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2021 (1) TMI 844 - NAPA - GSTProfiteering - restaurant service supplied by the Respondent - allegation that the reduction in the rate of tax not passed on by way of commensurate reduction in price - contravention of section 171 of CGST Act - penalty - HELD THAT:- It is revealed from the record that the Respondent is running a restaurant as a franchisee of M/S Subway Systems India Private Limited in Maharashtra and is supplying various food products to customers. It is also revealed from the plain reading of Section 171 (1) of the CGST Act, 2017 that it deals with two situations, one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the record that there has been a reduction in the rate of tax from 18% to 5% w.e.f. 15.11.2017, on the restaurant service being supplied by the Respondent, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 without the benefit of ITC. Therefore, the Respondent is liable to pass on the benefit of tax reduction to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the present investigation has been carried out w.e.f. 15.11 .2017 to 30.06.2019. It is also evident that the Respondent has been dealing with a total of 137 items during the period from 15.11.2017 to 30.06.2019. The DGAP has reported that the GST rate of 5% has been charged w.e.f. 15.11.2017 however the base prices of 133 products have been increased more than their commensurate prices w.e.f. 15.11.2017 which establishes that because of the increase in the base prices the cum-tax prices paid by the consumers were not fixed commensurately, despite the reduction in the GST rate. As per the provisions of Sec 171 (1) read with Rule 133 (1) the profiteered amount is determined as ₹ 6,85,531/- as has been computed in Annexure-15 of the DGAP’s Report dated 27.12.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined, are not identifiable, the Respondent is directed to deposit an amount of ₹ 6,85,531/- in two equal parts of ₹ 3,42,766/- each in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The above amount of ₹ 6,85,531/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned CGST/SGST Commissioners. Penalty - HELD THAT:- The Respondent has denied the benefit of GST rate reduction to the customers of his products w.e.f. 15.11.2017 to 30.06.2019, in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017, and therefore, he is liable for imposition of penalty under the provisions of the above Section. However, a perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 15.11.2017 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for the imposition of penalty is not required to be issued to the Respondent.
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