TMI Blog2018 (10) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the facts of the case that the Respondent had increased the base price of his products to make good the loss which had occurred due to denial of ITC post GST rate reduction. It is further revealed that the Respondent had increased the average base price by 12.14% to neutralize the denial of ITC of 11.80% and such increase is commensurate with the increase in the cost of the product on account of denial of ITC. Therefore, the allegation of not passing on the benefit of rate reduction is not established against the Respondent. Profiteering of ₹ 452/- made on the supply of the products on 14.11.2017 - Held that:- The same can not be termed as profiteering in terms of section 171 of CGST Act, 2017 as there was no rate reduction on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravention of the provisions of Section 171 of CGST Act, 2017. 2. The above application was examined by the Standing Committee on AntiProfiteering and was referred to the DGAP vide minutes of it's meeting dated 24.01.2018 for detailed investigations under Rule 129 (1) of the CGST Rules, 2017. 3. The DGAP had called upon the Respondent to submit reply on the above stated matter and also asked him to suo moto determine the quantum of benefit which was not passed on after reduction in the rate of tax. The Respondent had submitted replies vide e-mails dated 09.03.2018, 17.03.2018, 06.04.2018 and 01.05.2018 and stated that the Government of India had disallowed Input Tax Credit (ITC) on the purchase of material used in the restaura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion prices of the items sold during the period between 15.1 1.2017 to 28.02.2018 were compared and after taking into account the entire quantity of such items sold during the said period, it was revealed that the Respondent had increased the average output taxable value (base price) by 12.14% to neutralize the denial of ITC of 11.80%. The DGAP has further submitted that the Respondent had sold 32 number of different items on 14.11.2017 in one of his outlets at Karelibaug at the increased base prices and collected ₹ 452/-, where he had actually charged 18% GST on the said items. He has also contended that this was evidently done to compensate for the denial of ITC that was to take place one day later w.e.f. 15.11.2017. The DGAP has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant on 29.05.2018 however, the Applicant did not appear during the course of the hearings. M/S Subway Systems India Private Limited the owners of the 'Subway' Brand which had appointed the Respondent as it's franchisee were also associated during the hearings. S/Sh. Nihal Kothari and Mayank Jain Advocates who appeared on behalf of M/S Sunway submitted that it worked on the franchisee based model, and no consideration was taken from the franchisee expect the royalty on the net turnover. They also submitted that M/S Subway was not involved in fixing of the price of the products and it was solely the call of the franchisee to fix the prices of the products. They further submitted that no ITC was being passed on by M/S Subway a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates due to denial of ITC and the Report had not alleged any profiteering on his behalf and hence the present proceedings should be dropped. 8. We have carefully heard both the parties and have also considered the material placed before us and following two points pertaining to the allegation of profiteering made against the Respondent need to be decided as per the provisions of Sec. 171 of the CGST Ac, 2017:- i. Whether there was reduction in the rate of tax on the restaurant service after 14.11.2017 and whether the benefit as emanating from such reduced tax rate has not been passed to the Applicant No. 1 in terms of the commensurate reduction in the price of the product purchased by him? ii. Whether profiteering of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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