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By: Dr. Sanjiv Agarwal
March 26, 2020
All Articles by: Dr. Sanjiv Agarwal       View Profile
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Vide Office Memorandum dated 10.4.2018, Secretary of National Anti-profiteering Authority (NAA) advised respondent to provisionally deposit amount profiteered in Consumer Welfare Fund and set aside by respondent (₹ 12.6 crore) based on rate reduction w.e.f 15.11.2017. It also directed DGAP to conduct an investigation to determine the actual amount of benefit of reduction in the GST rates which was not passed on by the Respondent supplier to the recipients.

In DIRECTOR GENERAL OF ANTI-PROFITEERING, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS VERSUS M/S. NESTLE INDIA LTD. 2019 (12) TMI 588 - NATIONAL ANTI-PROFITEERING AUTHORITY;  In the instant case, DGAP filed a complaint based on its detailed investigation and reports/ supplementary reports dated 8.10.2018, 16.1.2019, 1.2.2019, 15.3.2019, 8.5.2019 and 12.6.2019.

The respondent supplier submitted to DGAP that wherever it was practical, it had passed on the benefit of GST rate reduction to the recipients by way of discounts on the stocks of the impacted products held by them as on 15.11.2017; that it had reminded each Distributor of their obligation to pass on the benefit to their recipients; that he had passed on the commensurate GST benefit at an aggregate product HSN category level; and that where it was not practical to pass on the GST rate reduction benefit on the existing stocks and till the availability of new stocks, it had set aside the money to be passed on to consumers and he needed guidance on how to do so as well as how to adjust the expenses incurred on the changeover.

It was also submitted that total amount of the benefit of reduction in the GST rate w.e.f. 15.11.2017, was ₹ 13.8 Crore for the period from November, 2017 to March, 2018 and it had incurred expenses of ₹ 3.9 Crore to give effect to passing on the GST rate reduction benefits expeditiously and these expenses were required to be adjusted against the amount set aside.

The respondent supplier had deposited the amount set aside of ₹ 15,32,86,055/- in two instalments of ₹ 13,80,54,526/- and ₹ 1,52,31,529/- for the period from 15.11.2017 to 31.03.2018 and ₹ 1,25,46.668/- for the period from 01.04.2018 to 30.06.2018, in terms of NAA  Office Memorandum dated 10.04.2018.

Based on DGAP report (refer text of Order), the NAA determined the profiteered amount at 89,73,16,384/- as per the provisions of Rule 133 (1) of the CGST Rules. Accordingly, the Respondent supplier was directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the Rules and to deposit an amount of ₹ 73,14,83,660/- (₹ 89,73,16,383/- ₹ 16,58,32,723/- as he had already deposited an amount of ₹ 16,58,32,723/- in the CWF of the Central and the concerned State Governments, as the recipients were not identifiable, as per the provisions of Rule 133 (3) (c ) of the Rules alongwith 18% interest payable from the dates from which both the above amounts were realised by the Respondent from his recipients till the date of their deposit . The above amount of ₹ 73,14,83,660/- shall be deposited within a period of 3 months from the date of passing of the order failing which it shall be recovered by the concerned Commissioner CGST/SGST.

The NAA held that the Respondent supplier had denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and had thus profiteered as per the explanation attached to Section 171 of the CGST Act. Therefore, it was  liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017.

Further, Authority as per Rule 136 of the CGST Rules 2017 directed the Commissioners of CGST/SGST to monitor the order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is deposited in the CWFs of the Central and the State Governments.

On petition to High Court

The company, Nestle India Ltd. filed a Writ Petition (WP No. 969 of 2020) NESTLE INDIA LTD. & ANR. VERSUS UNION OF INDIA & ORS.  2020 (2) TMI 671 - DELHI HIGH COURT before Delhi High Court against the NAA Order. The Court granted interim stay order on the NAA Order granted till next date, i.e. 20.05.2020. The petition was made on the following  grounds:

  1. The NAA order was passed not pursuant to any written complaint, as is mandated by law, but by the NAA suo motu assuming jurisdiction. Further, there is no provision under the Central Goods and Service Tax Act, 2017, and the rules made thereunder, that enables the NAA to do so.
  2. At the time when the matter was heard and orders reserved, the NAA was comprised of four members; however, the order was pronounced with only three of the four members signing it.
  3. The time taken for the impugned order to be passed was well beyond the mandatory three months from the date of receipt of the report of investigation.

Further, out of ₹ 89,73,16,384 demanded, ₹ 16,58,32,723 had already been deposited by the company.

The court observed that the company has made out a prima facie case for the grant of an interim relief as prayed for and that the balance of convenience in granting interim relief is also in the favour of the petitioners.


By: Dr. Sanjiv Agarwal - March 26, 2020



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