2019 (1) TMI 1419 – NATIONAL ANTI-PROFITEERING AUTHORITY – TMI – Profiteering – major manufacturers of Fast Moving Consumer Goods (FMCG) – benefit of reduction in the GST rate not passed on – contravention of provisions of Section 171 of the CGST Act, 2017 – Held that:- It is established that the Respondent had denied benefit of reduction in the rate of tax to his customers by increasing the base price exactly by the amount by which the tax was reduced and therefore, he had resorted to profiterring in violation of the provisions of Section 171 of the CGST Act, 2017. The Respondent had further compelled the recipients to pay additional GST on the increased price @ 18% and had he not increased the base price and charged additional GST his customers would have got benefit of further reduction in the MRP. Therefore, the additional amount of tax collected also amounts to profiteering made by the Respondent.
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It is quite clear that the Respondent had not passed on the benefit of tax re
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conduct which is contumacious and violative of the provisions of the above Section – appellant has committed offence under Section 122 (1) (i) of the CGST Act, 2017. Therefore, notice be issued asking him to explain why penalty should not be imposed on him.
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Application disposed off. – 03/2019 Dated:- 22-1-2019 – SH. B.N. SHARMA, CHAIRMAN, SH. J.C. CHAUHAN, TECHNICAL MEMBER, MS. R. BHAGYADEVI, TECHNICAL MEMBER, MR. AMAND SHAH, TECHNICAL MEMBER Ms. Gayatri Verma, Deputy Commissioner for the Applicant. Mr Rajender Kumar Sharma Accountant, Mr. Bhagwan Dass Verma Authorised Agent of the Owner and Mr. Dushant Kumar Dubey Tally Operator, for the Respondent. ORDER 1. The brief facts of the present case are that a reference was made by this Authority to the Director General Anti-Profiteering (DGAP), erstwhile Director General Safeguards, under rule 128 of the Central Goods and Services Tax (CGST) Rules, 2017 intimating that certain major manufacturers of Fast Moving Consumer Goods (FMCG)
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t on 31.05.2018, calling upon him to intimate whether he admitted that the benefit of reduction in the rate of tax had not been passed on to the recipients by way of commensurate reduction in prices and to also suo moto determine the quantum of benefit not passed on and mention the same in his reply. The Respondent was also provided opportunity by the DGAP to inspect the non-confidential record, however, he didn t avail of this opportunity. 5. The DGAP had sought extension of time to complete the investigation, which was granted upto 08.11.2018 by this Authority on 06.08.2018 in terms of Rule 129 (6) of the CGST Rules, 2017. 6. The DGAP has mentioned in his Report that the Respondent vide his reply dated 15.06.2018 had stated that he was getting commission on the purchases he made from the manufacturer and was also getting a discount of approx. 33% when the rate of tax was 28%, which was reduced to approx. 22% when the rate of tax had come down to 18%. He has also stated that the Respo
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d reduced the GST rate on a number of FMCGs from 28% to 18% w.e.f. 15.11.2017, including the Beauty Cream 50 GM vide Notification No. 41/2017-CentraI Tax (Rate) dated 14.1 1.2017, which had been also admitted by the Respondent. 9. The DGAP has also stated that the issue of passing on the benefit of reduction in the rate of GST to the recipients of various goods sold by the Respondent had been examined by him after determining the base prices of the products, pre 15.11.2017 and post 15.11.2017. 10. The DGAP has further stated that from the invoices made available as detailed in the Table below it was clear that the Respondent had increased the base price of the Beauty Cream 50 GM when the rate of tax was reduced from 28% to 18%, so as to keep the cum-tax selling price the same as it was prior to the rate reduction on 15.11.2017:- Sr. No. Invoice No. and date Description of products Discounted Base Price (in Rs.) Rate of GST Price charged (inclusive of GST) in Rs. 1 1429 12.11.2017 Beaut
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f most of the products supplied by the Respondent were increased after 15.11.2017. He has further alleged that during the period between 15.11.2017 to 31.05.2018, the Respondent had sold a total of 361 products comprising of 65 HSN codes, out of which 154 products constituting 24 HSN codes were affected by the reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017. The DGAP has also contended that out of the above 154 products, 48 products were not supplied during the period between 01.11.2017 to 14.11.2017 and they included 13 new products which were introduced for sale after 15.11.2017. He has further contended that for the remaining 35 products, the pre 15.11.2017 reference prices for calculating the profiteered amount were taken from the price list which was effective before 15.11.2017 and was submitted by the Respondent vide his email dated 30.09.2018 and these prices were found to be lower than the post 15.11.2017 base prices. The DGAP has also submitted that out of the r
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ingly notices were issued to all the interested parties. The Applicant was represented by Ms. Gayatri Verma, Deputy Commissioner and the Respondent was represented by Mr. Rajender Kumar Sharma Accountant, Mr. Bhagwan Dass Verma Authorised Agent of the owner and Mr. Dushant Kumar Dubey Tally Operator. 14. During the hearing of the case the Respondent did not file written submissions but stated that he had no control over the Maximum Retail Prices (MRPs) as the same were fixed by the manufacture viz. M/s. Patanjali Ayurveda Ltd. and he was bound to charge the same as per the instructions of the manufacturer. He has also stated that he was charging margin of 5% on the sales made by him which he had not increased after the rate of tax was reduced and hence he had not profiteered. He has further stated that he was not aware whether basic prices had been increased by M/S Patanjali Ayurveda Ltd. after the reduction in the GST rate or during the regular course of business. 15. We have carefull
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ore the reduction in the rate of tax. Therefore, it is established that the Respondent had denied benefit of reduction in the rate of tax to his customers by increasing the base price exactly by the amount by which the tax was reduced and therefore, he had resorted to profiterring in violation of the provisions of Section 171 of the CGST Act, 2017. The Respondent had further compelled the recipients to pay additional GST on the increased price @ 18% and had he not increased the base price and charged additional GST his customers would have got benefit of further reduction in the MRP. Therefore, the additional amount of tax collected also amounts to profiteering made by the Respondent. 16. It is also revealed from the perusal of Annexure-Il prepared by the DGAP after examining the details of the outward taxable supplies of all the products supplied by the Respondent that the base prices of most of the products sold by him were increased after the tax was reduced from 28% to 18% w.e.f. 1
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affected by the reduction in the rate of tax, the base prices of 109 (74+35) items were increased w.e.f. 15.11.2017; in respect of 32 products, the base prices were reduced after 15.11.2017; whereas 13 products were newly introduced after 15.11.2017. Therefore, it is quite clear that the Respondent had not passed on the benefit of tax reduction in respect of the 109 products supplied by him during the period between 15.11.2017 to 31.05.2018 and hence, it is established beyond doubt that the Respondent had resorted to profiteering of ₹ 6,06,752.72/-, as has been elaborated in Annexure-Il of the DGAP s Report. The Respondent has not raised any objection against the calculation of the profiteered amount by the DGAP and hence this Authority determines the above amount as the profiteered amount. It has also been found that all the supplies were made by the Respondent in the NCT of Delhi. 17. The only argument advanced by the Respondent is that the MRPs were fixed by the manufacturer
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legal obligation on the plea that he had no control on the fixing of the MPRs. 18. The Respondent has also claimed that he had only charged commission @ 5% on the sales made by him which he was charging before and after coming in to force of the GST and hence he had not profiteered. However, it is clear from the narration of the facts mentioned above that the Respondent had increased the base prices of 109 products which were being supplied by him after the rate of GST was reduced w.e.f. 15.11.2017 and forced his customers to pay more prices than what they should have paid and thus he had denied the benefit of rate reduction to them. He had also compelled them to pay additional GST on the increased quantum of base price otherwise this would also have further resulted in passing on the benefit of rate reduction to them. Mere charging of the fixed commission does not amount passing on the above benefit and hence the above plea of the Respondent is frivolous and can not be accepted. 19. A
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llegation of profiteering has been duly established against him. It is clear from the facts of the present case that the Respondent was fully aware of the provisions of Section 171 of the COST Act, 2017 as well as the Notification dated 14.11.2017 whereby he was bound to pass on the benefit arising due to reduction in the rate of tax to his customers. However, the Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and violative of the provisions of the above Section. He has further acted in conscious disregard of the obligation which was imposed upon him by the law, by issuing incorrect invoices in which the base prices were deliberately increased by the amount by which the rate of tax was reduced and thus he had denied the benefit of reduction in the prices to his customers. He has further forced them to pay additional GST on the increased base prices which they were legally not required to pay, by issuing incorre
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