TMI Blog2018 (12) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent had acted in contravention of the provisions of Section 171 of the CGST Act. 2017 and had not passed on the benefit to his customers by commensurate reduction in the prices of these products. Accordingly, the amount of profiteering made by the Respondent is determined as ₹ 501 ,646/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent has vehemently argued that he had no control on the fixing of the base prices as well as the MRPs as both of them were fixed by J J through the software which he was bound to follow as per the terms of the agreement executed by him with the above Company - However, it is apparent from the record that the Respondent is duly registered under the CGST/SGST Act, 2017 and he was hence bound to follow the Notification dated 14.11.2017 mentioned above vide which the rate of GST was reduced from 28% to 18% on 130 products which he was selling, He cannot escape the legal obligation which was imposed upon him by the above Notification by shifting his accountability on this ground. The Respondent has also not produced any evidence to show that he had made any correspondence with J J to inform it that he was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42018 had requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 on the allegation that the Respondent had not passed on the benefit of tax reduction from 28% to 18%, granted by the Central and the State Governments w.e.f. 15.11.2017 by maintaining the same Maximum Retail Prices (MRPs) which he was charging before the above date, in case of the two products namely (i) Johnson Johnson Baby Shampoo 100 ml. and (ii) Johnson Johnson Baby Powder 200 Gms. (here-in-after referred to as the products). It was also alleged that instead of reduction. the base prices of the above two products were increased on and thus the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him, In this connection, the details of 2 Tax Invoices issued by the Respondent in respect of the above two products were also enclosed by the DGAP with his Report as under:- S.No. Invoice No. and Date Description of Products Base Price (Rs.) Rate of GST Price C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the invoices dated 1210.2017 and 16.11.2017 were issued prior to the updation of software by J J and hence he could not charge the reduced prices. 4. The DGAP has also intimated that during the investigation it had been observed that the Respondent was required to sell the above products at the base prices which were prevalent before 15.11.2017 and he should have charged GST @ 18% on such base prices to pass on the benefit of reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017. He has further intimated that since the Respondent was a supplier registered under the CGST/SGST Act, 2017 vide GSTI No. 07AWPPK4876R1ZC, he was legally bound to pass on the benefit of reduction in the rate of GST to his customers immediately w.e.f. 15.11.2017. 5. The DGAP has also submitted that by increasing the base prices of the above products and having maintained the pre-GST rate reduction MRPs, the benefit of GST rate reduction was not passed on to the customers by the Respondent. 6. The DGAP has also stated that from the Price Lists submitted by the Respondent, it was revealed that he had raised the base prices of both the above products during the period between 15.11.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner and Shi Bhupender Goyal, Assistant Director (Costs). The Respondent was represented by Sh. Ankit Khandelwal, Proprietor and Shri Anand Kumar Garg. 10. The Respondent had filed his written submissions on 20.08.2018, 24.08.2018. 25.08.2018 and 0609.2018, Vide his submissions dated 20.00201 d, the Respondent had supplied a copy of the Distributor Agreement executed by him with J J. The Respondent had submitted that as per the above agreement, he was appointed as Retail Distribution Stockist (RDS) by J J and he was bound by the terms of this agreement to use the software Wave which included the Manual, any associated software components, any media, any printed materials other than the Manual, and any online or electronic documentation. He has also claimed that the contract also required him not to use the above software in case he did not agree to the terms of the above agreement. The Respondent has also maintained that the contract stated that the ownership of the licensed software at all times would be with J J. He has further alleged that through this agreement, he had been given a very limited right of using the software solely for the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came out to be ₹ 47,333.03/- only. 13. Clarification was sought from the DGAP on the issues raised by the Respondent in respect of the submissions dated 06.09.2018 made by the Respondent The DGAP vide his reply dated 10.09.2018 has intimated that the issues raised by the Respondent had already been covered in the Investigation Report itself. 14. During the course of the proceedings J J was also issued notice asking it to clarify the claims made by the Respondent in respect of the control on the software and increase in the base prices made by it after 14.11.2017. 15. J J vide it s submissions dated 28.09.2018 stated that it had in fact reduced the base prices after reduction in the rate of tax from to 28% to 18%. It had also submitted the details of the base prices, tax and the invoice prices from J J to the Distributor, from the Distributor to the Retailer and from the Retailer to the consumer upto 14.11.2017, and from 17.11.2017 onwards as per the table given below:- JB Powder 200 Gms, Monsoon Particular J J to Distributor Distributor to Retailer Retailer to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2017 i.e. by Rs- 4.86/- per item resulting in the base price of ₹ 73.28/- which it was charging before 15.11.2017. Similarly in the case of Baby Powder 200 Gms. the base price was increased from ₹ 80.82/- to Rs- 87.671- i.e. by Rs- 6.85/- per piece to maintain the same price of Rs, 103,451- which was prevalent before 15, 11.2017, Therefore, there is no doubt that the Respondent had increased the base prices of the above products w.e.f. 15.11.2017 by the amount shown above, whereas he was required not to increase them and after charging GST @ 18%, he was legally bound to charge the reduced prices so as to pass on the benefit of reduced tax rate to his customers and hence he has indulged in profiteering. 17. It is also revealed from the perusal of Annexure-8 submitted by the DGAP that between the period w.e.f. 15.11.2017 to 31.03.2018, the Respondent had sold 223 products manufactured by J J out of which rate of tax was reduced in respect of 134 products from 28% to 18% w.e.f 15.11.2017. It is further revealed that out of the above 134 products, 11 products were not supplied during the period between 01.11.2017 to 14.11.2017 and hence for calculating the profiteer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had deliberately charged the enhanced prices with an intention to pocket the amount which he was bound to pass on to the recipients. Therefore, the above contention of the appellant cannot be accepted. 19. It is also apparent from the perusal of Annexure-8 that the DGAP has correctly calculated the amount of profiteering by taking in to account all the supplies made by the Respondent w.e.f. 15.11.2017 to 31.03.2018. Inspite of the claim made by the Respondent that he had purchased the goods on the increased prices from J J after 14.11.2017 there is no denying the fact that he had charged the prices which he could not have charged in view of the reduction in the rate of tax Mere charging of the tax @ after 15.11.2017 cannot be construed to have resulted in passing on of the benefit when the base prices had been deliberately increased. Hence, this contention of the Respondent is not tenable and cannot be accepted. 20. The Respondent has also submitted that the amount of profiteering should be calculated on the basis of the stock which was lying with him as on 14.11.2017 instead of the sales made between 15.11.2017 to 31.03.2018 and therefore, the total amount of profiteer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is order failing which the same shall be recovered by the DGAP as per the provisions of the CGST Act, 2017 and shall be deposited as has been directed vide this order, Since the present investigation in to the issue of not passing on the benefit of reduction in the rate of tax by the Respondent has been conducted w.e.f. 15.11.2017 to 31.032018 only, the DGAP is directed to further investigate the quantum of profiteering which the Respondent has made thereafter and submit his report accordingly. 24. It is also established from the above facts that the Respondent had issued incorrect invoices while selling all the above products to his customers as he had not correctly shown the basic prices which he should have legally charged from them. The Respondent had also compelled them to pay additional GST on the increased prices through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he had failed to pass on, It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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