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2022 (5) TMI 842 - NAPA - GSTProfiteering - supply of Services by way of admission to exhibition of cinematography films - benefit of reduction in the GST rate not passed on - contravention of section 171 of CGST Act - penalty - HELD THAT - The Respondent has resorted to profiteering by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate, on Services by way of admission to exhibition of cinematograph films where price of admission ticket is above one hundred rupees from 28% to 18% w.e.f. 01.01.2019 upto 30.06.2019. On this account, the Respondent has realised an additional amount to the tune of Rs. 42,60,104/-from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteered amount is determined as Rs. 42,60,104/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. As per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, the Respondent is therefore directed to reduce the prices of his tickets, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of Rs. 42,60,104/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering in two equal parts, of Rs. 21,30,052/- in the Central Consumer Welfare Fund (CWF) and Rs. 21,30,052/- in the Telangana State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with interest @18%. The above amount shall be deposited within a period of 3 months from the date of receipt of this Order failing which the same shall be recovered by the jurisdictional Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017. Penalty - HELD THAT - Respondent has denied the benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and resorted to profiteering and hence, committed an offence under section 171 (3A) of the CGST Act, 2017. Therefore, the Respondent is liable for the imposition of penalty under the provisions of the above Section. Accordingly, a notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Application disposed off.
Issues Involved:
1. Allegation of profiteering by not passing on the benefit of GST rate reduction. 2. Examination of the jurisdiction and authority of the DGAP and NAA. 3. Determination of whether the benefit of GST rate reduction was passed on. 4. Calculation and quantification of the profiteered amount. 5. Compliance with statutory and constitutional provisions. 6. Imposition of penalty for profiteering. Issue-wise Detailed Analysis: 1. Allegation of Profiteering: The case originated from an application alleging that the Respondent did not pass on the benefit of GST rate reduction on "Services by way of admission to exhibition of cinematograph films" effective from 01.01.2019. The GST rate was reduced from 28% to 18% for tickets priced above Rs. 100 and from 18% to 12% for tickets priced Rs. 100 or less. The applicant claimed that the Respondent increased the base price to maintain the same final selling price, thereby not passing the benefit to consumers. 2. Examination of Jurisdiction and Authority: The Respondent challenged the jurisdiction of the DGAP and NAA, arguing that the price of cinema tickets is fixed by the State Government and that the Central Government does not have the authority to regulate cinema ticket prices. The DGAP countered that the GST Council, comprising representatives from all states, has the authority to set GST rates, and Section 171 of the CGST Act mandates passing on the benefit of any tax rate reduction to consumers. 3. Determination of Benefit Passing: The DGAP's investigation revealed that the Respondent did not reduce the prices of cinema tickets commensurately with the GST rate reduction. Instead, the Respondent maintained the same final ticket prices by increasing the base price, thereby not passing on the benefit of the reduced GST rate to consumers. 4. Calculation and Quantification of Profiteered Amount: The DGAP calculated the profiteered amount by comparing the base prices before and after the GST rate reduction. The investigation covered the period from 01.01.2019 to 30.04.2020. The total profiteered amount was determined to be Rs. 42,60,104, which included the additional amount collected due to the increased base prices. 5. Compliance with Statutory and Constitutional Provisions: The Respondent argued that the scheme of anti-profiteering under the CGST Act was defective and did not account for controlled industries like cinema. The DGAP and NAA maintained that the anti-profiteering provisions are designed to ensure that consumers benefit from tax rate reductions and that the methodology for determining profiteering is well-established and has been upheld in previous cases. 6. Imposition of Penalty: The NAA found that the Respondent had contravened Section 171 of the CGST Act by not passing on the benefit of the GST rate reduction. Consequently, the Respondent was directed to deposit the profiteered amount along with interest into the Consumer Welfare Fund. Additionally, a notice was issued to the Respondent to explain why a penalty under Section 171(3A) should not be imposed. Conclusion: The NAA concluded that the Respondent had engaged in profiteering by not passing on the benefit of the GST rate reduction to consumers. The Respondent was ordered to deposit the profiteered amount of Rs. 42,60,104 along with interest into the Consumer Welfare Fund and was also issued a notice for the imposition of a penalty. The jurisdiction of the DGAP and NAA was upheld, and the methodology for determining profiteering was found to be consistent with statutory provisions.
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