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2019 (3) TMI 371 - NAPA - GSTProfiteering - Melaglow Rich (Niacinamide) Depigmentation Glow Restoration Cream - situation post implementation of GST - benefit of reduction in the rate of tax/input tax credit not passed on - increase in MRP by tampering the label - contravention of the provisions of Section 171 of the CGST Act 2017 - Penalty. First objection raised by Respondent No. 1 states that Section 171 of the CGST Act 2017 was not applicable in the instant case since its scope was restricted to the cases where there was reduction in the rate of GST on the supply of the goods or services and a reduction in the rate of GST did not extend to a reduction in the rate of tax when compared with the pre-GST indirect tax regime rates - Held that - IT would be appropriate to mention that the main objective of introducing the GST was to subsume multiple central and state taxes to reduce the costs of doing business and while doing so there should not be exorbitant rise in the prices. To curb the tendency of undue enrichment by the suppliers of goods and services on account of and on the eve of implementation of the GST Section 171(1) of the CGST Act 2017 was enacted which states that a reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. - thus any reduction in the rate of tax should result in commensurate reduction in the price w.e.f. 01.07.2017 the date from which the above Act has come in to force so that there is no profiteering by the suppliers at the expense of the consumers in case the rate of tax is reduced post GST and in case it is not done the supplier shall be liable for breach of the above provision. There is no force in the contention of the above Respondent that the provisions of Section 171 (1) can not be invoked by comparing the pre GST rate with the post GST rate of tax as he can not be allowed to pocket the amount of reduced tax which should have normally gone to the coffers of the Central/State Governments. Any benefit of reduction in the rate of tax given by the above Governments by sacrificing their own revenue must be passed on to the customers by commensurate reduction in the prices by the suppliers as per the intention of Section 171 and any other interpretation of the same would be illogical and unreasonable. It appears that the Respondent No. 1 is trying to misinterpret the provisions of Section 9 of the CGST/SGST Acts 2017 and Section 5 of the IGST Act 2017 by stating that the term tax as used in the above Sections does not apply on the CED CST or the VAT as it applies only on the supply of goods and services - A bare perusal of Section 7 of the CGST/SGST Acts 2017 shows that supply includes sale also and as per Section 2(21) of the IGST Act 2017 the supply shall have the same meaning as has been assigned to it under Section 7 of the CGST Act 201 T As CED forms part of the price of the product on which VAT is leviable therefore all of them viz. CED CST and VAT are equally applicable on the taxable event of supply as supply includes sale also. There is no restriction imposed by the Parliament/ State Legislatures on comparing the pre and post GST rates and nor the terms tax rate of tax or rates of tax or change in the rate of tax prohibit such comparison to examine whether the above two benefits have been passed on or not. There is no doubt that the expression reduction in the rate of tax has to be read in conjunction with the words on any supply of goods and services but it can not be interpreted to mean that only reduction in the rate of GST can be considered for invocation of Section 171(1) and no comparison can be made with the pre-GST rates. The rate of tax was 30.06% in the pre-GST era which was reduced to 28% in the post-GST era vide Notification No 1/2017 Central Tax (Rate) dated 28.06.2017 and the rate of GST was further reduced from 28% to 18% vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017. However during these periods the base price of the product was increased from Rs. 202.06 to Rs. 230.90 per unit which resulted in increasing of the selling price amounting to denial of not passing the benefit of tax reduction to the customers - the total amount the benefit of which was denied to the recipients by the Respondent No. 1 or the profiteered amount during the period w.e.f. 01.07.2017 to 31.07.2018 comes to Rs. 96, 59, 716.26/-. The Respondent No. 1 has also himself agreed to deposit this amount along with the applicable interest vide his submission dated 24 12 2018 before this Authority. Since the present investigation in to the issue of not passing on the benefit of reduction in the rate of tax by the Respondent No. 1 has been conducted w.e.f. 01.07.2017 to 31 07 2018 and the Respondent No. 1 has also not provided the details of every stage MRP change in the value chain along with the date of change of MRP for all the products that was demanded by the Authority during the hearing on 15.11.2018 the DGAP is directed to further investigate the quantum of profiteering on all the products including the present product which the Respondent No. 1 is supplying and thereafter submit his report accordingly. Penalty - Held that - Respondent has issued incorrect invoices while selling the above product to his customers as he had not correctly shown the basic price which he should have legally charged from them. The Respondent has also compelled them to pay additional GST on the increased price through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he has failed to pass on - It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act. Hence he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules 2017 - opportunity must be provided to respondent No. 1 to be heard a notice be issued to him to explain why such a penalty should not be imposed on him. Application disposed off.
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