TMI Blog2018 (9) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14.11.2017. He has also admitted that after 15.11.2017 he had sold the product at the base price of ₹ 172.77/- after levying GST of ₹ 31.10/- @ 18% and charging margin of ₹ 9.77/- per unit and the product was sold by him at the price of ₹ 213.64/-. Therefore, it is clear that there was no reduction in the sale price charged by him although the rate of GST was cut by 10%, rather the base price was increased by ₹ 14.11/- per unit by the Respondent. It is established from the record as well as the admission of the Respondent himself that he had resorted to profiteering by increasing the base price in violation of the provisions of Section 171 of the above Act and had thus not passed on the benefit of reduction in the rate of tax by commensurately reducing the price of his product rather the base price was increased by him exactly by the same amount by which the tax had been reduced. The Respondent has claimed that the HUL had changed the base price in its software and hence he was bound to charge the increased base price at the time of issuing invoices. However, the Respondent being a registered dealer having GSTIN 08AAEFS7072EIZ4 under the CGST/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and dishonest - Accordingly, it is proposed to impose penalty on the Respondent under Section 122 of the CGST Act, 2017 read with Rule 133 (d) of the CGST Rules, 2017. However, before the penalty is imposed the Respondent is hereby given notice as to why such penalty should not be imposed on him. Application disposed off. - 06/2018 - - - Dated:- 7-9-2018 - Sh. B. N. Sharma, Chairman, Sh. J. C. Chauhan, Technical Member And Ms. R. Bhagyadevi, Technical Member For the Applicant No. 1 : None For the Applicant No. 2 : Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal Assistant Director (Costs) For the Respondent : Sh. Subash Joshi, Proprietor and Sh. Vishal Sharma Advocate ORDER 1. This report dated 16.03.2018, has been received from the Applicant No. 2 i.e. Director General of Safeguards (DGSG) now re-designated as Director General Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods Services Tax (CGST) Rules, 2017. The brief facts of the present case are that an application dated 22.11.2017 was filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winters and before coming into force of the GST it was being sold under various Consumer Promotion Schemes (CPS) during the lean season by offering additional quantity or along with some additional products and such CPS were usually withdrawn during the winters. He has further informed that the Respondent had also submitted that the Scheme launched during the month of September, 2017 by offering additional quantity of the product was not withdrawn in November, 2017 and the MRP was retained at ₹ 235/- for 400 ml. of Vaseline which was the MRP for 300 ml. and thus the benefit of reduced rate of tax was passed on to the recipients through the additional quantity of 100 ml. The DGAP has also stated that the Respondent had claimed that the product was sold @ ₹ 0.59 per ml. after 15.11.2017 as compared to it's price of ₹ 0.73 per ml. during the month of November, 2017 and hence there was decrease of more than 18% in the price resulting in passing on of the benefit of reduction in the rate of the tax. The DGAP has further intimated that the Respondent had also maintained that the price of the above product was reduced from ₹ 235/- to ₹ 233/- w.e.f. 13.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST on the product was reduced from 28% to 18% w.e.f. 15.11.2017, the price realised by the Respondent including GST from the Applicant No. 1 had remained unchanged at ₹ 213.63/- per unit, which showed that the unit base price was enhanced by ₹ 14.15/- (Rs. 181.05-Rs. 166.90) and therefore, profiteering to the extent of ₹ 14.15/- per unit was proved against the Respondent. The DGAP has also stated that the Applicant No. 1 had again purchased 11 units of the product vide invoice No. GSA42046 dated 28.11.2017 from the Respondent on which the same net price of ₹ 213.63/- inclusive of GST was charged thus, profiteering of ₹ 14.15/- per unit was established against him. 6. The DGAP has concluded by stating that the Respondent had profiteered to the extent of ₹ 5,50,370/- from November, 2017 to January, 2018 which included the profiteering of ₹ 184/- made by him from the Applicant No. 1 on the sale of the 11 units of the product on 28.11.2017. He has further stated that the Respondent had profiteered an amount of ₹ 2,41 ,922/- @ ₹ 16.69/- including GST @ 18% per unit on the sale of 14,495 units and ₹ 3,08,448/- @ ₹ 14.88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - per unit on which he had paid GST @18% and earned profit margin of 4.06%. He has also claimed that on the closing stock, the differential amount of ₹ 14.11/- (Rs. 172.77/- - ₹ 158.66/-), along with the ITC benefit of ₹ 0.03/- (Rs. 8.28/- - ₹ 8.25/-) due to the change in the rate of tax had been recovered by the HUL from him on 26.02.2018. He has also submitted a copy of the letter dated 21.11.2017 issued by the HUL to all it's Redistribution Stockists in which they were asked to refund the excess ITC which was available to them on the closing stocks as on 15.11.2017 to the HUL. Therefore he has further stated that profit, if any, was made by the HUL and not by him, as the excess amount of ₹ 18,217.90/- stood debited from his account on 26.02.2018 to the HUL for the 1288 units of the product which were in his stock as on 14.11.2017. He has also furnished a copy of The Bank Certificate and the Chartered Accountant's Certificate in this behalf. He has further contended that the cumulative benefit of reduction in the tax available on all the Stock Keeping Units (SKU) of which the product was part of, which came to ₹ 5,18,443.74/-, had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the Hon'ble High Court of Kerala in the case of Grasim Industries Ltd. V. State of Kerala [19941 1994 taxmann.com 377 (Kerala) in which it was ruled that a sales return meant a return of the very goods purchased by the buyer in whole or in part and it was a reversal of the sale, as if the sale had not taken place in respect of the returned goods and therefore contemplated a return before the goods were appropriated and used by the buyer. He has also contended that applying the same principle in the present case, the transaction of supply did not exist and hence the entire proceedings were contrary to the provisions of the law as the contention of the DGAP that any subsequent transaction of return of goods would not negate the original transaction of supply of goods was not correct and the proceedings were required to be set aside on this ground itself. 11. The Respondent has also averred that Section 171 of the CGST Act, 2017 provided that any benefit of reduction in the rate of tax should be passed on to the recipient by way of commensurate reduction in prices however there was no mechanism mentioned in the CGST Act on the factoring of commensurate reduction in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss ITC and the deposits made by it in the CWF. The HUL vide its reply dated 03.05.2018 had admitted that it had asked its Redistribution Stockist to credit the excess ITC to its account and also that it had deposited the same in the CWF after recovering the same from them. 15. The DGAP vide his reply received by the Authority on 03.07.2018 on the letter dated 03.05.2018 of the HUL has stated that the profiteered amount could not have been recovered by the HUL from its Stockists as there was no such provision in Section 171 of the CGST Act, 2017. 16. We have carefully considered the submissions made by both the parties as well the material placed on the record and it is revealed that the Respondent has himself admitted through the Table submitted by him vide his submissions dated 23.4.2018 that prior to the reduction in the GST on the product from 28% to 18% w.e.f. 15.11.2017 it was being purchased by the Respondent at the base price of ₹ 158.66/- per unit with GST of ₹ 44.42/- @ 28% and the total purchase price was ₹ 203.08/ per unit and it was being sold by him on the price of ₹ 213.63/per unit after adding his margin @ 4.06% of ₹ 10.55/-. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that the HUL had changed the base price in its software and hence he was bound to charge the increased base price at the time of issuing invoices. However, the Respondent being a registered dealer having GSTIN 08AAEFS7072EIZ4 under the CGST/SGST Acts 2017 was fully aware of the reduction in the rate of tax of the product issued vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017, with effect from 15.11.2017 and Section 171 of the above Act and hence he was legally bound not to charge the enhanced base price resulting in negation of the effect of reduction in the rate of tax and thus he cannot escape his accountability of passing on the benefit of the reduction in the rate of tax to his customers. The Respondent has also not produced any evidence to show that he had objected to the increase made by the HUL in the base price or under what provisions of the above Acts he was bound to follow the instructions given to him by the HUL vide it's letter dated 21.11.2017, vide which the excess amount of ITC was credited by him to the HUL in respect of the above product, in contravention of the provisions of Section 171 of the Act and also charge the increased bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case is whether the supply made by Respondent on 15.11.2017 was nullified or not and hence the findings recorded in the above case are not being relied upon. 18. The Respondent has also averred that Section 171 of the Act did not provide for any methodology for determining the commensurate reduction in the prices. The argument advanced by the Respondent appears to be frivolous as it involves only mathematical calculation of the amount by which the tax had been reduced i.e. by 10% and after subtracting the same from the existing Maximum Retail Price (MRP), the MRP was to be re-fixed as per the provisions of the Legal Metrology (Packaged Commodities) Rules, 2011. It was also mandatory for the Respondent to declare the reduced MRP by affixing additional sticker or stamping or online printing as per the letter No. WM-10(31 )/2017 dated 16.11.2017 issued by the Ministry of Consumer Affairs, Food and Public Distribution. Govt. of India which he has failed to do. The GST law requires that the commensurate benefit as a result of reduction in the rate of tax or ITC has to be passed on to the recipients on each and every product which the Respondent has not done. It would also be pertin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that the excess ITC credited by him to the HUL as per the letter dated 21.11.2017 had been deposited in the CWF and hence he could not be held accountable for profiteering. However it is apparent from the record that the Respondent had been instrumental in issuing incorrect tax invoices on 15.11.2017 and 28.11.2017 as well as in the case of supply of 35,244 units of the product sold by him between the period of 15.11.2017 to 31.01.2018 in which he had increased the base price of the product in order to negate the benefit of reduction in the rate of tax and extract illegal profit from his customers which was exactly equal to the amount of reduction in the rate of tax and hence any subsequent deposit of such excess amount in to the CWF cannot absolve him of the allegation of profiteering. 21. It is clear from the narration of the facts stated above that the Respondent has indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction of tax as per the Notification dated 14.11.2017 supra in respect of the above product to his customers and therefore, he is liable for action under Rule 133 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculated from the first of the subsequent month in which the profiteering was done as per the amount which has been mentioned in the Table shown in para 6 above, till it is paid. The DGAP shall ensure that in case the above amount pertaining to the Respondent in respect of the above product has been deposited by the HUL in the CWF, the balance amount due as interest is calculated and got deposited from the above Respondent. In case the above amount has not been deposited or short deposited, the same shall be got deposited from the Respondent by the DGAP alongwith the interest. The above amount shall be further got deposited in the respective CWF of the Central or the State Government as per the provisions of Rule 133 (c) of the CGST Rules, 2017 by the DGAP as per the ratio prescribed under the above Rule. 24. We have also carefully considered the issue of imposition of penalty on the Respondent as the allegation of profiteering has been duly established against him. It is clear from the facts of the present case that the Respondent was fully aware of the Notification dated 14.11.2017 whereby the rate of GST was reduced on the above product from 28% to 18%. He was also fully a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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