TMI Blog2019 (12) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 67, 28,592/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited in terms of the Rule 133 (3) (b) of the CGST Rules, 2017. Since, the present investigation is 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. 01.07.2017 to 31.08.2018, the Authority, as per the Rule 133 (5) (a) of the CGST Rules, 2017, directs the DGAP to investigate quantum of profiteering on all the products including the present product which the Respondent is supplying for violation of the provisions of Section 171 of the CGST Act, 2017 and submit his Report as per the provisions of Rule 133 (5) (b) of the CGST Rules, 2017. Penalty - HELD THAT:- The Respondent has denied the benefit rate reduction of the GST to the consumers in contravention of the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2017 Central Excise duty @ 12.5% the MRP with 35% abetement + VAT@14.5% 18157/-(base price-13624/-) 3220059299 dated 04.08.2017 28% 23922 (base price-18689/ 5765/- (base price diff.-5065/-) 2. The said complaint was examined by the Standing Committee and vide minutes of its meeting dated 02.07.2018; it requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and to conduct a detailed investigation in the matter. 3. In this connection, a Notice under Rule 129 of the CGST Rules, 2017, was issued on 10.09.2018 by the DGAP to the Respondent, directing the Respondent to intimate as to whether he admitted that the benefit of reduction in the tax rate had not been passed on to the recipients by way of commensurate reduction in price. The Respondent was also asked to suo- moto determine the quantum of benefit not passed on, if any, and indicate the same in his reply to the Notice issued by the DGAP. Certain documents, viz., Balance sheet, GST Returns (1 3B), price list, details of outward taxable supplies of the impugned product in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT taken on the raw material/inputs used in the manufacture of the product which was amounting to ₹ 24.34 per unit of the product. 6. The Respondent also submitted the Table given below:- Table-B (Amount in Rs.) Details Pre GST period Post GST Period MRP 27,490.00 27,490.00 Excise duty 2,233.56 VAT@14.50% 3,481.27 G5T@28% 6,013.44 Total Taxes 5,714.83 6,013.44 Basic Price 21,775.17 21,476.56 Reduction in Basic Price 298.61 7. The Respondent also furnished the following documents to the DGAP:- i. Invoice-wise details of outwards taxable supplies of the product Washing machine Elena Aqua VX on All-India basis for the period April, 2017 to August, 2018. ii. Price list of the product un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioned at S. No. 1 to 16, post introduction of GST w.e.f. 01 07 2017. On the basis of aforesaid pre and post-GST tax rates and the details of outward supplies of the impugned product to the States mentioned at S, Nos. 1 to 16 of Table, during the period 01.07.2017 to 31.08.2018 furnished by the Respondent, the amount of net higher sale realization due to increase in the base price of the product, despite the reduction in the rate of tax post implementation of GST 01.07.2017, or, the profiteered amount was computed as Rs, 51, 04,002/-. The profiteered amount had been arrived at by comparing the State-wise average base price of the impugned product during the period 01,04.2017 to 30.06.2017, with the actual transaction-wise base prices during the period 01.07.2017 to 31.08,2018. 13. The DGAP also furnished a Table in respect of the place of supply of the total profiteered amount:- Table-D (Amount in Rs.) S.No. State Code State (Place of Supply) Profiteering (Rs.) 1. 1 Jammu Kashmir 9261 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2019, 27.02.2019, 23.04.2019, 21.05.2019 and 12.06.2019, none appeared on behalf of the Applicant No. 1; the Applicant No. 2 was represented by Smt. Gayatri, Deputy Commissioner; the Respondent was represented by Sh. Siddhartha Jain, Consultant, Sh. Ashish Singh, DGM (Finance), Sh. Anirban Ganguly, Head- Indirect Tax, Sh. Amit Tibrewal, Consultant and Sh. Arijit Ghosh, Deputy Manager. 17. The Respondent filed his first written submissions on 11.01.2019. Vide his submissions, he stated that (a) That the proceeding of the DGAP was based on incorrect understanding of facts and was against the principles of anti-profiteering under GST and the law laid down by the Authority; That various details and documents sought by DGAP had been submitted from time to time; That it had been explained to the DGAP that the base price of the said product, as charged from his dealer (M/s. Pittapilli Agencies), had actually been reduced from ₹ 21,7751- (pre-GST) to ₹ 21,4761- (post-GST); That the difference in prices pointed out by DGAP was only due to discounts and incentive schemes offered by him to his dealers, and that the details of the same were as below:- Table --E ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the case of Kerala State Screening Committee and another Vs. M/s. Maruti Suzuki India Ltd. in Case No. 01/2019 decided on 02.01.2019 = 2019 (1) TMI 139 - NATIONAL ANTI-PROFITEERING AUTHORITY passed by this Authority (d) That since in his case. the tax rate on the said product had increased under GST, hence, provisions of Section 171 of the CGST Act were not attracted, as was evident from the fact that in the pre-GST regime, the product was subject to Central Excise Duty @12.5% on 65% of MRP and VAT in general (most of the States) was chargeable @14,5%. Thus, the total tax rate applicable for the product in pre-GST regime basis the MRP was 26.40%, which showed that his was a case of increase in the rate of tax to 28%. He also submitted a Table for the same which is given below:- Table-F (Amount in Rs.) Product [Elena Aqua VX] Pre-GST Post-GST MRP 27,490 27,490 VAT [@14.5%, included in MRP] 3,481 - Excise Duty [@12.5% on 65% of MRP, included in IMP] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration each State, then also, the computation done by the DGAP was principally incorrect, since the instant enquiry was meant only for the State of Kerala and hence, the inclusion of certain other States in the study and exclusion of some others was unjustified. Also that the DGAP had not limited his enquiry to the concerned registered person [IFB Kerala] but had prepared the report at Company level but had still not considered the entire sales of the said product Further if the DGAP had intended to limit his enquiry to specific registered person i.e., IFB Kerala, the impact of taxes paid in other States i.e., in manufacturing State (Goa) for excise duty and VAT reversal in pre-GST regime, ought not have been considered and the analysis should have been limited to pre-GST and post GST tax payments in Kerala only. (h) That even it was assumed but not admitted that the contention of the DGAP was correct, the computation in the report was erroneous and amount of alleged profiteering determined therein was incorrect as even for the 16 States, that had been considered by the DGAP, the question of any profiteering did not arise at all in the present case. The basis adopted by DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -118 Tamil Nadu 18,502 1,16,00,470 628 18,472 5,56,00,418 3,012 18,460 -12 Gujarat 18,435 71,31,167 392 18,192 2,78,89,002 1,550 17,993 -199 Karnataka 17,968 23,91,706 134 17,849 1,10,30,882 622 17,735 -114 Andhra Pradesh 18,248 12,94,720 71 18,235 61,62,499 341 18,072 -164 UP 18,375 12,41,765 68 18,261 46,49,206 260 17,882 -380 Telangana 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in above table. (iii) The states wherever the positive differences were coming out, the sates in terms of quantity were minimal as compared to total sales of the product by the Respondent and such cases should not be considered. Thus, he has submitted that it could be seen that no profiteering was involved and the positive figure as computed in the DGAP report was arising only due to arithmetical errors in deriving the average and not considering certain transactions etc. He also submitted the state wise summary of the revised figure which is as follows:- Table -H (Amount in Rs.) S.No. State code State As per DGAP Report Revised working modifying the aforesaid errors Average Price Alleged Profiteering amount 1 32 Kerala 17,990 27,75,386 -6,70,319 2 33 Tamil Nadu 18,502 15,68,332 -37,503 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 Delhi 18,930 - -2,39,257 19 27 Maharashtra 18,427 - -91,926 20 21 Orissa 19,636 - -17,418 21 06 Haryana 19,035 - -136 22 02 Himachal Pradesh 18,508 - 1,321 Subtotal for balance 6 states (Not considered by DGAP] -9,63,458 Thus, it was clear that, the manner of computation adopted in the report submitted by DGAP was incorrect and the question of any profiteering on the product due to GST did not arise. (k) He also submitted that since any methodology and procedure for determining the anti-profiteering amount was not prescribed by Legislature, he could not be h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST laws without considering any efficiency in the operations, commercial negotiations, etc., was incorrect and unjustified since a mere change in rate of tax could not be considered as profit which would necessitate reduction in price and that the business of dealer and impact of changes on supply chain ought to be seen as a whole for the purposes of Section 171 of the Act. He also mentioned that it was also imperative to note that GST had also led to various increases in costs like increase in working capital costs, cost of GST implementation, etc., which had been totally ignored. (n) That the expansion of proceedings by DGAP beyond the state of Kerala was without jurisdiction and the submission of report by DGAP, without granting any opportunity for personal hearing to the Respondent, was against the principle of natural justice more so, since he had submitted all requisite documents and information as solicited by the DGAP. Also that the scope of the instant proceeding should have been restricted to the Applicant No. 1 and the registered person in respect of the said product. Both the initiation and conduct of proceedings under Rule 129 and order under Rule 133 was in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only those invoices had been taken into consideration where the post-GST discounted base price was more than the pre-GST discounted base price. The invoices where the post-GST discounted base price was less than the pre-GST discounted base price, had not been considered by DGAP. Regarding the Respondent s contention of the modalities and mechanism of anti-profiteering, the DGAP reported that the Respondent had mentioned that there was no guideline / methodology for ascertaining the quantum of profiteering by the supplier. In this regard, it might be seen that as per Rule 126 of the CGST Rules, 2017, the Authority has been empowered to determine the methodology and procedure for determination as to whether the reduction in the rate of tax or the benefit of input tax credit has been passed on by the registered person to the recipients by way of commensurate reduction in prices. Regarding the contention of expansion of proceeding by DGAP was without jurisdiction and submission of report by DGAP without granting any opportunity for personal hearing to the Respondent was against the principle of natural justice, the DGAP mentioned that there was nothing in the existing statutory provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.6% 26.34% 8 Karnataka 4.5% 26.53% 9 Uttar Pradesh 1.9% 26.70% 10 Gujarat 11.1% 26.81% 11 Bihar 0.5% 27.10% 12 North East 0.1% 27.10% 13 Chhattisgarh 0.4% 27.25% 14 Rajasthan 0.1% 27.73% 15 West Bengal 0.4% 27.74% 16 Madhya Pradesh 0.6% 27.88% 17 Mumbai (Due to Octroi) 0.2% 30.63% (b) That there had been no change in MRP pre and post GST (₹ 27,490/-) and the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F=B+E] 4,533 5,161 5,064 5,089 Effective tax rate [G=F/D*100] 24.0% 28.7% 29.4% 29.2% Explaining the table above, the Respondent submitted that the tax rates applicable on product during the pre-GST regime were Excise Duty @ 12.5% on 65% of MRP and VAT @ 14.5% on Actual Selling price. He added that since the two above mentioned taxes i.e., Excise Duty and VAT were payable at two different bases, varying discounts could be offered to different dealers based on independent price negotiations and the tax rate for a product would not change in the pre-GST era on account of different prices charged to different customers. Since, DGAP had computed the tax rate based on discounted base price, there was different effective tax rate for each dealer on account of varying quantum of discounts offered to each dealer. The Respondent thus submitted that it was incumbent on the DGAP to have not calculated the tax rate on the basis of post discount prices. (e) He reiterated that the method of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pre GST prices with independent prices for each dealer during the Post GST period, Further, the DGAP had ignored the transactions where post GST prices were lower than pre GST average price and had alleged profiteering for transactions where post GST price was greater than the pre GST Average price. This approach was incorrect as comparison of an average value 1 price with sales at above average values/price would always arithmetically result in a positive number even if the prices for that customer has been reduced post GST. (g) That the non-consideration of Large number of sale invoices where post GST discounted price were lower than average of pre-GST discounted base price, in itself showed that computation of profiteering in the report was erroneous and arbitrary. He also stated that the fact that DGAP had not replied to the several computational errors highlighted by him implied that such errors had been accepted by the DGAP. He also submitted his version of the calculation of profiteering based on comparison of prices for the pre and Post GST periods at Dealer level. (h) That the principle adopted by DGAP was actually an attempt to regulate the price and profit whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -8,93,765 1,30,057 -10,23,823 Madhya Pradesh -2,678 11,438 -14,116 Rajasthan -9,609 - -9,609 Tamil Nadu -5,84,633 42,892 -6,27,524 Uttar Pradesh -64,245 12,386 -76,631 West Bengal 12,657 16,831 -4,174 Jammu Kashmir -3,578 - -3,578 Haryana -725 - -725 Punjab -14,610 - -14,610 Uttarakhand -10,093 - -10,093 Delhi -1,54,096 3,864 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 which was higher, had been taken by the DGAP. On this issue, the DGAP reported that this was a new fact which had not been previously submitted by the Respondent, at any time during the investigation. (b) That the dealer-wise data in respect of different States could not be considered to arrive at the total applicable tax rate in the pre-GST period as there were more than 1000 dealers to whom the Respondent had made supplies in the pre-GST period as also the post-GST period and it was not possible to compare the pre-GST and post-GST base prices in respect of each dealer separately. DGAP further submitted that the investigation was conducted based on the average of the discounted base prices during the pre-GST period separately for each State which were then compared with the actual invoice-wise discounted base prices in the post-GST period for each of the States separately and that he had adopted this line of investigation uniformly for all the cases. (c) That only those invoices had been taken into account for computing profiteering, where the post-GST discounted base prices were higher than the average pre-GST discounted base price. The invoices where the post-GST di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 Andhra Pradesh 153892 2 10 Bihar 30083 3 22 Chhattisgarh 32242 4 24 Gujarat 489976 5 20 Karnataka 179221 6 32 Kerala 3459894 7 23 Madhya Pradesh 132493 8 18 Assam 2095 9 3 Punjab 19184 10 8 Rajasthan 840 11 33 Tamil Nadu 2047928 12 36 Telangana 90596 13 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of GST which was beyond the ambit of Section 171 of the CGST Act, 2017, since the section 171 of CGST Act, did not deal with comparison of any change in the tax rate in post-GST regime with tax rates applicable during pre-GST regime. He further submitted that the above Section contained no reference to tax rate under provisions of erstwhile tax laws i.e., central excise and VAT. In fact, provisions of the erstwhile laws had been repealed by virtue of Sec. 174 of CGST Act. (b) Without prejudice to his submissions dated 27.02.2019, the DGAP had completely overlooked the directions of the Authority to review the dealer wise pre and post GST price and tax rate analysis submitted by IFB. Instead of reviewing the working submitted by the Respondent, the DGAP had only provided the justification that it was not possible to compare the details submitted by the Respondent as there were more than 1000 dealers to whom the sales had been made. The DGAP had also recomputed the profiteering impact considering the invoice-wise cum-tax prices, i.e. total invoice price including taxes - which was clearly not the direction given by the Authority. (c) The DGAP had inter-alia failed to un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and exemption Clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a changing provision, the benefit must necessarily go in favour of subject/assessee. In the governance of Rule of low by a written constitution, there is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizen towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject Assessee may warrant visualising different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions made by the Respondent and by the DGAP. The issues to be decided by the Authority are as under- 1) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 28. Perusal of Section 171 of the COST Act shows that it provides as under:- (1). Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices In the instant case, the Respondent has raised certain objections first of which is that the average price was considered for pre-GST period, but for the post-GST period, the actual price from the invoices was taken which is incorrect and the average prices for post GST period should also have been taken for the computation of profiteering amount, This objection is also incorrect since it is impossible to compare the actual pre-GST invoices with the actual post-GST invoices state-wise and dealer-wise. It was also not feasible to check the availability of the pre-GST invoices of the same dealer for same state with the post-GST invoices of the same dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 1402 - NATIONAL ANTI-PROFITEERING AUTHORITY and Kerala State Screening Committee 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 are of no help to the Respondent since no fixed mathematical methodology can be determined for all the cases of profiteering as the facts of each case differ. Therefore, the determination of the profiteered amount has to be computed by taking into account the particular facts of each case, Hence, it is respectfully submitted that the cases referred to by the Respondent are of no help to him. 31. The Respondent has also cited the judgement passed in the case of Indraprastha Gas Ltd. v. Petroleum and Natural Gas Regulatory Board and others. 2015 (9) SCC 209 = 2015 (7) TMI 1130 - SUPREME COURT in his support. However, in this case the issue involved was fixing of the maximum retail price of the gas on which it could be sold, however in the present case no such direction has been sought to be passed by the DGAP through his present Reports and hence the argument advanced by the Respondent on the basis of the above judgement cannot be accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COURT in his support which pertain to the interpretation of the statutes. It is to emphasize that the legal principles for interpreting a statute are to be used only when parent legislation is ambiguous and unclear in its intent. In the instant case, Section 171 of the CGST Act, 2017, is crystal clear in its objective and scope and it is on different footing when compared to all other sections of the CGST Act, 2017 and hitherto prevalent taxation laws of the land in as much as it provides for a mechanism to ensure that consumers derive the benefit of any reduction in tax or increased availability of ITC, which is ultimately a sacrifice made by the Govt. from its revenue. Hence, it is respectfully submitted that the cases referred to by the Respondent No 1 are of no help to him. 35. We also find that the Respondent has further averred that the MRP for the product was not increased by him even when rate of tax, post introduction of GST, Le. in July 2017, had been increased from 26,40% to 28% and hence he should be allowed to offset this loss when the tax rate was later reduced, This averment of the Respondent is also untenable since the rate of tax was not increased as the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. Nowhere, it mentions that the investigation should be done only for the State of complaint filed and not for other states, The Authority is therefore of the view that all the supplies made have to be taken into account. 38. The Respondent further objected that no methodology and procedure for determining the anti-profiteering amount had been prescribed by Legislature and the provisions of Section 171 of the CGST, Act and Rule 122 to 137, being part of a taxing Statute cannot be enforced in the absence of machinery provisions for computation of the profiteered amount. He also objected that no mechanism/ guideline had been prescribed as to whether the price alteration was required to be done at entity level, State level, product level, SKU level, category level and there was no guidance whether commensurate change in price would be assessed in absolute terms or as trend or in percentage terms. On these issues, it is stated that Section 171 (1) of the CGST Act, 2017 clearly states that Any reduction in the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority. 40. The Respondent has also contended that the calculation of DGAP is based on discounted base price and since discounts were reduced, there emerged so called profiteering. The Respondent further stated that the tax rates applicable on product during the pre-GST regime were Excise Duty @ 12.5% on 65% of MRP and VAT a 14.5% on Actual Selling price and since the two above mentioned taxes i.e., Excise Duty and VAT were payable at two different bases, varying discounts could be offered to different dealers based on independent price negotiations and the tax rate for a product would not change in the pre-GST era on account of different prices charged to different customers, With regard to the above contentions it would be relevant to refer Section (15) (1) of the CGST Act, 2017 which reads as under:- The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. We therefore observe that Section 15 (3) (a) provides that the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Respondent vide his submissions dated 27,02.2019 had mentioned that he had increased the MRP of the product from ₹ 26,990/- to ₹ 27,490/- in the month of March, 2017. However, the product sold during the period April, 2017 to June, 2017, was carrying the MRP of both ₹ 26,9901- and ₹ 27,490/-. The DGAP further reported that the Respondent had also stated that he had again increased the MRP of the product from ₹ 27,490/- to ₹ 28,4901- w.e.f. 07.06.2018 which was a new fact for the DGAP which had not been previously submitted by the Respondent, at any time during the investigation carried by the DGAP. Thus, the DGAP recalculated the profiteered amount for the period 01.07.2017 to 31.08.2018 which came out to be ₹ 67,28,592/- and for period 01.07.2017 to 06.06.2018 (in view of increase in the MRP/base price w.e.f. 07.06.2018) which came out to be Rs, 37,97,663/-. Since, the Respondent had himself agreed that he had again increased the MRP of the product from ₹ 27,490/- to ₹ 28,490/- w.e.f 07.06.2018, thus it can be inferred that the Respondent had not reduced the MRP of the product at any stage within the period of investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 Chhattisgarh 16121 4. 24 Gujarat 244988 5. 29 Karnataka 89610.50 6. 32 Kerala 1729947 7. 23 Madhya Pradesh 66246.50 8. 18 Assam 1047.50 9. 3 Punjab 9592 10. 8 Rajasthan 420 11. 33 Tamil Nadu 1023964 12. 36 Telangana 45298 13. 9 Uttar Pradesh 23507.50 14. 5 Uttarakhand 2352 15. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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