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By: Dr. Sanjiv Agarwal
January 18, 2021
All Articles by: Dr. Sanjiv Agarwal       View Profile
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SH. RAHUL SHARMA, M/S. LOCAL CIRCLE (I) PVT. LTD., DIRECTOR GENERAL OF ANTI-PROFITEERING, INDIRECT TAXES AND CUSTOMS VERSUS M/S. SAMSUNG INDIA ELECTRONICS PVT. LTD. [2020 (3) TMI 184 - NATIONAL ANTI-PROFITEERING AUTHORITY],  complainant filed a complaint that the respondent company had profiteered in respect of Power Bank "Portronics Power Slice 10" supplied by the Respondent.  It was  also alleged that the it did not reduce the selling price of the Power Bank "Portronics Power Slice 10", when the GST rate was reduced from 28% to 18% w.e.f. 1-1-2019, vide Notification No. 24/2018-Central Tax (Rate) dated 31-12-2018 and the price of the product remained the same at ₹ 1349/- and thus, the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price.

The matter was referred to DGAP for investigation who investigated for the period 01.01.2019 to 31.03.2019 and submitted its reports dated 30.08.2019, 30.09.2019 and 23.12.2019. In the instant case, DGAP had to issue summons u/s 70 of CGST Act, 2017 as the respondent company did not cooperate and submitted the required documents.

The DGAP observed that the Central Government, had reduced the GST rate on the "Power Bank" from 28% to 18% w.e.f. 1-1-2019, vide Notification No. 24/2018-Central Tax (Rate) dated 31-12-2018.

As per section 171 of the CGST Act 2017, legal requirement was abundantly clear that the benefit of ITC or reduction in rate of tax has to be passed on to the recipients by way of commensurate reduction in the price. Such a reduction could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of ITC. This was the legally prescribed mechanism to pass on the benefit of ITC or reduction in rate of tax to the recipients under the GST regime.

The Respondent had increased the base prices of the impugned goods when the rate of GST was reduced from 28% to 18% w.e.f. 1-1-2019.

The DGAP, on the basis of comparison of the aforesaid pre and post-reduction GST rates and the details of outward taxable supplies (other than zero rated, nil rated and exempted supplies) of the impugned goods during the period 1-11-2018 to 1-3-2019, observed that the amount of net higher sales realization due to increase in the base prices of the impacted goods, despite the reduction in the GST rate from 28% to 18% or in other words, the profiteered amount came to ₹ 5,21,965/-. The profiteered amount had been computed by comparing the average of the base prices of the impugned goods sold during the period 1-11-2018 to 31-12-2018, with the actual invoice-wise base prices of such products sold during the period 1-1-2019 to 31-3-2019. The DGAP report also provided the details of the State/Union Territory wise break-up of the total profiteered amount of ₹ 5,21,965/- .

The respondent company submitted that the DGAP has not considered various relevant facts particularly in the electronic industries where prices of the goods are driven by fast changing technology, demand and supply and terms of sale like cash, debit/credit card and credits. The location of the sale was also important as price in a mall may be different from the price at a warehouse. The respondent submitted various submissions.

The NAA considered the DGAP report as also the submissions.  The DGAP in his last report stated that  the fresh set of segment/location wise (or in other words supply channel wise) sales data submitted by the Respondent during the hearings before the Authority has been analysed, and that the profiteered amount may vary if the same was determined segment-wise.

The NAA observed that justice cannot be done if the aforementioned supply chain wise data is not re-examined and the profiteered amount is not recomputed. Therefore, without going into merits of the case and without considering the other submissions of the Respondent and the complainant found it imperative that there is need of re-computation of the profiteered amount. All other submissions of the Applicants and the Respondent were to be duly considered after the final computation of the profiteered amount is done.

The NAA under rule 133(4) of the CGST Rules, 2017 directed the DGAP to further investigate the following issues and to furnish his Report accordingly under Rule 129 (6) of the CGST Rules, 2017:



To investigate the Respondent's contention that that the negative figures in his sales data actually relate to the credit notes raised by him on account of sales return and the effect thereof on the amount of profiteering, if any, after due verification.



To investigate the mismatch between the Respondent's GST return for the month of January, 2019 as compared to the sales data figure for the same period and ramification thereof on the computation of the amount of profiteering.



To investigate the Respondent's submissions dated 19-11-2019 vide which he has submitted his own calculation of the amount of profiteering based on his own understanding which is given in the Para 23 of this order.



To investigate the data submitted by the Respondent in pen drive on 6-12-2019 which the DGAP has itself claimed to be in a different format (channel/segment wise) from the one that was submitted earlier (five types viz. Exports, inter-state, intra-state, normal and Stock transfer) during the investigation period.

Thus, the NAA directed the DGAP to re-compute the profiteered amount keeping in view the above observations and to furnish the report within a period of three months, something which is a normal practice in appeals before Tribunals and Courts.


By: Dr. Sanjiv Agarwal - January 18, 2021



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