Shri Pawan Sharma c\/o Kalptaru Departmental & General Stores, Director General Anti-Profiteering, Indirect Taxes & Customs Versus M\/s Sharma Trading Company
GST
2018 (9) TMI 625 – THE NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (19) G. S. T. L. 497 (N. A. P. A.)
THE NATIONAL ANTI-PROFITEERING AUTHORITY – NAPA
Dated:- 7-9-2018
06\/2018
GST
Sh. B. N. Sharma, Chairman, Sh. J. C. Chauhan, Technical Member And Ms. R. Bhagyadevi, Technical Member
\nFor the Applicant No. 1 : None
\nFor the Applicant No. 2 : Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal Assistant Director (Costs)
\nFor the Respondent : Sh. Subash Joshi, Proprietor and Sh. Vishal Sharma Advocate
\nORDER
\n1. This report dated 16.03.2018, has been received from the Applicant No. 2 i.e. Director General of Safeguards (DGSG) now re-designated as Director General Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the present ca<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n taken against him. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n P for 300 ml. and thus the benefit of reduced rate of tax was passed on to the recipients through the additional quantity of 100 ml. The DGAP has also stated that the Respondent had claimed that the product was sold @ Rs. 0.59 per ml. after 15.11.2017 as compared to it's price of Rs. 0.73 per ml. during the month of November, 2017 and hence there was decrease of more than 18% in the price resulting in passing on of the benefit of reduction in the rate of the tax. The DGAP has further intimated that the Respondent had also maintained that the price of the above product was reduced from Rs. 235\/- to Rs. 233\/- w.e.f. 13.12.2017 which had also resulted in passing on the benefit of tax reduction along with supply of enhanced quantity of Vaseline. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n n his stock and on which full Input Tax Credit (ITC) of 28% had been availed by him. The DGAP has also submitted that the base price of the product, at the time of GST rate reduction w.e.f. 15.11.2017, was increased to maintain the same selling price which was prevalent before the reduction and therefore, the Respondent had indulged in the profiteering and had thus contravened the provisions of Section 171 of the CGST Act, 2017. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n t the Respondent had profiteered an amount of Rs. 2,41 ,922\/- @ Rs. 16.69\/- including GST @ 18% per unit on the sale of 14,495 units and Rs. 3,08,448\/- @ Rs. 14.88\/- including GST @ 18% per unit on the sale of 20,729 units between the period of 15.11.17 to 31.01.2018. Thus an amount of Rs. 5,50,370\/- was profiteered by the Respondent in the supply of 35,244 units of the product as per the following chart which amounted to violation of the provisions of Section 171 of the CGST Act, 2017:- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 213.64\/- inclusive of GST and 4.06% margin. He has also stated that on 14.11.2018 he had 1288 units of the product in his stock, which were bought @ Rs. 158.66\/- per unit excluding GST however, On 15.11.2017 after reduction in the GST, the purchase price on the stocks was increased from Rs. 158.66\/- to Rs. 172.77\/excluding GST by the HUL in its software. He has further stated that although the tax was reduced from 28% to 18%, the software supplied by the HUL showed per unit price of the product as Rs. 172.77\/- per unit on which he had paid GST @18% and earned profit margin of 4.06%. He has also claimed that on the closing stock, the differential amount of Rs. 14.11\/- (Rs. 172.77\/ Rs. 158.66\/-), along with the ITC benefit of Rs. 0.03\/- (Rs. 8.28\/ Rs. 8.25\/-) due to the change in the rate of tax had been recovered by the HUL from him on 26.02.2018. He has also submitted a copy of the letter dated 21.11.2017 issued by the HUL to all it's Redistribution Stockists in which they were as<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n r rate of Rs. 172.77\/- and paid CST, i.e. Rs. 31.10\/which was availed by him as ITC. He has also submitted that the product was sold for Rs. 213.64\/- per unit including GST and 4.06% margin and hence his margin had remained the same, therefore, no profiteering was done by him. He has further submitted that on 08.12.2017, the MRP of the product was reduced from Rs. 235\/- to Rs. 233\/- by the HUL due to which his purchase price had been reduced from Rs. 172.77\/- to Rs. 171.30\/- excluding CST. He has also claimed that he had bought the product from the HUL @ Rs. 171.30\/- per unit on which GST of 18%, i.e. Rs. 30.83\/- was paid by him and ITC was claimed and the product was sold for Rs. 211.82\/per unit inclusive of 4.06% margin and 18% GST and therefore, his margin had remained the same. He has also claimed that actually, he had lost Rs. 0.07\/- per unit during each transaction and hence even after reduction in the MRP w.e.f. 08.12.2017, no additional profit had accrued to him. The Respondent<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n has also relied upon the law settled by the Hon'ble High Court of Kerala in the case of Grasim Industries Ltd. V. State of Kerala [19941 1994 taxmann.com 377 (Kerala) in which it was ruled that a sales return meant a return of the very goods purchased by the buyer in whole or in part and it was a reversal of the sale, as if the sale had not taken place in respect of the returned goods and therefore contemplated a return before the goods were appropriated and used by the buyer. He has also contended that applying the same principle in the present case, the transaction of supply did not exist and hence the entire proceedings were contrary to the provisions of the law as the contention of the DGAP that any subsequent transaction of return of goods would not negate the original transaction of supply of goods was not correct and the proceedings were required to be set aside on this ground itself. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n a thing which was impossible as was enshrined in the legal maxim “Lex Non Cogit Ad Impossibilia” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n HUL has stated that the profiteered amount could not have been recovered by the HUL from its Stockists as there was no such provision in Section 171 of the CGST Act, 2017. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 15.11.2017 in which the base price was shown as Rs. 181.05\/- and the selling price was Rs. 213.63\/- and hence the base price was enhanced by Rs. 14.15\/- per unit by the Respondent. It has further been acknowledged by the Respondent that the above Applicant had purchased 11 units of the product from the Respondent vide invoice No. GSA42046 dated 28.11.2017 in which again an amount of Rs. 14.15\/per unit was over charged from him. The Respondent was also aware that the rate of tax had been reduced from 28% to 18% w.e.f. 15.11.2017 on the above product which has been correctly charged by him in the above 3 tax invoices issued by him to the above Applicant. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n r what provisions of the above Acts he was bound to follow the instructions given to him by the HUL vide it's letter dated 21.11.2017, vide which the excess amount of ITC was credited by him to the HUL in respect of the above product, in contravention of the provisions of Section 171 of the Act and also charge the increased base price. Thus it is established that he had profiteered to the extent of Rs. 5,50,370\/- on account of the increased base price charged by him including GST from 15.11.2017 to 31.1.2018 as has been mentioned in the table shown in para 6 supra. It has also been proved that the Respondent had profiteered an amount of Rs. 184\/- @ Rs. 16.69\/-per unit including GST @ 18% by supplying 11 units of the product to the Applicant No. 1 on 28.11.2017, therefore, he has violated the provisions of Section 171 of the above Act. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n month of November, 2017 and hence this averment of the Respondent cannot be accepted. As soon as the Respondent had issued the tax invoice on 15.11.2017 after increasing the base price he had violated the provisions of Section 171. The law settled in the case of Grasim Industries Ltd. Supra cited by the Respondent is of no help to him as the same is based on entirely different facts as the issues involved in this case were whether the returned goods were of the same quality which was supplied and whether return of these goods to the headquarter and not to the branch from where they were supplied made the Grasim Industries entitled for deduction of their value from its turnover or not. The issue in the present case is whether the supply made by Respondent on 15.11.2017 was nullified or not and hence the findings recorded in the above case are not being relied upon. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rocedure” as required under Rule 126 of the CGST Rules, 2017 for determining whether both the above benefits have been passed on or not vide it's Notification dated 27.03.2018. It is further made clear that this Authority is not mandated to be a price regulator. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n y of the product as he was only an agent and not the manufacturer of the product and the units of product sold by him w.e.f. 15.11.2017 were from the stock on which he had availed full ITC of 28% and hence he was duty bound to pass on the benefit by reducing his base price. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n uivalent to the amount not passed on by the way of commensurate reduction in prices along with interest at the rate of eighteen percent from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be; = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n tioned in the Table shown in para 6 above, till it is paid. The DGAP shall ensure that in case the above amount pertaining to the Respondent in respect of the above product has been deposited by the HUL in the CWF, the balance amount due as interest is calculated and got deposited from the above Respondent. In case the above amount has not been deposited or short deposited, the same shall be got deposited from the Respondent by the DGAP alongwith the interest. The above amount shall be further got deposited in the respective CWF of the Central or the State Government as per the provisions of Rule 133 (c) of the CGST Rules, 2017 by the DGAP as per the ratio prescribed under the above Rule. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ue of any invoice or issues an incorrect or false invoice with regard to any such supply; (Emphasis supplied) = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" Shri Pawan Sharma c\/o Kalptaru Departmental & General Stores, Director General Anti-Profiteering, Indirect Taxes & Customs Versus M\/s Sharma Trading CompanyGST2018 (9) TMI 625 – THE NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (19) G. S. T. L. 497 (N. A. P. A.)THE NATIONAL ANTI-PROFITEERING AUTHORITY – NAPADated:- 7-9-201806\/2018 GSTSh. B. N. Sharma, Chairman, Sh. J. C. … Continue reading “Shri Pawan Sharma c\/o Kalptaru Departmental & General Stores, Director General Anti-Profiteering, Indirect Taxes & Customs Versus M\/s Sharma Trading Company”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-13665","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/13665","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13665"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/13665\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13665"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13665"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13665"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
For full text:-Visit the Source <\/a><\/p>\n
\n2. The above application was examined by the Standing Committee on Anti-Profiteering and was referred to the DGAP, vide minutes of it's meeting dated 29.11.2017 for detailed investigation under Rule 129 (1) of the CGST Rules, 2017.
\n3. The DGAP had issued notice to the Respondent on 29.12.2017 to submit his reply on the allegation levelled by the Applicant No. 1 and also to suo moto determine the quantum of benefit which he had not passed on after the reduction in the rate of GST. The Respondent was also requested to provide copy of the balance sheet, invoices of sales and purchases and returns filed by him. The DGAP has informed that the Respondent in his replies dated 12.01.2018, 24.01.2018, 09.02.2018, 28.02.2018 and 12.03.2018 had stated that he was a distributor and stockist of M\/S Hindustan Unilever Limited (hereinafter referred to as the HUL) and had supplied 20 units of the above product to the Applicant No. 1 vide invoice No. GSA37782 dated 15.11.2017 h<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n4. The DGAP has reported that the contention of the Respondent that no profiteering was involved in the present case as the Applicant No. 1 had returned the product on 15.12.2017 which was sold to him on 15.11.2017 and a credit note had been i<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n5. The DGAP has also intimated that the Respondent had himself admitted that the Applicant No. 1 had purchased 10 units of the product on 26.09.2017 from him, vide invoice No. GSA25066 at the base price Rs. 166.90\/- per unit on which the price charged including GST was Rs. 213.63\/- per unit. The Applicant No. 1 had again bought 20 units of the product on 15.11.2017, vide invoice No. GSA37782 in which the base price was shown as Rs. 181.05\/- and the price charged including GST was mentioned as Rs. 213.63\/- per unit.
\nTherefore, the DGAP has concluded that altho<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n7. The above report was considered by the Authority in it's meeting held on 23.03.2018 and it was decided to hear the Applicant No. 1 and 2 and the Respondent on 10.04.2018. However, the Applicant No. 1 did not appear during the hearing and vide his letter dated 09.04.2018 showed his satisfaction over the investigation report. The Applicant No. 2 was represented by Sh. Akshat Aggarwal, Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Cost).
\nSh. Subhash Joshi proprietor appeared<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n11. The Respondent has also averred that Section 171 of the CGST Act, 2017 provided that a<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n12. The Respondent has also pleaded that para 16 of the Report dated 16.03.2018, had failed to consider the benefit of additional grammage as it was stated that the Respondent being an intermediary could not increase the grammage. He has contended that there was no provision in the law which debarred him from getting benefit of grammage as an intermediary and in the entire supply chain any benefit which was available to a manufacturer was also available to an intermediary and the GST law did not make any distinction on this account. He has further pleaded that had the increase in weight been considered, it would have established that the commensurate benefit had been passed-on.
\n13. The Respondent has also claimed that the excess ITC and the excess purchase price that was recovered by the HUL from the Respondent had been deposited by the HUL in the Consumer Welfare Fund (CWF). The Responde<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n16. We have carefully considered the submissions made by both the parties as well the material placed on the record and it is revealed that the Respondent has himself admitted through the Table submitted by him vide his submissions dated 23.4.2018 that prior to the reduction in the GST on the product from 28% to 18% w.e.f. 15.11.2017 it was being purchased by the Respondent at the base price of Rs. 158.66\/- per unit with GST of Rs. 44.42\/- @ 28% and the total purchase price was Rs. 203.08\/ per unit and it was being sold by him on the price of Rs. 213.63\/per unit after adding his margin @ 4.06% of Rs. 10.55\/-. He had 1288 units of the product in stock on 14.11.2017. He has also admitted that after 15.11.2017 he had sold the product at the base price of Rs. 172.77\/- after levying GST of Rs. 31.10\/- @ 18% and charging <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nTherefore, it is established from the record as well as the admission of the Respondent himself that he had resorted to profiteering by increasing the base price in violation of the provisions of Section 171 of the above Act and had thus not passed on the benefit of reduction in the rate of tax by commensurately reducing the price of hi<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n17. The Respondent has also claimed that all the units of the product bought by the above Applicant on 15.11.2017 had been returned by him on 15.12.<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n18. The Respondent has also averred that Section 171 of the Act did not provide for any methodology for determining the co<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\nSection 171 only stipulates that any benefit of reduction in the rate of the tax or the ITC which accrues to a supplier must be passed on to the consumers as both are the concessions given by the Government from its own revenue and the suppliers cannot appropriate them as they are not entitled to do so. Both the benefits must go to the consumers and in case they are not identifiable the amount so collected by the suppliers should be deposited in the CWF so that it can be used in the public interest. In case of any legal or logistical difficulties the amount of benefit collected by the suppliers can always be deposited in the CWF but cannot be retained by the suppliers as it does not belong to them. The Respondent has made <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n20. The Respondent has also contended that the excess ITC credited by him to the HUL as per the letter dated 21.11.2017 had been deposited in the CWF and hence he could not be held accountable for profiteering. However it is apparent from the record that the Respondent had been instrumental in issuing incorrect tax invoices on 15.11.2017 and 28.11.2017 as well as in the case of supply of 35,244 units of the product sold by him between the period of 15.11.2017 to 31.01.2018 in which he had increased the base price of the product in order to negate the benefit of reduction in the rate of tax and extract illegal profit from his customers which was exactly equal to the amount of reduction in the rate of tax and hence a<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n (c) the deposit of an amount equivalent to fifty percent of the amount determined under the above clause in the Fund constituted under section 57 and the remaining fifty percent of the amount in the Fund constituted under section 57 of the Goods and Services Tax Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable;
\n (d) imposition of penalty as specified under the Act; and
\n (e) x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-xx-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
\n22. Accordingly, the Respondent is directed to reduce the sale price of the product immediately commensurate to the reduction in the rate of tax as was notified on 14.11.2017<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n24. We have also carefully considered the issue of imposition of penalty on the Respondent as the allegation 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 Notification dated 14.11.2017 whereby the rate <\/p>\n
For full text:-Visit the Source <\/a><\/p>\n
\n x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-
\n He shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not reduced under section 51 or short-deducted or deducted but not paid to the Government or tax not collected under section 52 or shortcollected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.”
\n25. Accordingly, it is proposed to impose penalty on the Respondent under Section 122 of the CGST Act, 2017 read with Rule 133 (d) of the CGST Rules, 2017. However, before the penalty is imposed the Respondent is hereby given notice as to why such penalty should not be imposed on him.
\n26. Any amount ordered to be paid or deposited by the Respondent under this order shall be paid or depo<\/p>\n
For full text:-Visit the Source <\/a><\/p>\n