 1.2017, details of outward taxable supplies from 01.11.2017 to 31.03.2018 for all the products impacted by GST rate r
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rice of the said goods the Respondent had maintained the pre-GST rate reduction cum-tax price thus denying the benefit of GST rate reduction to the consumer. The DGAP has further stated that the Respondent submitted that he had passed on the benefit of reduction in tax rate to the customer by way of a GST Scheme No. SCH1700722 by providing a discount of 12.5% on the base price of the product Garnier Nat Shade 3 under the said scheme. However, even after taking into account the discount of 12.5% (Rs. 3.78 per piece) offered under the Scheme, the base price of the product worked out to be Rs. 26.48 per piece, which was more than the pre rate reduction price of Rs. 24.41 per piece, charged by the Respondent for the same product.
5. The DGAP has further stated that the details submitted by the Respondent were analysed and it was found that 388 products supplied by the Respondent during the period between 15.11.2017 to 31.03.2018 were impacted by the reduction in the rate of GST from 28% t
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
that the base prices of 293 (259+34) products were increased post 15.11.2017, for 54 products, the base prices were reduced post 15.11.2017 and 41 products were newly introduced post 15.11.2017. Thus, the total amount of profiteering in respect of these 293 products supplied by the Respondent during the period w.e.f. 15.11.2017 to 31 03.2018, was arrived at Rs. 3,43, 109/-.
6. The above report was considered by the Authority in its meeting held on 14.08.2018 and it was decided to hear the interested parties (Applicant and the Respondent). The Applicant was represented by Sh. Akshat Aggarwal, Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs). The Respondent was represented by Sh. Mukesh Malik.
7. The Respondent vide his written submissions filed on 18 09.2018 and 21.09.2018 stated that the demand raised on him was incorrect as he was only a distributor of the products in question. He has further added that the MRP was fixed by the manufacturer i.e. M/S L'
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
was issued by him when the MRP of the product was Rs. 40. He has further added that while it has been alleged that the profiteering has been done by keeping the base price constant after GST rate reduction, the DGAP has failed to note that the base price has been kept constant even after increase in the MRP of the product. By paying the same base price as earlier, potential realization by retailer has increased to the extent of increase in the MRP (i.e. Rs. 5). He has also contended that the MRP was decided by the Manufacturer as required under the law as such he should not be questioned for any such revision of MRP. He has further contended that the calculation made by the DGAP was incorrect and the proposed demand was in excess of the profiteering liability. He has also stated that the present notice by proposing cancellation of registration obtained by him under GST the law as a measure of penalty was not only grossly disproportionate to the alleged contravention, but was also extre
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ted requirement. He has also claimed that post 15.1 1.2017; he had bought products from the manufacture @ 18% GST which were sold subsequently to the customers at the prevailing GST rate of 18%. He has claimed that all the purchases and sales made after 15.11.2017 did not attract anti profiteering provisions under section 171 of the CGST Act,2017 as there was no benefit in tax rate that had accrued to him as he was buying and selling goods at the same GST rate of 18%.
10. The Respondent has filed his further submissions on 16.10.2018 and 18.10.2018 in which he has stated that his sale invoices showed that the MRP of Rs. 35 was not increased to Rs. 40 but the MRP of Rs. 40 was decreased to Rs. 35 during the two months of September and October 2017, when the manufacturer had allowed a Special Promo Discount of Rs. 5 on the MRP for a short period of 2 months as a Consumer promotion benefit. He has also added that the manufacturers had not increased the MRP to Rs. 40 which had prevailed f
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ad already been covered in the Investigation Report itself.
12. During the course of proceedings, M/s. L'oreal the manufacturer of the product in question, was also asked to clarify the claims made by the Respondent in respect of the control on the software and increase of base price after 14.11.2017. M/S. L'oreal in it's written submissions filed on 03.10.2018 stated that they had ensured that the benefits reach the ultimate consumer by instructing the distributors to reduce the prices. It has also claimed that the notice was liable to be dropped as it was without jurisdiction and since M/S L'oreal and the Respondent were two different legal entities undertaking transactions on principal to principal basis and neither section 171 of the CGST Act nor under any provisions of the CGST Rules could be invoked against it in the proceedings initiated against the Respondent. It further stated that without prejudice, it had taken all the necessary steps and was under a bona-fi
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
l, placed before us as well as the claim made by the Applicant. The fact that the GST rates have been reduced vide Notification No. 41/2017-Central Tax (Rate) dated 14 11.2017, with effect from 15.11.2017 is not in dispute. The Respondent is a distributor who is duly registered under the above Act and hence the benefit of rate reduction was required to be passed on by him to the recipients as per the provisions of Section 171 of the CGAT Act, 2017. From the perusal of the invoices dated 11.10.2017 and 30.11.2017 it is noticed that the Respondent had increased the base price of Garnier Nat Shade 3 from Rs. 24.41 (price charged prior to rate reduction) to Rs. 26.48 (price charged after rate reduction). Similarly from the perusal of Annexure-13 of the DGAP's Report it is clear that to retain the MRPs of all his products at pre-GST rate reduction the Respondent had increased the base prices of his products to the extent of GST rate reduction. Thus it is established that out of the 388
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
at the MRP of the above product was not increased from Rs. 35 to Rs. 40 but discount of Rs. 5 was given on it in the months of September and October 2017. However the documents filed by the Respondent show that the discount was to the extent of 12.5% on the MRP of Rs. 40 as is apparent from the invoice No. LCBL039761704221 dated 30.11.2017 and 5% on the other products. In this invoice nowhere it has been mentioned that this discount was on account of the reduction in the GST rate from 28% to 18%. Moreover the Respondent has himself claimed that during the months of September and October regular promotional discounts were given on most of the products. Therefore the discounts provided to the customers after GST rate reduction are required to be considered as the on going existing promotional schemes during the pre-GST rate reduction period. The argument of the Respondent that the prices were controlled by the manufacturer does not hold good in as much as he is registered supplier under
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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 Rs. 3,43,109/- 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 as the same has been used by him in his business. Since the recipients in this case are not identifiable the above amount of profiteering of Rs. 3,43,109/- along with interest shall be deposited by the Respondent in the Consumer Welfare Fund of the Central Government and the State of Delhi respectively as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 under the supervision of the DGAP. The above amount shall be deposited within a period of 3 months by the Respondent from the date of r
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =