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TMI Blog2019 (6) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 41/2017-Central Tax (Rate) dated 14.11.2017, as he had increased the base price of the "Vitrified Tiles" (here-in-after referred to as the product) from Rs. 750/- in the pre-rate reduction period to Rs. 814/- in the period post implementation of the notification dated 14.11.2017. The Applicant No. 1 had also claimed that since the Respondent had increased the MRP of the product after the rate of tax was reduced on it, he 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 regard, Uttar Pradesh State Screening Committee had relied on two invoices issued by the Respondent, one dated 06.11.2017 (Pre rate revision) and the other dated 09.12.2017 (Post rate revision), as has been discussed in table given below:- Table Sr.No. Name of the Product Supplied Pre GST rate revision on 15.11.2017 Post GST rate revision on 15.11.2017 Invoice No. & Date Tax Rate Base price (in Rs.) Invoice No. & Date Tax Rate Base price (in Rs.) 1. Vitrified Tiles (HSN Code 6901) 1649 06.11.2017 28% 750 1950 09.12.2017 18% 814 2. The above complaint was examined by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time to complete the investigation up to 09.12.2018 which was allowed by this Authority under Rule 129 (6) of the CGST Rules, vide its order dated 21 08.2018. The present investigation pertains to the period between 15.11.2017 to 30 06.2018. 5. The DGAP, in his Report, has stated that the Respondent submitted his replies to the DGAP, vide letters dated 23.07.2018, 02.09.2018, 23.09.2018, 08.10.2018, 22.10.2018, 01.11.2018 and 15.11.2018. Vide his replies, the Respondent submitted that he is a retailer of tiles and his business was not based on MRP or fixed prices but at prices lower than MRP. He added that, no sale was made on MRP since his customers bargained the price based on the volume of requirement of tile boxes and finalized the deal at competitive prices. He further added that the Applicant No. 1 had offered to purchase vitrified tiles at a net price of Rs. 960/- per box, even though the MRP was Rs. 1300/- per box and that he had to accept the above price offered by the above Applicant due to competition and downfall in the business. The Respondent has further submitted that the above Applicant had also filed a complaint in the office of State Goods and Service Tax, U.P. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e base prices of the tiles when the rate of tax was reduced from 28% to 18% and did not pass on the commensurate benefit of rate reduction to his customers. It was the Respondent's statutory responsibility and obligation to pass on the benefit of reduction in the GST rate to his customers. However, it was evident from the invoices submitted by the above Applicant, that by increasing the base price of the product from Rs. 750/- to Rs. 814/-, the benefit of the GST rate reduction was not passed on to him. 8. The DGAP has also analysed the outward sales data for the period 01.11.2017 to 30.06.2018 of the tiles supplied by the Respondent and stated that the prices of the same even before reduction in the tax rate w.e.f. 15.11.2017 used to vary across different invoices for the same period. For example, prior to GST rate reduction w.e.f. 15.11.2017, the Respondent had sold the tiles (size 2"X1") in the price range between Rs. 234 to Rs. 525. Therefore, the average base prices for all sizes available from the sale data, have been considered to be the base prices during the pre-rate reduction period for a specified size. The DGAP has further observed from the analysis of outward sales da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confidence and to bring sense of security among the consumers towards the Act. However, in absence of any notified/specified rules for the proceedings under the anti-profiteering provision, there was lack of clarity regarding factors to be considered for profiteering or methods for determination of profiteering. 14. The Respondent further pointed out certain major lapses in the calculation sheet of profiteered amount. He submitted that the DGAP had taken the base prices for all the categories of products for the period prior to 15th November 2017 arbitrarily as the average of all discounted prices at which he had sold the goods (tiles) during the period of 1st November 2017 to 14th November 2017, in place of the MRP based standard prices. Further, the DGAP had taken a single price/rate as base price for all the qualities of the product in a particular size category; whereas, there was much price variation among the various qualities of tiles of any size category. He also submitted that the DGAP had compared selling price (inclusive of GST) with cum-tax Base Price (Ideal selling price based on above assumptions) and had taken the difference as profiteering. The amount of profiteeri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guard the interest of the consumers and deal with the violators who did not pass on the benefits to be passed on to the consumers, through anti-profiteering measures and there was no intention of the legislature to regulate the competitive prices and corresponding rebates and discounts and a dealer could not be forced to grant a certain amount of rebate or discount or to maintain the uniformity in rebates and discounts and allowing of rebate or discount was completely a discretionary subject for the dealers, which could not be regulated through the legislation. 17. He has further submitted that even if the contention of the Applicant No. 1 be taken according to his own viewpoint, the said transactions could be described as under:- TABLE Sl.No. Particulars Before change in Tax (GST) Rate [up to 14/11/2017] After change in Tax (GST) Rate [after 14/11/2017] 1. Product description (Complete Detail given under Annexure - 2) A Vitrified Tiles(4'x2') Vitrified Tiles (32'x32') Vitrified Tiles(4'x2') Vitrified Tiles (32'x32') 2. HSN Code (Chapter heading) B 6907 6907 6907 6907 3. Invoice No. C 1649 1649 1950 1950 4. Date of transaction D 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .40 1950 09-12-2017 814.00 -152.40 10 Tile Size 32X32 (PVT. STD SOLI & PLUS Kajaria) 1313 11-10-2017 1000.00 2506 23-01-2018 994.06 -5.94 11 Tile Size 48X48 (ETER. COM. H.D. WOOD Kajaria) 1690 11-11-2017 542.00 1835 23-11-2017 523.73 18.27 12 Tile Size 48X8 (ETER. COM. H.D. WOOD Kajaria) 1564 02-11-2017 960.00 1708 16-11-2017 948.00 -12.00 13 Tile Size 48X8 (ETER. STD. HD. WOOD Kajaria) 1580 05-11-2017 637.00 1919 06-12-2017 587.29 -49.71 14 Tile Size 4X2 (ETR.COM PO. HD Kajaria) 1251 06-10-2017 750.00 2392 17-01-2018 745.76 -3.24 15 Tile Size 4X2 (ETR.PREM. PO. HD Kajaria) 1564 02-11-2017 1250.00 2434 21-01-2018 1220.00 -30.00 16 Tile Size 4X2 (ETR.STD. PO. HD Kajaria) 823 08-09-2017 875.00 2395 17-01-2018 800.00 -75.00 17 Tile Size 4x4 (ETR.COM PO. HD Kajaria) 965 17-09-2017 850.00 2414 13-01-2018 813.56 -36.44 18 Tile Size 5X32 (ETR.COM PO. HD Kajaria) 1678 09-11-2017 500.00 2755 15-02-2018 494.00 -600 19 Tile Size 5X32 (ETR, STD PO. HD Kajaria) 571 13-08-2017 620.00 1955 03-12-2018 513.00 -113.00 20 Tile Size 6X24 (CRM UTY DIGITAL Kajaria) 1668 08-11-2017 375.00 2013 10-12-2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teering after 15.11.2017 0 0 0 0 Profiteering if Average Rate taken Rs. 386.33 AS the DGAP had done (230-386.33)X100=0 (390-386.33)X300=1101 (520-386.33)X600+=80202 81303.00 Actual Sales after 15.112017 23000 117000 312000 452000.00 However, sale on the basis of Average Rate 386.33X1000 386330.00 From the above average rate methodology, it is clear that average rate theory results in blunders. In the above example, even in case of loss in actual, the average calculation method declared it to be Profiteering of Rs. 81,303.00. Even considerable difference in sale figure i.e Rs. 386330.00 against actual sale of Rs. 452000.00. Hence average method is not recognised in any accounting standard/ law and not in use anywhere in the world. Therefore, the average theory of DGAP in the instant case has no leg to stand as by this (imaginary) average theory for calculating the profiteering is taken, every trader shall be restricted to sale the same product on same rate even after 15.11.2017 (tax reduce date) else it shall amounts to profiteering as done in the case of Noticee hereon also as is clear from the above example." 24. The Respondent also cit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk, involves a taxable sale of goods must be decided on the facts and circumstances of the case. The burden in such a case lies upon the taxing authorities to show that there was a taxable sale, and that burden is not discharged by merely showing that property in goods which belonged to the party performing service or executing the contact stands transferred to the other party". 26. He has also submitted that from the above judgements, it was clear that it was duty of the DGAP to properly investigate and to calculate actual profiteering by following the proper accounting norms so that the Respondent might not be penalized, which the DGAP did not do. 27. He has further intimated that there was no restriction on fixing Base / Sale rate before 15.1 1.2017 and the provisions of Section 171 of CGST Act were inapplicable due to no change in the tax rates. He has further clarified that there was no restriction on accepting the profit according to Article 19 (g) of the Constitution of India before 15.1 1.2017 but the profiteering would be applicable after 15.11.2017 when the rates of GST were reduced from 28% to 18%. He has also submitted the profiteering calculation sheet as per his cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arefully considered the material placed before us and all the submissions made by the Applicant No. 1 dated 14.01.2019, Respondent No. 1 dated 25.01.2019, 13.02.2019, 06.03.2019 and 23.04.2019, and by the DGAP dated 05.02.2019, 12.02.2019 and 25.03.2019. 33. It is revealed that the Central Govt. vide Notification No.41/2017-Central Tax (Rate) dated 14.11 2017 had reduced the rate of GST from 28% to 18% in respect of the tiles with effect from 15.11.2017, the benefit of which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the CGST Act, 2017. From the above discussion and the invoices available, it is revealed that the Respondent had increased the base price of the product from Rs. 750/- to Rs. 814/when the rate of tax was reduced from 28% to 18% with effect from 15.11.2017. Thus, by increasing the base price of the product, post-GST rate reduction, the benefit of reduction in tax rate was not passed on to the Applicant No. 1 by the Respondent. 34. As far as the contentions of the Respondent mentioned in Para 13 to 28 and in Para 31 of this order are concerned the same are discussed herein below. (i) He has sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se calculation and the base price for pre and post rate reduction of GST was arrived at as Rs. 750/- and Rs. 814/exclusive of tax at the rate of 28% and 18 % respectively. Second contention that the single base price for different qualities was taken, the same is also not acceptable because copies of invoices of the Respondent do not carry any details of quality/colour/ texture/brand of the tiles supplied. Even the brand of the tiles was not been mentioned in the invoices. Hence, we find that the approach adopted for reckoning the profiteering by the DGAP is correct. While making the above observation, we keep in mind that the Respondent has not provided any specific details of the goods, i.e. the size/quality/colour/texture etc. of the tiles supplied by him through the invoices dated 06.11.2017 and 09.12.2017, therefore, we are bound to accept above two invoices as both these invoices do not carry details of the quality, size colour and brand name even. Profiteering has to be seen from the prism of the consumer and if he had to pay more than the commensurately reduced price, it amounts to profiteering. In fact, even if the tax has been paid in excess of the correctly leviable amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoice had no details of size, quality & texture etc. and the Respondent has not provided the invoices of his suppliers in respect of his purchases despite being asked to do so several times, merely supplying MRP list of his supplier is not sufficient and hence this submission of the Respondent cannot be accepted. (vii) The facts of the cases referred by the Respondent viz. of KSC and another Vs. M/s. Maruti Suzuki India Ltd. Case No. 01/2019 decided on 02/01/2019 = 2019 (1) TMI 139 - NATIONAL ANTI-PROFITEERING AUTHORITY and of KSC and another Vs. M/s. Asian Paints Ltd. Case No. 29/2018 decided on 27.12.2018 = 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY, are not similar to the facts of the instant case as the Respondent in this case could not prove that the amount charged after GST was on account of reduction in the discount, rather it can be inferred that the base price was increased after tax rate reduction. In table A' of his submission, the Respondent has merely portrayed the discounts which were reduced after rate reduction, hence the above cases cannot be relied upon. (viii) In respect of the Respondent's submissions that no law can regulate his profit ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact DGAP was only asked to submit his report on the submission dated 06.03.2019 of the Respondent which he has done vide his Report vide dated 28.03.2019. (xiii) The Respondent in his submission dated 12.06.2019 has also stated that DGAP had wrongly taken separate rates for the same sized tiles twice. This fact cannot be considered since he has produced no documentary evidence before the DGAP to substantiate this claim. He also did not furnish any purchase data, neither before the DGAP not before the Authority despite being asked for the same by the Authority. His claim of size column in respect of the 39 items sizes being left blank in the calculation sheet of the DGAP also does not hold good since he did not provide the data of those 39 items sizes before the DGAP. (xiv) The Respondent has further questioned the methodology so adopted by the DGAP. We find that his contention regarding methodology is incorrect since the methodology adopted by the DGAP was the most apt and the Respondent's submissions questioning the DGAP's methodology have no basis, being without any documentary basis. The Respondent's submissions are nothing but an afterthought. The DGAP has conducted its in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent which is detailed in the Para 31 of the present order is also incorrect. In this context, we find that the Respondent had not cooperated during the entire period of investigation and had not submitted the requisite data at any point of time. During the proceedings of the Authority, such submissions of the Respondent are devoid of any meaning as at no stage the case was considered fit to be sent for re-investigation. 35. Based on the above facts it is established that the Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax to his recipients by commensurate reduction in the prices. Accordingly, the amount of profiteering is determined as Rs. 54,67,149/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, 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. 54,67,149/- along with the interest to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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