TMI Blog2018 (9) TMI 1640X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent had resorted to profiteering amounting to ₹ 15,861/- which includes profiteering of ₹ 41/- made by him from the Applicant No. 1, which constitutes violation of the provisions of Section 171 of the above Act. It is also established that the Respondent had issued incorrect invoices while selling the product to his customers as he had not correctly shown the basic price which he should have legally charged from them which is an offence under Section 122 (1) (i) of the CGST Act, 2017 and hence he is liable for imposition of penalty under the above Section. Rule 133 (3) (d) of the CGST Rules, 2017 also makes it clear that the penalty has to be imposed as per the provisions of the Act and since it is proposed to impose penalty under the Act there is no question of creating substantive liability under the Rules as there is specific sanction under the above Act to impose penalty. Similarly the CGST Act, 2017 also provides for imposition of interest under the Act and therefore, the same can be levied in the present proceedings. The Respondent cannot claim that since the amount of profiteering was miniscule no penalty should be imposed as each breach of the law has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is further no restriction on the right of the Respondent to conduct trade as per Article 19 (1) (g) of the Constitution as Section 171 only requires him to pass on the above two benefits and does not require him to get any licence or seek approval to conduct trade or fix prices of the products being sold by him. The Respondent must remember that the Government has thought is appropriate in the public interest to reduce the rate of tax on the products being sold by him by sacrificing its own revenue and therefore, he is bound to pass on this benefit to his customers and by no stretch of imagination he can pocket this reduction to the detriment of the ordinary consumer. Notice may also be issued to the Respondent to show cause as to why penalty as per the provisions of Section 122 of the CGST Act, 2017 read with Rule 133 (3) (d) of the CGST Rules, should not be imposed upon him. Application disposed off. - 08/2018 - - - Dated:- 25-9-2018 - SH. B. N. SHARMA, CHAIRMAN, SH. J.C. CHAUHAN, TECHNICAL MEMBER, AND MS. R. BHAGYADEVI, TECHNICAL MEMBER Present:- None for the Applicant No. 1. Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum Retail Price (MRP) of ₹ 550/- and the sale price of the product in the retail sale invoice was shown as ₹ 525/- and that he was not in a position to correlate the invoice with the MRP label as only a part of the MRP label was made available along with the application. The DGAP has further informed that the Respondent had also contended that it was evident that the MRP label of the product provided by the applicant was from the pre-GST stock which was imported in March, 2017 and hence, it did not factor the GST in it s price. The Respondent had also stated that in respect of the external brands he was dependent on the respective brand owner and the MRP and the retail selling price should have been revised by the brand owners. 5. The DGAP has also intimated that the Respondent had maintained that he had submitted the details of the sales of the product for all the 24 GSTINs made during the period between November, 2017 to January, 2018 and had further maintained that in total 797 units of the product had been sold by him on which he had given discount of 11.66% on the MRP which was more than what he was required to pass on consequent to the reduction in the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l profiteering of ₹ 811/- on all the 24 units (Rs. 779+ ₹ 16+ ₹ 16= ₹ 811). 8. The DGAP has further stated that the Respondent had sold 485 units of another shade of the product which were having MRP of ₹ 575/- per unit between 01.11.2017 to 14.11.2017, in which the basic price per unit was increased from ₹ 449/- to ₹ 487/- and as a result of which the retail selling price charged Inclusive of 18% GST had remained unchanged at ₹ 575/-. He has also claimed that if the reduction in the GST rate from 28% to 18% had been taken into consideration the RSP charged inclusive of 18% GST would have been maximum of ₹ 530/- and therefore it was evident that profiteering of ₹ 45/- per unit (Rs. 575 - ₹ 530) and profiteering of ₹ 14,985/- on total 333 units (Rs.45x333=14,985) supplied during the period between 15.11.2017 to 31.01.2018 has been made and in the case of 13 units the RSP of which was ₹ 535/-, profiteering of Rs .5/- per unit (Rs.535 - ₹ 530) and profiteering of ₹ 65/- on total 13 units (Rs.535 - ₹ 530)x13=Rs.65) has been made during the period between 15.11.2017 to 31.01.2018 which fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. APAF 1 and such form had been provided to the Respondent. He had therefore, sought a copy of the complaint on the basis of which the entire proceedings were initiated. 11. The Respondent has also filed further submissions on 18.05.2018 in which he has stated that Rule 126 of the CGST Rules, 2017 empowered the National Anti-Profiteering Authority to prescribe the methodology and procedure for determination whether any reduction in the rate of tax or benefit of ITC had been passed on by a registered person by way of commensurate reduction in the prices or not. He has also claimed that since no guidelines had been framed as prescribed under Rule 126 thus a registered person could not be held being non-compliant. He has further stated that in the absence of any prescribed methodology, a methodology which was reasonable and consistent with the objectives of the statutory provisions deserved to be accepted and since the Respondent had adopted a methodology that was reasonable and consistent with the objectives, the entire proceedings needed to be dropped. He has also stated that under Section 171 (2) of the CGST Act, 2017, it was required to determine whether the reduction in ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hearing held on 3 May 2018 but the same was not supplied to him. He has also claimed that no personal hearing was granted by the DGAP prior to issuance of the investigation report and hence the entire proceeding are in contravention of the principle of audi alteram partum and liable to be dropped. He has also pleaded that the scope of the present investigation ought to have been restricted to the complaint and could not be expanded to include any other complainant/recipient, product or dealer and hence, the extension of scope of investigation to panIndia registrations and sales of the product was without jurisdiction and not permitted under the law. He has further pleaded that in the event it was held that the term the recipient did not refer to the complainant but the recipients of goods in general, it supported his claim that the reduction in prices generally and offering the same to the recipients of goods in general was in compliance with the above provisions. He has also claimed that he had sold the pre-GST and post-GST stock of the product at the average per unit price of ₹ 483/- and ₹ 523/- respectively which was lower than the price of ₹ 484/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the FY 2017-18 as compared to the FY 2016-17 which had not been taken into account in arriving at the ideal price of the product. The Respondent has further submitted that in Para 14 it had been mentioned that the MRP of the product was ₹ 550/-, which was revised to ₹ 575/- post 20.06.2017 and the Respondent had no control on the revision of the MRP of the external brands and hence he could not be held accountable for profiteering. He has also contended that it had been admitted in the Report that the RSP of the product was decided by the Respondent within the MRP printed on the pack of the product and therefore, no profiteering could be alleged. He has further contended that only a part of the label had been made available to him along with the complaint and therefore, it was impossible to correlate the invoice with the MRP / Label of the product. He has also maintained that only ₹ 525/- and not ₹ 550/- were charged from the Applicant No. 1, therefore, even if the MRP had been increased to ₹ 550/- the sale had been made only at the price of ₹ 525/- by the Respondent and hence he had suo moto passed on the GST benefit by lowering his RSP. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en offered, however, from the details of outward taxable supplies submitted by him it had been observed by the DGAP that the total number of units sold during the period between 15.11.2017 to 31.01,2018 was 2604 out of which the Respondent had sold 370 units by increasing the basic price excluding GST. In reply to Para 17 the Respondent has claimed that he had only submitted details of sales of the specific shade of the product which was the subject matter of the complaint however, the DGAP had also taken details of other shades of the product into account which had resulted in the difference in the number of the units. The Respondent has further claimed that the notification prescribing rate change with effect from 15th November 2017 was published on the same date and a reasonable time frame was required to implement it in respect of each product. He has also contended that Section 171 did not provide that the price reduction had to be immediate and Section 126 of the CGST Act itself waived liability for minor breaches of tax regulations and procedural requirements and since the profiteered amount was only ₹ 15,861/- which was a miniscule percentage of the sales made of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with adequate evidence. The Committee has also informed that the second complaint mentioned at Sr. No. 30 of the proceedings filed by the above Applicant had her full name, email address, product label, bill and gist of the complaint alleging that she had bought one unit of the product from the Respondent for ₹ 525/-, the MRP of which was ₹ 550/- and the Respondent had not passed on the benefit of reduction of GST from 28% to 18% to her. The Committee has informed that since the complaint had all the details and it prima-facie appeared to be genuine it was forwarded to the DGAP for investigation. 16. Vide it s reply dated 19.06.2018 the DGAP has intimated that Form APAF-1 had not been prescribed when the complaint was filed by the above Applicant and hence there was no question of filing the complaint on this form. He has also informed that copy of the complaint dated 23.11.2017 was received by Sh. Sayan Bandhopadhyay on behalf of the Respondent on 06.01.2018 and a receipt was also issued by him which has been placed on record. 17. We have carefully considered the material placed before us as well as the submissions made by the Applicant No. 2 and the Respondent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e product to other customers after the rate of tax was reduced and hence he had profiteered ₹ 779/- (41X19) from them. He had also sold one unit of the product @ ₹ 500/- on which profiteering of ₹ 16/- was made and further sold 4 units @ ₹ 488/- on which profiteering of ₹ 16/- was realised and thus the Respondent had resorted to profiteering of Rs, 811/- on the sale of 24 units of the product. 18. Further, it is also apparent from the record that the Respondent had sold 485 units of another shade of the product which was having MRP of ₹ 575/- per unit during the period between 01.11.2017 to 14.11.2017, wherein the basic price per unit excluding GST of the product was ₹ 449/- and the RSP charged inclusive of 28% GST was ₹ 575/-. After the reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017 and taking into consideration the basic price per unit excluding GST the ideal RSP inclusive of 18% GST would have been ₹ 530/- per unit. Although there was a reduction in the GST rate from 28% to 18%, the basic price per unit excluding GST was increased by the Respondent from ₹ 449/- to ₹ 487/- per unit so that the RSP i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rule 126 of the CGST Rules, 2017 for determining whether the benefit of tax reduction had been passed on or not and hence he could not be held liable for profiteering. In this connection it would be pertinent to mention that the Authority has already prescribed the methodology and the procedure as required under Rule 126 vide it s notification dated 28.03.2017 and hence the objection raised by the Respondent in this regard is not tenable. However, it is made clear that the Authority is not required to make mathematical calculations on behalf of the Respondent to arrive at the amount of benefit which he was required to pass on. This exercise can be done by the Respondent himself and he can pass on the commensurate benefit which has accrued as a result of tax reduction. The Respondent has not suggested any alternate reasonable and consistent methodology to pass on the benefit except for making far-fetched claims which cannot be accepted. Provisions of Section 171 are very clear which state that any reduction in the rate of tax or the benefit of ITC has to be passed on to the recipient which means that every citizen who is a recipient of supply of goods or services has to get the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has also objected to the pan India investigation against him. The objection raised by the Respondent in this behalf is frivolous as all violations of Section 171 whether done locally or on all India basis can be looked in to by the DGAP and adjudicated upon by this Authority and the Respondent cannot be given liberty to decide which areas he should pass on the benefit and which areas he should not. Once infringement of the above provisions has come in the notice of the DGAP he was required to investigate and report upon it forthwith. The argument of the Respondent that reduction in prices in general amounted to sufficient compliance is also incorrect as the benefit of reduction in the rate of tax has to be passed on to each and every buyer and not to those buyers who are arbitrarily chosen by the Respondent. The claim made by the Respondent that he had sold both the products at an average price of ₹ 483/- and ₹ 523/- which was less than the price of ₹ 484/- and 530/- calculated by the DGAP is also illogical as the law of averages cannot be applied when benefit is to be given to each and every customer. The Respondent has also submitted that his net realisation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... makes it clear that the penalty has to be imposed as per the provisions of the Act and since it is proposed to impose penalty under the Act there is no question of creating substantive liability under the Rules as there is specific sanction under the above Act to impose penalty. Similarly the CGST Act, 2017 also provides for imposition of interest under the Act and therefore, the same can be levied in the present proceedings. The Respondent cannot claim that since the amount of profiteering was miniscule no penalty should be imposed as each breach of the law has to be visited penalty. The law settled in the case of Kunj Behari Lal supra is of no help to the Respondent as there is specific provision of penalty under Section 122 of the CGST Act, 2017 which the Respondent has violated and hence this Authority is competent to impose penalty upon him under the above Section. Similarly, the judgement passed in the case of Petroleum and Natural Gas Regulatory Board mentioned above is also not relevant in the facts of the present case and hence it is respectfully submitted that the same is not being relied upon. 23. Accordingly, the Respondent is directed to reduce the price of bot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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