9911796707
TMI Blog2020 (3) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of an application dated 30.07.2018. (Annexure-1) filed by the Applicant No. 1 against the Respondent in respect of supply of Deodorant 'Wild Stone Deo Chrome BX 120 ml. The Applicant No 1 had stated that the above product had been shipped by the Respondent to M/s. Big Bazar, Inderlok on 28.09.2017 under Purchase Order No. 8114615731 with the MRP of Rs. 250/-, was again supplied on 04.12.2017 under purchase Order No. 81.15262327 with the MRP of Rs. 250/- and on 16.06.2018 it was again sold under Purchase Order No. 4518224285 with the same MRP of Rs. 250/-. The above Applicant had alleged that the Respondent had not pass on the benefit of reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017 which was reduced vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 in terms of Section 171 of the CGST Act ,2017 and instead, he had increased the base price of 'Wild Stone Deo Chrome BX 120 ml. Deodorant to maintain the same MRP of Rs. 250/-. 2. The DGAP in his above Report has stated that the Standing Committee in its meeting held on 11.03.2019 had examined the above said reference and it had referred the application to the DGAP for detailed investigation und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had submitted the following documents/information:- a. GSTR-1 & GSTR-3B Returns for the period from October, 2017 to March, 2019 for all the registrations held all over India. b. Details of invoice-wise outward taxable supplies during the period from July, 2017 to December, 2019. c. Price Lists (pre and post November, 2017) for all the products, specifically indicating the SKUs impacted by the GST rate reduction w.e.f. 15.11.2017. d. Sample copies of invoices issued to the dealers, pre and post 15.11.2017. 7. The DGAP in his report has also submitted that the reference from the Standing Committee on Anti-Profiteering, various replies of the Respondent and the: documents/evidence placed on record had been carefully examined by him and the main issues to be examined were whether the Respondent had reduced the rate of GST from 28% to 18% on the goods supplied by him w.e.f. 15.11.2017 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to the recipients, in terms, of Section 171 of the CGST Act, 2017. 8. The DGAP has further mentioned that in respect of the issue of reduction in the rate of GST, it was observed that the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir (BS) 150ml 40 127.81 3. DEL/GTI-705 24/11/2017 Delhi Delhi Affair (BS) 150ml 40 127.81 5. DEL/GTI-729 29/11/2017 Delhi Delhi Affair (BS) 150ml 40 120.91 6. DEL/GTI-730 29/11/2017 Delhi Delhi Affair (BS) 150ml 80 120.91 7. DEL/GTI-779 09/12/2017 Delhi Delhi Affair (BS) 150ml 80 120.91 11. The DGAP has further reported that it was evident from the Table-A that the Respondent had increased the base price of the above product after GST rate reduction (post 14.11.2017) and then reduced the same but still kept the increased base price (i.e. Rs. 120.91 as against Rs. 115.72) as compared to the pre-GST rate reduction price. The DGAP has therefore, concluded that the claim of the Respondent was incorrect. 12. The DGAP in his Report has also stated that the next issue was to determine and quantify the profiteering made by the Respondent on account of not passing on the benefit of the reduction in the rate of GST on the goods supplied to the recipients, in terms of Section 171 of the CGST Act, 2017. As per the invoices submitted by the Respondent, the DGAP has observed that the Respondent had increased the base prices of the goods whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 1098677 17. Meghalaya 17 457750 0 0 457750 18. Assam 18 7164063 636054 0 7800117 19. West Bengal 19 11436665 351961 0 11788626 20. Jharkhand 20 4522384 690168 0 5212552 21. Odisha 21 11706772 1176834 0 12883606 22. Chhattisgarh 22 8576800 0 0 8576800 23. Madhya Pradesh 23 24697908 528286 0 25226194 24. Gujarat 24 10138881 1753591 0 11892472 25. Maharashtra 27 19982374 7241984 1799 27226157 26. Karnataka 29 5798401 1574107 0 7372508 27. Goa 30 597649 5219 0 602868 28. Kerala 32 1209329 469677 0 1679006 29. Tamil Nadu 33 1751785 1115094 0 2866879 30. Puducherry 34 88797 0 0 88797 31. Telangana 36 4063323 2506843 0 6570166 32. Andhra Pradesh 37 5229373 1134903 0 6364276 Total 18,85,04,799 2,92,42,335 17,49,694 21,94,96,828 14. The DGAP in his Report has contended that in the present case, the base prices of the goods under investigation had indeed been increased post GST rate reduction w.e.f. 15.11.2017 and thus, by increasing the base prices of the goods consequent to the reduction in the GST rate, the commensurate benefit of reduction in the GST rate from 28% to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced by the Respondent on the orders passed by this Authority in the following cases wherein the investigation had been restricted to the products against which the complaint was filed:- * Rishi Gupta v. M/s. Flipkart Internet Pvt. Ltd. = 2018 (7) TMI 1490 - NATIONAL ANTI-PROFITEERING AUTHORITY * Ankur Jain v. M/s Kunj Lub Marketing Pvt. Ltd. = 2018 (10) TMI 510 - NATIONAL ANTI-PROFITEERING AUTHORITY * Sandeep Puri v. M/s. Glenmark Pharmaceuticals Ltd. = 2019 (10) TMI 934 - NATIONAL ANTI-PROFITEERING AUTHORITY d. That it was a settled principle in law that if the manner of doing a particular act was prescribed under any statute, that act must be done in the manner so prescribed or should not be done at all. Reliance in this regard has been placed on the case of State of Uttar Pradesh v. Singhara Singh = 1963 (8) TMI 43 - SUPREME COURT wherein it was held that:- "8. The rule adopted in Taylor v. Taylor [(1875) 1 Ch D 426, 431] is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Continental Commercial Corporation v. ITO = 1975 (1) TMI 26 - MADRAS HIGH COURT wherein the Hon'ble Madras High Court while dealing with an amendment that expanded the jurisdiction of income Tax Officer, had held that such an amendment must be prospective and could not have a retrospective effect. The relevant extract of Para 6 of the judgment has been quoted below:- "Even so, the learned counsel for the revenue contended that section 274 (2) and the amendment made by Act 42 of 1970 are procedural in nature and, therefore, the amendment would apply to all cases of infringements whether committed before or after the amendment. In other words, the amendment was retrospective and would apply to even a case where the return was filed prior to; the amendment. The learned counsel, in this connection, also relied on the marginal note saying "procedure". We are unable to agree with this contention of the learned counsel. The provision relates to the jurisdiction of the Income-tax Officer to deal with penalty proceedings. Before the amendment the Income-tax Officer could deal with cases falling under section 271 (1) (c) only if the minimum penalty imposable did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of registration. Hence, the authorities (DGAP, NAA) ought to be circumspect while exercising their powers while undertaking investigation and issuing rulings. k. That it was also settled rule of law that when a statute was penal in character, it must be strictly followed. In the case of State of Jharkhand v. Ambay Cements = 2004 (11) TMI 319 - SUPREME COURT, the Hon'ble Supreme Court has held as under:- "it is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein" l. That in the case of Reckitt Benckiser India Pvt. Ltd. v. Union of India = 2019 (7) TMI 1135 - DELHI HIGH COURT the Hon'ble High Court of Delhi has directed that no information was required to be submitted to the DGAP ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;CIT v. Dalipur Construction Pvt. Ltd. = 2017 (1) TMI 1709 - ALLAHABAD HIGH COURT decided by the Hon'ble Allahabad High Court wherein the Department inter-alia argued that once objection regarding jurisdiction was riot taken before the Assessing Officer, the order could not be challenged. However, the Hon'ble Court while rejecting the argument of the Department observed that lack of jurisdiction was not a mere irregularity but nullity in the eyes of law and if an authority had no jurisdiction, same could not be conferred even by the con Sent of the parties. p. That the Hon'ble Court while passing its decision in the case of Dalipur Construction (supra) inter-alia relied on the following decisions to enunciate that jurisdiction could not be conferred by consent or acquiescence:- Judgements Relevant Text United Commercial Bank Limited V. Their Workmen = 1951 (4) TMI 25 - SUPREME COURT "No acquiescence or consent can give a jurisdiction to a court of limited jurisdiction which it does not process." Kiran Singh v. Chaman Paswan = 1954 (4) TMI 48 - SUPREME COURT "A defect of jurisdiction ... strikes at the very authority of the Court to pass any decree and such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, if the Commissioner is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of 60 days, he can allow it to be presented within a further period of 30 days. In other words, this clearly shows that the appeal has to be filed within 60 days but in terms of the proviso further 30 days' time can be granted by the appellate authority to entertain the appeal. The proviso to sub-section (1) of Section 35 makes the position crystal clear that the appellate authority has no power to allow the appeal to be presented beyond the period of 30 days.. The language used makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning delay only up to 30 days after the expiry of 60 days which is the normal period for preferring appeal. Therefore, there is complete exclusion of Section 5 of the Limitation Act. The Commissioner and the High Court were therefore justified in holding that there was no power to condone the delay after the expiry of 30 days' period." s. That as per the decisions in the cases of CCE v. Hongo India (P) Limited and Another = 2009 (3) TMI 31 - SUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Committee to examine the matter was extinguished and a very valuable right had come to vest in the Respondent that the investigation could not be proceeded further. In this regard, reference was made to the judgment of Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and others = 2015 (1) TMI 1053 - SUPREME COURT, wherein the Hon'ble Supreme Court has considered. the respective rights of the parties upon expiry of limitation period as under:- "26 The law of limitation is a substantive law and has definite consequences on the right and obligation of a party to arise. These principles should be adhered to and applied appropriately depending on the facts and circumstances of a given case. Once a valuable right has accrued in favour of one party as a result of the failure of the other party to explain the delay by showing sufficient cause and its own conduct, it will be unreasonable to take away that right on the mere asking of the applicant, particularly when the delay is directly a result of negligence, default or inaction of that party. Justice must be done to both parties equally. Then alone the ends of justice can be achieved. If a party has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time limit prescribed in Regulation 22(1) is only directory and not mandatory. It is not even the contention of the respondents that the time limit prescribed in Regulation 22(1) need not be strictly adhered to. On the, question that the first respondent is duty bound to initiate proceedings within 90 days from the date of receipt of offence report, there are no two opinions, at least before me. Therefore, the decision of the Division Bench of the Delhi High Court is of no assistance to the respondents. Hence the first contention is to be upheld." z. That once the initiation of investigation proceedings was bad in law in as much as the Standing Committee had gone beyond the permissible time limit (including the extended period), the entire proceedings would be rendered void ab initio and without authority of law. The proper initiation of investigation proceedings was a pre-requisite for conferring the jurisdiction especially given that there was no power to this Authority to suo-motu expand the time limit for initiation of subject investigation. That the continuance of the proceedings was contrary to the mandate of Rule 128 of the. CGST Rules and was in clear violation of the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17th GST Council Meeting held on 18.06.2017. dd. That this Authority in the case of M/s Jubilant Foodworks Ltd. = 2019 (2) TMI 295 - NATIONAL ANTI-PROFITEERING AUTHORITY has itself admitted in. Para 47 that no methodology of calculation of profiteered amount could be fixed as parameters required to be taken into account would vary from industry to industry. The stance of this Authority that no methodology/guidelines could be prescribed for computing the profiteering amount was untenable. In the case of anti-dumping levies imposed under the Customs Tariff Act, 1975, there were broad guidelines on the basis of which the extent of dumping and anti-dumping duty was quantified. Even under the anti-dumping investigations, the products under consideration were from completely different industries still, the general principles for determination of injury and dumping margins were well enshrined under the law and the rules made thereunder. In this regard, the principles for determination of injury, evidence of dumping and calculation of non-injurious price had been provided in a detailed manner under the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it was also observed in Gullapalli [AIR 1959 SC 308 = 1958 (11) TMI 28 - SUPREME COURT], if one person hears and other decides, then personal hearing becomes an empty formality." gg That the. DGAP could not be given a free pass to compute profiteering in a random manner without paying any heed to the commercial/business realities or mathematical principles. There was a complete lack of transparency and a patent disconnect in the approach followed by the DGAP which varied from case to case. For instance, in the present case, the DGAP had considered an exceedingly long period from 15.11.2017 to 31.03.2019 (nearly 1.5 years). No reasons whatsoever had been given in the impugned Report as to why such an extended period was specifically chosen and not any other period Such an approach of the DGAP was violation of Article 14 of the Constitution and the concept of equality before law. hh. That reliance was placed on the decision of the. Hon'ble Supreme Court given in the case of Ajay Hasia and Ors. v. Khalid Mujib Sehravarcli and Ors. = 1980 (11) TMI 150 - SUPREME COURT wherein it was inter-alia observed that wherever there was arbitrariness in the State act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had not made any exorbitant or unreasonable profits in an unlawful manner. Accordingly, it could not be said that the Respondent had profiteered. mm. That as per the audited financial statements for the FY 2017-18 and FY 2018-19, even the actual profits earned by the Respondent were significantly lower than the alleged amount of profiteering:- Financial Year Profit After Tax (Rs.) FY 2017-18 3.61 crores FY 2018-19 4.31 crores Total 7.92 crores nn. That in view of the above, if the contention of the DGAP that the Respondent had profiteered to the extent of Rs. 21.94 Crore (approx.) was considered as genuine, it would mean that the Respondent would have incurred huge losses of approximately Rs. 14.02 Crore (Rs. 21.94 Crore - Rs. 7.92 Crore) had it not been involved in the alleged profiteering. oo. That over the past 5 years, his profits had only gradually increased and there were no abnormal/exorbitant/excess/ unreasonable profits that could be attributed as. profiteering. After meeting all expenses, the. Respondent was able to earn meagre profits in relation to his sales. The profits of the Respondent as a percentage of his sales ranged between 0.9 to 1% which was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad also submitted the sample letters and e-mails sent to the distributors which were attached as Annexure-4. Sample invoices and sample purchase orders 'showing sale of the complained product at reduced MRP of Rs. 230/- was also attached as Annexure-S. uu. That he had reduced the MRPs of the impacted goods w.e.f. 28.11.2017. In respect of the time limit required to pass on the benefit of fate reduction, the CGST Act did not provide any time frame within which the commensurate reduction in prices had to be undertaken. Therefore, in the absence of any time period in the law, a reasonable time period was required to be given to bring the necessary reduction in prices pursuant to the GST rate reduction. Non-granting of any period for price revision would be unreasonable and an absurdity. vv. That it was impossible to change the prices of the impacted goods overnight since there were practical issues as well as legal requirements which were required to be complied with. He had to check the old stock levels with his depots, distributors and retailers across the country, send communication to all his channel partners, print and distribute stickers with reduced MRP etc. All such activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CGST Act to check the period of investigation conducted by the DGAP. The DGAP has abused this freedom by considering the entire time period from 15.11.2017 to 31.03.2019 as the period of investigation. It was unconceivable that a business could not revise the prices for such a prolonged period of time. bbb. That he had increased the MRPs of his products only w.e.f. 15.03 2018 due to several factors viz. (a) rise in cost (b) response to the pricing strategy of the competitors and (c) change in season, among others. i. Rise in Cost:- a. That he had to revise the prices of his goods due to increase in their cost. The cost of the impacted goods had increased in the manner tabulated below;- Product Particulars 01.07.2017 to 14.11.2017 15.11.2017 to 14.03.2018 15.03.2018 to 31.03.2018 FY 2018-19 Wild Stone Deo Chrome BX 120 ml Cost p.u. 99 107 110 117 % increase - 8% 11% 18% b. That a certified cost sheet showing rise in cost was attached as Annexure-7. c. That reliance was placed on the decision of this Authority in the case of Kumar Gandharv v. KRBL Ltd. = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY wherein this Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity, it was incumbent upon the Respondent to respond to the competition. d. That such competitive market forces could not be ignored by this Authority and reduction in the tax rate could not be the sole determinant of price fixation. On the basis of the submissions made above, it could be seen that the price increase w.e.f. 15.03.2018 was made only in the ordinary course of business which could not be termed as an act of profiteering under Section 171 of the CGST Act. iii. Change in Season:- a. That the business of the Respondent was seasonal in nature with summers being the peak. Any revision in the prices, mostly happened either before the onset of summers (Feb-March) or the onset of winters (October-November). The Respondent when felt need to increase the prices, had accordingly increased the MRPs of the goods from 15.03.2018 i.e. before the start of net peak season. An illustration has been furnished by the Respondent in the Table given below which showed that even before the GST regime whenever there was a revision in prices, it had happened generally before the change in the seasons:- Product Change in MRP Effective Month Wild Stone Hydra Energy Deo 75 ml From Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution. g. That by computing profiteering for the period beyond 15.03.2018, the DGAP had infringed the right of the Respondent to decide the selling prices of his products because such revision in MRPs was in the normal course of business. It was an attempt by the DGAP to indirectly put a cap on the sale prices of the products being sold by the Respondent which violated his right to carry on trade as per Article 19 (1) (g) of the Constitution. By considering the price increase w.e.f. 15.03.2018 for computing profiteering, the DGAP had tried to step into the shoes of a price regulator and such an action implied that the Respondent could never increase the prices of his products pursuant to a GST reduction. h.. That the anti-profiteering provisions as well as the constitution of the DGAP were part of the taxing statute. The unfettered way in which the period of investigation had been stretched by the DGAP had brought the entire exercise into, the realm of price regulation act. Without any explicit authority under the law passed by the Parliament or the State Legislature, the DGAP could not force a blanket mandate to keep the prices in check as the same was violative of freedom o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of concern for the DGAP in a scenario where the MRPs paid by the consumers had reduced commensurate with the reduction in the GST rate. fff. That it was nobody's case that Section 171 of the CGST Act restricted a supplier to revise the 'base price of the products pursuant to a GST rate reduction. The law nowhere provided for doing a 'base price' comparison and it appeared that this practice of 'base price' comparison had been evolved suo-motu by the DGAP, The Respondent was well within his right to revise the base price of the product till such revision did not take away the benefit of GST rate reduction from the customers. It was only to be seen if the benefit of reduction in the tax rate had resulted in commensurate reduction in prices of the goods paid by the consumers. The findings of the DGAP that the base prices of the product had not been reduced was of no consequence when the benefit had been passed on to the ultimate consumers by way of reduction in MRPs. Reliance has been placed on the decision given in the case of the Kerala State Screening Committee on Anti-Profiteering v. Asian Paint Ltd. = 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY wherein t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 120 100 120 20 Nil Hisar 80 100 80 -20* Nil Thane 100 100 100 0 Nil Total 20 Nil *Negative values have been set to '0' by the DGAP. c. That upon perusal of the illustration above, it was evident that in case of Patna depot the actual average base price of Product X was Rs. 120/-. whereas when the base price was averaged for all the three depots (as per the methodology adopted by the. DGAP) the average base price of Product X was Rs. 100. Now, if the actual base price post GST rate reduction was Rs. 120/- which was compared with the average all India base price of Rs. 100 computed by the DGAP, there was a notional profiteering of Rs. 20/-. However, when the average base price at Patna depot (Rs. 120) was compared with the actual base price (Rs. 120) post GST rate reduction, there was no element of profiteering, d. That if the calculation by the DGAP was done at the depot level, alone, the alleged profiteering amount (without admitting) should be reduced to Rs. 16,30,22,644/- (reduction by Rs. 5.64 Crore approximately). ii. Incorrect Inclusion of Modern Trade. Buyers as General Trade Buyers:- a. That the profiteering amount had been computed for thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of zeroing. According to the said methodology, while calculating the dumping margin only those products were considered which were being dumped and those products which were not being dumped were not considered. The Government of India disputed this practice and had taken a stand against such methodology at the WTO and argued that while determining the dumping margin, all products should be taken into consideration rather than only those which showed positive dumping. d. That reference was made to the Report No. WT/DS141/AB/R dated 01.03.2001 of the Appellate Body of the World Trade Organization, regarding anti-dumping duties on imports of cotton-type bed linen from India. In the said case, exporters from India who were exporting bed linen to EU faced an anti-dumping investigation by the EU. In some cases, the exporters were exporting at positive dumping margin, whereas in many cases there was a negative dumping margin. The European Commission applied its general practice of not netting off the positive and negative dumping margins. in fact, they applied zero' for negative dumping margins and calculated only positive dumping margins and thereby arrived at a higher dumping margin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the recipients also included the GST charged on the increased base prices. Since, the amount has already been paid to the Government hence it could not be held that the Respondent had profiteered from such amount. b. That Section 76 (1) of the CGST Act provided that if any person has collected any amount in the nature of tax but has not deposited the same with the Government he was liable to pay to the Government such amount irrespective of the fact whether the supplies for which such amount was collected were taxable or not. The provision reads as under:- "Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax tinder this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to. the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not." c. That the inclusion of the GST would have been correct had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods w.e.f. 15.03.2018 as a normal business decision taking into account various factors (as discussed above) including rise in cost of material, other direct and indirect costs and maintainability of brand equity etc. However, the DGAP had completely ignored such significant factors while determining the profiteering amount. This demonstrated complete lack of application of mind as regards the accounting/costing principles and business dynamics. It was a settled accounting principle (known as matching concept) that revenues had to be matched against corresponding costs/expenses in order to determine the appropriate profits. b. That if the incremental cost before the GST rate reduction and post GST rate reduction was taken into account for the units sold during the impugned period, the total incremental cost (based on DGAP workings) would stand at Rs. 20,68,82,274/-. The workings of the same have been attached as Annexure-16. vii. Exclusion of Sales Returns:- a. That during the period of investigation, the Respondent had sales returned on various products but the DGAP had failed to exclude such sales from the profiteered amount which were returned by the customers. The Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as data mining of customers * No data mining and website maintenance is done * Carries out product cataloguing for the entire portfolio across all digital platforms * No product cataloguing is done * involved in photography supervision, content creation for all deos, perfumes etc., * Not involved in any such services * Provides digital marketing support by way of programming and designing banners/e-mailers etc. * No digital marketing is done * Credit period of 60 days is allowed * No credit is allowed instead goods are sold on advance payments d. That copy of the agreement dated 16.04.2018 entered between KCHP and the Respondent was attached as Annexure-17. e. That KCHP had been made a business partner only from FY 2018-19 and there were no transactions with KCHP in the FY 201'7=18. Given this, there were no pre-GST rate reduction prices that could be compared with the post GST rate reduction prices for KCHP. The sales made to KCHP should not be considered by the DGAP in his computations and in such a scenario, the alleged profiteering amount should stand reduced by Rs. 17,46,234/. ix Inclusion of Commercial Credit Notes and Freebies:- a. That the 'base p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of credit notes to the distributors in the normal course of business. Likewise, the. Respondent had issued free items such as soaps etc. to distributors as incentives on a cyclical/trend basis. The value of commercial credit notes as well as the value of freebies given to the distributors should be excluded from the alleged profiteering amount. iii. That that there was no computational methodology prescribed under the GST law to determine the amount of profiteering as envisaged under Section 171 of the CGST Act. The methodology currently followed by the DGAP while computing the alleged profiteering amount was principally inaccurate in as much as it did not take into account relevant accounting/costing principles and critical factors such as (a) adjustments for value of sales return, rise in cost of goods sold and credit notes etc. (b) depot-wise comparison of pre and post GST rate reduction prices instead of pan-India average base prices and (c) a reasonable investigation period at the most till 14.03.2018. jjj. That if all the above said irregularities were corrected, there was no profiteering whatsoever that could be attributed to the Respondent. The same has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the law did not stipulate to restrict the investigation only to the alleged product or to the complainant/applicant. He has given an example of the product "Affair (BS) 150 ml" to show how the profiteering was arrived at in the instant case. ii. That the DGAP, under the provisions of Section 171 of the CGST Act, 2017 read with Rule 129 of the CGST Rules, 2017, has to conduct investigation as per the directions of the Standing Committee on Anti-profiteering and to submit Report of his findings to this Authority under Rule 129 (6) of CGST Rules, 2017. Therefore, the investigation was conducted within the scope of Section 171 of the CGST Act, 2017 on the basis of the information and documents collected from the Respondent and the Report of his findings had been submitted to this Authority. The DGAP was not bound to discuss his findings with the Respondent before submitting his Report to this. Authority. Moreover, the DGAP was merely submitting Report of his findings to this Authority and was not deciding or adjudicating the case where under personal hearing was to be granted. iii. That the product "Affair (BS) 150 ml" had been taken for example in the Report dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of each case as well as the nature of goods or services supplied. Any uniform methodology for determination of the quantum of benefit to be passed on could not be adopted As per Rule 126 of the Rules, the word used was determine' and not 'prescribe'. This Authority had already notified the Methodology and Procedure under Rule 126 on 28.03.2018. Hence, the Methodology and Procedure for determination of profiteering might vary from case to case, depending on the facts and circumstances of the case as well as the nature of goods or services supplied. Therefore, the cases quoted by the Respondent were different from the instant case. vii. That Rule 133 of the CGST Rules, 2017 has been amended by insertion of sub-rule (5) (a) to cover the other goods which were not covered in the DGAP's Report and in case this Authority has reasons to believe that there had been contravention of the provisions of Section 171 of the CGST Act, 2017, it has power to expand the scope of investigation in respect of the goods which were not covered by the DGAP in. his Report under the above Rule. Therefore, the DGAP has conducted his investigation within the scope of Section 171 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndulge in profiteering and conversely, a profit making entity could pass on the due benefit to the recipients, in terms of Section 171 of the CGST Act, 2017. In the instant case, the issue involved was that the Respondent did not pass on to the recipients the benefit of reduction in the tax rate by not reducing the prices of the products commensurately. xii. That the legislative intent behind Section 171 of the CGST Act, 2017, was to pass on the benefit of tax rate reduction by way of commensurate reduction in price. Mere charging of GST at the reduced rate was not sufficient to pass on the benefit of tax rate reduction. Even when the GST was charged at the reduced rate, the benefit which ought to be have been passed on to the recipient, could still be denied by increasing the base price. MRP was the maximum price at which goods could be sold in retail. The value of transaction between the manufacturer and the wholesaler or the wholesaler and the retailer was invariably less than the MRP. Therefore, regardless of whether the MRP was required to be marked on the product or not, the pre and post-tax rate reduction transaction values were compared to determine profiteering. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts which they were not supposed to pay. If any supplier has charged more tax from the recipients, the aforesaid statutory provisions would require that such amount be refunded to the eligible recipients or alternatively deposited in the Consumer Welfare Fund, regardless of whether such extra tax collected from the recipient had been deposited in the Government account or not. xvi. That the Respondent had not submitted the documents related to the return of sold products. However, the benefit of the sales return could have been given if the Respondent had submitted the documentary evidence like sales return documents and credit notes etc. xvii. That the Respondent had not submitted the details of terms of trade with 11/1/s KCHP Technologies. Therefore, in the absence of any documentary evidence, the claim of the Respondent was not acceptable. xviii. That the value for the purpose of Goods and Services had been defined in Section 15 of the CGST Act, 2017 which stated that the value shall be transaction value. Therefore, a document after supply had been effected would be considered only if an agreement was there and it was specifically linked with the invoices and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or in the notes of submission or from the bar, allow to incorporate the missing ingredients in the show cause notice. That is plainly impermissible. The show cause notice has to be adjudged the way it is issued." iii. He has further placed reliance on the case of United Arab Shipping Agency Co. (I) P. Ltd. v. CC (Import) = 2014 (9) TMI 1213 - CESTAT MUMBAI, wherein complaint was filed by an importer before the Customs authority against the shipping company as the shipping company had denied moving the containers to a specific container freight station. Based on the complaint the Customs authority issued a show cause notice to the shipping company without enclosing a copy of the complaint. The Hon'ble Tribunal held such show cause notice issued by Customs authority as vague as neither complaint letter nor gist of allegation was contained therein which effected the right of the company to submit a proper response. Thus, the entire proceedings were vitiated on this ground alone. iv. He has also requested to provide the following documents:- * Date on which the complaint dated 30.07.2018 was returned by the Standing Committee. * Copy of complaint filed in February 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 27 19899548 7193605 1799 2709452 18. Manipur 14 382678 0 0 382678 19. Meghalaya 17 457750 0 0 457750 20. Mizoram 15 232524 0 0 232524 21. Nagaland 13 800496 0 0 800496 22. Odisha 21 11652717 1162048 0 12814765 23. Puducherry 34 88797 0 0 88797 24. Punjab 3 5719747 1315455 0 7035203 25. Rajasthan 8 13760615 1539037 0 15299652 26. Sikkim 11 319134 0 0 319134 27. Tamil Nadu 33 1750656 1103957 0 2854613 28. Telangana 36 3974706 2502476 0 6477183 29. Tripura 16 1095268 3409 0 1098677 30. Uttar Pradesh 9 22138663 1995031 0 24133694 31. Uttarakhand 5 2070786 75635 0 2146420 32. West Bengal 19 11384660 351961 0 11736621 Grand Total 187,699,280 29,030,817 1,749,694 218,479,790 ii. Further, para-wise clarifications except those which have already been mentioned in the paras mentioned above, on the Respondents additional written submission, submitted, by the DGAP are as under;- Para 2 to 17 The issue has already been addressed by the DGAP in his reply to Para 2.2 of his reply dated 18.12.2019 which is reproduced below: Para 2:2. It is clarified that initially an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , every recipient of goods or services has to get the due benefit from the supplier. Therefore, in the cases where the prices of the products were reduced more than what was required to, in those cases though there would be no profiteering but this extra reduction of price cannot be appropriated with the other products where the reduction is less or not at par with commensurate reduction. Every recipient is eligible for his due benefit from the supplier. The benefit of one recipient cannot be adjusted with the other recipient: Para 32 The submission of the Respondent has been considered and profiteering has been revised accordingly as stated under Para 2 above. Para 33 to 35 The issue has already been addressed in his reply dated 18 12.2019 vide Para 3.4 (h) which is reproduced below: Para 3.4 (h) During the investigation, the Respondent did not make any such submission. Therefore, in absence of any documentary evidence, this claim of the Respondent is unacceptable at this point of time. Further, the trade with KCHP is not substantially different with that of other distributors as it is primarily doing online product promotion which is not very costly. Para 36 This issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir opportunity to defend is prejudiced by the very fact that the Respondent has not been provided with the complaint filed in February 2019 along with the new Invoices that formed the entire basis of the present investigation. The gap for the first time in the Reply dated 18.12 2019 disclosed new material facts and the Respondent vide his additional written submissions and a letter dated 21.01.2020 sought connected information as under:- * Date on which the Invalid complaint dated 30.07.2018 was retuned by the Standing Committee, Date on which complaint was filed again in the month of February 2019, * Copy of complaint filed in February 2019 along with new supporting invoices (evidences curing the defect for which the earlier invalid complaint was returned), * Minutes of the meeting held by the Standing Committee on 11.03.2019 21. This Authority has carefully examined the DGAP's Reports, the written submissions of the above Applicants as well as that of the Respondent. The issues to be decided by this Authority in the present case are as under:- 1) Whether the Respondent is liable to pass on the benefit of tax reduction w.e.f. 15.11.2017 to his buyers? 2) Whether there h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hannel partners. He has also claimed that this reduction was carried out w.e.f. from 28 11.2017 due to the reason that till that date he was analyzing the impact of the above Notification on his products and was computing the revised MRPs. To verify the above claim made by the Respondent the DGAP has examined the prices of his product "Affair BS 150 ml" as per the data submitted by him for different dates as has been illustrated in the following Table-A: - Table-A S.No. Vch. No. Date PLACE OF SUPPLY GOODS DESCRIPTION QTY (PCS) Base Price (RATE/UNIT) 1. DEL/GTI-641 14/11/2017 Delhi Delhi Affair (BS) 150ml 40 115.72 2. DEL/GTI-703 24/11/2017 Delhi Delhi Affair (BS) 150ml 40 127.81 3. DEL/GTI-705 24/11/2017 Delhi Delhi Affair (BS) 150ml 40 127.81 5. DEL/GTI-729 29/11/2017 Delhi Delhi Affair (BS) 150ml 40 120.91 6. DEL/GTI-730 29/11/2017 Delhi Delhi Affair (BS) 150ml 80 120.91 7. DEL/GTI-779 09/12/2017 Delhi Delhi Affair (BS) 150ml 80 120.91 25. it is evident from the Table-A that the base price of the above product was Rs. 115.72 per unit on 14.11 2017 before the tax reduction and it was increased to Rs. 127.81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been computed on the basis of the prices which were charged by the Respondent during the month of October, 2017 as no supplies of these products had been made during the period from 01.11.2017 to 14.11.2017. These base prices were compared by the DGAP with the actual base prices charged by the Respondent between the period from 15.11.2017 to 31.03.2019 and it was found by him that the Respondent had charged more base prices than what were prevalent during the pre rate reduction period. The DGAP has computed the profiteered amount separately for the supplies made by the Respondent to the CSD Canteens, E-commerce Platforms, General Trade and Modern Trade as the Respondent had charged different base prices to each of them. 28. The DGAP has compared the average pre rate reduction base prices with the actual post rate reduction prices due to the reasons that (i) it was not possible to compare the average base prices pre and post rate reduction as the post rate reduction the benefit has to be legally passed to each buyer on the actual transaction value received by the Respondent from each of such buyer (ii) it was also not possible to compare the actual to actual base prices pre a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the perusal of the above Sub-Sections that the benefit of tax reduction or ITC is to be passed on by each registered person by commensurate reduction in prices on each supply to every recipient by commensurate reduction in the prices and this Authority is empowered to examine whether these benefits have been passed on or not. To assist this Authority an investigating agency designated as the DGAP has been created under Rule 129 of the CGST Rules, 2017 to conduct detailed investigation and submit Report to this Authority under Rule 129 (6) to determine whether the above benefits have been passed or not in terms of Section 171 (1) and Rule 133 (1) of the above Rules. Under Rule 129 (2) the DGAP has mandate to conduct investigation and collect necessary evidence to determine whether these benefits have been passed on. Further, the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs vide its Office Order No. 05/Ad.IV/2018 dated 12.06.2018 in pursuance of the Government of India (Allocation of Business) 34th Amendment Rules, 2018 has assigned the following duties to the DGAP:- a) Conduct of investigation to collect evidence nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined as an illustration by the DGAP to establish that the Respondent had not reduced the base prices after the rate reduction w.e.f. 15.11.2017. The DGAP has also investigated the Deodorant "Wild Stone Deo Chrome BX 120 ml" and therefore, the above contention of the. Respondent is incorrect. 33.The Respondent has also claimed that as per Rule 129 (3) of the above Rules, the DGAP had not mentioned "the description of the other goods or services" other than "Wild Stone. Deo Chrome BX 120 ml" Deodorant in his notice and hence he could not have investigated the other products. Perusal of the notice dated 08.04.2019 issued by the DGAP for initiating investigation shows that it no where stipulates that the investigation would be restricted to the above Deodorant only. Para 2 of the above notice clearly states that the Respondent was required to furnish his reply stating whether he admitted that the benefit of reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017 has not been passed on to the recipients by way of commensurate reduction in price and he should also sou moto determine the quantum of benefit not passed on. Vide para 4 of the notice the Respondent was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoted above this Authority had inherent power to examine all the products in respect of which benefit of tax reduction or ITC is to be passed on in terms of Section 171 (1) even before the amendment dated 28.06.2019 was brought. The above amendment only explains the provisions of Section 171 (2) further to make them more explicit. As mentioned above the DGAP as investigating arm of this Authority has mandate to investigate all infringements of the above Section as per the provisions of Rule 129 as well as the Office Order dated 12.06.2018 Therefore, the DGAP is bound to investigate all the products on which the rate of tax has been reduced and therefore, there is no question of his expanding the investigation suo moto. Hence, the above argument of the Respondent is not tenable. 37. The Respondent has also cited the judgements passed in the cases of Continental Commercial Corporation v. ITO (1975) 100 ITR 170 = 1975 (1) TMI 26 - MADRAS HIGH COURT and Purbanchal Cables and Conductors Pvt. Ltd. v. Assam State Electricity Board (2012) 7 SCC 462 = 2013 (3) TMI 518 - SUPREME COURT in his support. In this connection it is submitted that the DGAP has mandate to inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has not been passed on. Hence, the law settled in the above case is not being relied upon. 39. The Respondent has also submitted that he has fully co-operated during the investigation and his this act should not be considered as acquiescence of the fact that the DGAP had jurisdictional power to investigate him in respect of all the products. In this connection it would be pertinent to mention that as has been mentioned above the DGAP has full legal sanction to investigate all the products being supplied by the Respondent on which rate of tax was reduced and the Respondent was duly aware of this fact due to which he has voluntarily submitted himself to such investigation. It is only as an afterthought that he is raising objections on his jurisdiction when the DGAP has found him liable for violation of the provisions of Section 171. The Respondent cannot extricate himself from the consequences of the above violation once he has voluntarily submitted to the investigation by the DGAP. 40. The Respondent has also cited the judgements passed in the cases of CIT v. Dalipur Construction Pvt. Ltd. Income Tax Appeal No. 45 of 2015 at Lucknow = 2017 (1) TMI 1709 - ALLAHABAD HIGH C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom a member of Local Circles. Local Circles is India's leading Community Social Media Platform". A copy of the complaint received from Sh. Anil Mehta, a member of the Local Circles mentioned above, was also attached with the email which stated as under:- "Complaint against Deodorant manufacturers I have received information from a friend at Big Bazaar that suggests that Deodorant manufacturers (Vini Cosmetics -maker of FOGG, Raymonds - maker of Park Avenue and Monroe maker of Wild Stone) have engaged in profiteering by not reducing MRPs. Here is the evidence: Vini Cosmetics shipped Fogg Deo Fougere BX 150 ml to Big Bazaar Inderlok on 9/11/17 under PO number 8114996814 with MRP 299, after GST rate reduction on Nov 15, 17 Vini Cosmetics shipped the same deo to Big Bazaar Inderlok under PO No. 8115259654 on 8/12117 with MRP 299. Again on May 8, 2018 Vini Cosmetics shipped the same product to Big Bazaar Inderlok under PO Number 4517361778 with MRP 299, so basically Vini Cosmetics did not change the MRP despite GST rate reducing from 28 to 18% on Nov 15, 17. Monroe shipped Wild Stone Deo Chrome BX 120 ml on 28/9/17 under PO number 8114615731 to Big Baza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in detail by the Standing Committee comprising of S/Sh. H. Rajesh Prasad Commissioner, Department of Trade & Taxes, Govt. of NCT of Delhi, Amit Kumar Aggarwal, Excise & Taxation Commissioner, Govt. Of Haryana, Sanjay Mangal, Commissioner Central Tax (Audit) and Pranesh Pathak, Commissioner Central Tax in its meeting held on 11.03.2019 and vide 'Sr. No. 26 of minutes of the meeting recorded in respect of the above complaint which was mentioned. in Annexure-1C, it was decided to forward the same to the DGAP for investigation. It is also apparent from the perusal of the minutes that the above complaint was treated to have been received in the month of February, 2019. 44. It is apparent from the above facts that the complaint made by the Applicant No. 1 vide his email dated 30.07.2018 had been returned by the Standing Committee to the Applicant No. 1 as per the minutes of the meetings of the Committee held on 07.08.2018 and 08.08.2018 and hence, the proceedings in respect of the above complaint had terminated w.e.f. 08 08 2019. It is further clear from the record that the above. Applicant had made a fresh complaint to the Standing Committee vide his email dated 21.02.2019 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation can also not be, mandatory as no consequences have been provided for not adhering to it in Rule 128 Therefore, the above contentions o the Respondent are untenable and therefore, the investigation conducted by the DGAP is legally correct and the present proceedings are not void. 47. In this regard, the Respondent has made reference to the judgments passed in the cases of Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and others (2013) 12 SCC 649 = 2015 (1) TMI 1053 - SUPREME COURT, State of Punjab v. Shreyans Industries Ltd. (2016) 4 SCC 769 = 2016 (3) TMI 331 - SUPREME COURT, Bharat Heavy Electricals Limited v. CCT (2006) 143 STC 10 (Kar}, Thirumalai Chemicals v. Union of India (2011) 6 SCC 739 = 2011 (4) TMI 489 - SUPREME COURT and A.M. Ahamed & Co. v. Commissioner of Customs (Imports) Chennai 2014 (309) ELT 433 (Mad.) = 2014 (9) TMI 237 - MADRAS HIGH COURT. However, it is mentioned that the Standing Committee has not violated the period of limitation prescribed under Rule 128 (1) and hence the above cases do not support the case of the Respondent. 48. The Respondent has further argued that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of benefit which a supplier is required to pass on to a recipient or for computation of the profiteered amount. However, to give further elaborate upon this legislative intent behind the law, this Authority has been empowered to determine the 'Procedure and Methodology' which has been done by this Authority vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed formula which fits all the cases of profiteering can be set while determining such "Methodology and Procedure" as the facts of each case are different. In one real estate project, date of start and completion of the project, price of the house/commercial unit, mode of payment of price, stage of completion of the project, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realised before and after the GST implementation would always be different than the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to another project. Therefore, no set parameters can be fixed for determining methodology to compute the benefit of additional ITC which would be require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ady notified the Procedure and Methodology' vide its. Notification dated 28.03.2018 under Rule 126 and not on 19.07.2018 as has been claimed by the Respondent which is available on its website. As discussed above computation of profiteering has to be done SKU and unit of construction wise and not invoice-wise, product-wise, business vertical-wise or state-wise etc. as every buyer has fundamental right to get the benefit which is due to him. It is also clear from the Explanation attached to Section 171 what is to be construed as the profiteered amount and hence the Respondent should have no difficulty in computing and passing on the benefit of tax reduction. 51. The Respondent has also pleaded that in the absence of any guidelines in the statute or rules, the powers given to this Authority to determine methodology was a case of "excessive delegation" of powers. In this regard it would be relevant to mention that the Methodology & Procedure to determine profiteering is succinctly mentioned in Section 171 itself and hence there is no question of excessive delegation to this Authority. Rule 126 has been framed by the Central Government under Section 164 which has sanction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they could not be enforced. On this aspect it is to be noted that no tax has been imposed under the above measures and hence the law settled in the. above cases is not applicable. However, it would be relevant to mention here that Section 171 (2) of the CGST Act, 2017 and Rule 122, 123 , 129 and 136 of the CGST Rules, 2017 have provided an elaborate machinery in the form of this Authority, the Standing and Screening Committees, the DGAP and a large number of field officers of the Central and the State Taxes to implement the anti-profiteering provisions. Therefore, the Respondent cannot allege that no machinery has been provided to implement the above measures. 54. The Respondent has also claimed that during the course of the investigation or even thereafter he was never put to notice or offered any reasoning through grant of a hearing or otherwise as to how the DGAP was going to derive profiteering. In this regard it is mentioned that the DGAP being an investigating agency has no power to grant opportunity of hearing to the Respondent. However, it is apparent from the Report dated 04.09.2019 of the DGAP that the Respondent was duly issued notice dated 08.04.2019 under Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to mention here that in the cases bearing No. 20/2018, 02/2019 59/2019, 46/2019, 14/2018 and 08/2018, decided by this Authority, in which the investigation was conducted for the period ranging between 2 months to 4.5 months, the period of investigation was limited to the period, when the complaint was received, as has been done in the present case. Had the Respondent passed on the benefit before 31.03.2019 he would have been investigated only till that date. No supplier can be investigated for the benefit which he is required to pass on in the future. Hence, the above contention of the Respondent is not tenable. 57. The respondent has further contended that earning profits through lawful means was not a sin and he could be held liable if he had earned profit by unlawful means. He has also cited the definitions given in Black's Law Dictionary, Shorter Oxford English Dictionary and Law Lexicon on profiteering. In this connection it would be appropriate to refer to the definition of profiteered amount given in the Explanation attached to Section 171 Which states as under:- "Explanation : For the purposes of this section, the expression "profiteered" shall mean the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Report are absolutely Correct as it has been repeatedly found that the suppliers have not passed- on the benefit of tax reduction in a large number of cases. The Respondent has also correctly cited the flier released by the Central Board of Indirect Taxes & Customs and the case of Sandeep Puri v. M/s Johnson & Johnson 2019 (11) TMI 1084, which make it abundantly clear that the objective of the anti-profiteering provisions is to protect the interests of the consumers therefore, it is responsibility of the anti-profiteering mechanism to ensure that the benefits of tax reduction and ITC are passed on to the unorganised, voiceless and vulnerable customers and the suppliers are not allowed to misappropriate them. However, there is no evidence to come to the conclusion that the Respondent has reduced his MRPs as was ruled by this Authority in the case of Pawan Sharma V. M/s Sharma Trading Company 2018 (9) TMI 625. 61. The respondent has also submitted that he had passed on the entire benefit of reduction in the tax rate by way of reduction in MRPs which was also communicated to all his channel partners vide Fetters and emails dated 27.11.2017 and/or 28.11.2017 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;State of MP v. Narmada Bachao Andalan (2011) 7 SCC 639 = 2011 (5) TMI 914 - SUPREME COURT he could not be forced to perform an impossible act. However, keeping in view the observations made in the para above the above case does not cone to the rescue of the Respondent as the Respondent was not required to do an impossible act. 64. The Respondent has further averred that he had reduced the MRPs of 5 other SKUs, sample invoices of which were attached. by him as Annexure-6, Perusal of these invoices shows: that they do not reflect the commensurate price. Which the Respondent could have Charged on the basis of the tax reduction and hence no reliance can be placed on them. 65. The Respondent has also stated that he had increased the MRPs of the impacted goods only w.e.f. 15.03.2018 due to several factors viz. (a) rise in cost (b) response to the pricing strategy of the competitors and (c) change in season, among others. However, it is revealed from the record that the: Respondent had not reduced his prices commensurately even once after 15.11.2017: and his prices had been more than the commensurate and, he had further increased them w.e.f 15.03.2018. This Authority h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent has also contended that there were no guidelines regarding the period during which prices could not be revised. In this regard it is to be noted that the Respondent can fix his prices as per his own strategy however, he has not produced any evidence during the course of the present investigation which can prove that he has passed on the benefit of tax reduction till 31.03.2019 and therefore, any increase made in the prices by the Respondent amounts to profiteering. The Respondent cannot deny the benefit of tax reduction by taking shelter of Article 19 (1) (g) of the Constitution. The Respondent has also placed reliance on the case of Petroleum and Natural Gas Regulatory Board v. lndraprastha Gas Limited & Qrs. (2015) 9 SCC 209 = 2015 (7) TMI 1130 - SUPREME COURT in this regard. Since, the: DGAP has not interfered with the right of the Respondent to fix his prices the law settled in the above case is not being relied. 70. He has further contended that he had revised his base prices on account of margin realignment, of his intermediaries in the normal course of his business and he has reduced his prices commensurately. He has also enclosed Annexure-10 in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discount offered from dealer's margin did not amount to profiteering; However, there is no evidence to the effect in this case that the Respondent has increased his base prices due to withdrawal of the discount and hence the above case does not further the cause of the Respondent. Realignment of margins cannot be compared with the discounts as no dealer was bound to offer discounts from his margins and hence the profiteered amount cannot be reduced by Rs. 2,73,07,915/- as has been claimed by the Respondent. 72. The Respondent has further argued that averaging of prices at pan India level was conceptually inappropriate. In this regard it would be relevant to mention that since the Respondent was charging different prices to his various customers there was no alternative except to compute average of these prices for comparison with the actual base prices post rate reduction to arrive at the conclusion whether the benefit of tax reduction had been passed by the Respondent or not. The Respondent has also compared the base prices prevalent at his Patna, Hissar and Thane Depots to prove his contention. However, the same is not correct as the Respondent was not charging different b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the amount of benefit which he has claimed to have passed, which will result in complete denial of benefit to the customers who were entitled to receive it. Every recipient of goods or services is entitled to the benefit of tax rate reduction by way of reduced prices and Section 171 does not offer the Respondent to suo moto decide on any other modality to pass on the benefit of reduction in the rate of tax to his recipients. Therefore, any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction due to another recipient or customer. Hence, this methodology of 'netting off cannot be, applied in the present case as the customers have to be considered as individual beneficiaries and they cannot be compared with dumped goods and netted off. This Authority has also clarified in its various orders that the benefit cannot be computed at the product service or the entity level as the benefit has to be passed on each supply of goods and services. Hence, the above contentions of the Respondent are not correct as the Respondent cannot apply the above methodology of netting off as has been ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the profiteered amount as it denotes the amount of benefit denied by the Respondent. The above amount can also not be paid to the eligible buyers from the Consumer Welfare Funds as the Respondent has not deposited it in the above Fund. Therefore, the above contention of the Respondent is untenable and hence it cannot be accepted. Accordingly, an amount of Rs. 33,484,248/- cannot be subtracted from the profiteered amount as per Annexure-15. In support of his above claim, the. Respondent has relied upon the decision given by the Hon'ble Apex Court in the case of R.S. Joshi Sales Tax Officer Gujarat v. Ajit Mills Limited (1977) 4 SCC 98 = 1977 (8) TMI 140 - SUPREME COURT. However, keeping in view the facts of the present case the law settled in the above case cannot be relied upon. 77. The Respondent has also stated that he has increased his prices w.e.f. 15.03.2018 as a normal business decision taking into account various factors including rise in the cost of material, other direct and indirect costs and maintainability of brand equity etc. However, the DGAP had completely ignored such significant factors while determining the profiteering amount. As discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents and the same should be reduced from the profiteered amount: The above contention of the Respondent is not correct because the investigation carried out by the DGAP reveals that the profiteering has been computed on the transaction value as per the provisions of Section 15 of the CGST Act, 2017 and all the discounts which do not form part of such value cannot be included in the price of the product. The Respondent has accepted that the discounts offered by him were in accordance with the general discount pattern Which was, being followed by him in the course of his business which every other supplier was also doing to promote his sales. Therefore, the above discounts and freebies cannot not be construed to have been given due to the GST rate reduction. Further it is revealed from the DGAP's Report that the Respondent has not submitted the copies of credit notes as per the provisions of Section 15,(3) (b) of CGST Act, 2017 and Rule 54 (1) (A) of the, CGST Rules, 2017 and hence, the above claim of the Respondent cannot be accepted. In support of his above the Respondent has relied upon the judgements passed by the. Hon'ble Supreme Court in the cases of Union of India v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were required to be mentioned in the above Notice or the Report furnished by the DGAP. The Respondent has been given full opportunity of defending himself during the course of the present proceedings on: the allegations levelled against him and hence no prejudice has been caused to him. Since, the present investigation has been conducted by the DGAP in consonance with the provisions of Section 171 read with Rule 129 the current proceedings against the Respondent are maintainable. 83. The Respondent has also cited the judgements passed in the cases of CCE Bangalore v. Brindavan Beverages (P) Limited 2007 (213) E.L.T. 487 (SC) = 2007 (6) TMI 4 - SUPREME COURT, Shipli Enterprises v. CCE Allahabad 2017 (349) ELT 308 (Tri.-All) = 2016 (12) TMI 1263 - CESTAT ALLAHABAD, Delta International Limited v. Commissioner of Customs 2012 (281) E.L.T. 400 (Cal.) = 2012 (9) TMI 144 - CALCUTTA HIGH COURT and United Arab Shipping Agency Co. (1) P. Ltd. v. CC (Import) 2014 (310) E.L.T. 933 (Tri- Mumbai) = 2014 (9) TMI 1213 - CESTAT MUMBAI. in his support. However, since the Respondent was duly put to notice on the allegation of having not passed on the benefit of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deposited within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned Commissioners CGST/SGST. The State/Union Territory wise amount of benefit to be deposited by the Respondent in the concerned CWF is as under:- S.No. Row Labels State Code General trade Modern Trade E-Commerce trade Final Profiteering 1. Andhra Pradesh 37 5227562 1121697 0 6349258 2. Arunachal Pradesh 12 194462 0 0 194462 3. Assam 18 7138419 636054 0 7774474 4. Bihar 10 5692599 621167 0 6313766 5. Chandigarh 4 573872 0 0 573872 6. Chhattisgarh 22 8545118 500829 0 904597 7. Delhi 7 9732859 1983347 1660 11717866 8. Goa 30 597649 5219 0 602869 9. Gujarat 24 10112053 1753591 0 11865645 10. Haryana 6 4097845 1962477 1746235 7806556 11. Himachal Pradesh 2 1749130 793 0 1749923 12. Jammu and Kashmir 1 2153988 4953 0 2158941 13. Jharkhand 20 4515539 688505 0 5204044 14. Karnataka 29 5796479 1536896 0 7333376 15. Kerala 32 1208947 456132 0 1665079 16. Madhya Pradesh 23 24634011 516543 0 25150554 17. Maharashtra 27 19899548 7193605 1799 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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