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TMI Blog2020 (6) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... dit, vide Notification No. 25/2018-Central Tax (Rate) dated 31.12.2018. 2. The DGAP has stated in his Report that the above application was examined by the Standing Committee on Anti-profiteering in its meeting held on 15.05.2019, whereby it was decided to refer the same to the DGAP to conduct a detailed investigation in the matter in terms of Rule 129 (1) of the CGST Rules, 2017. 3. The DGAP has also stated that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 28.06.2019, a notice under Rule 129 (3) of the CGST Rules, 2017 was issued by him on 11.07.2019, calling upon the Respondent to submit his reply as to whether he admitted that the benefit of reduction in the GST rate w.e.f. 01.01.2019 had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all documents in support of his reply. Vide the above said notice dated 11.07.2019, the Respondent was also afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the said notice, during the period from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019, 19,09.2019, 01.10.2019, 19.11.2019, 02.12.2019, 04.12.2019 and submitted the following documents/information:- a) List of all GSTIN registrations. b) GSTR-1 & GSTR-3B Returns for the period from September. 2018 to June, 2019 for all the GST registrations in India. c) Details of invoice-wise outward taxable supplies for the impacted products during the period from September, 2018 to June, 2019. d) Sample copies of invoices, pre and post 01.01.2019. e) Total outward sales summary for the period from September, 2018 to June, 2019. f) Price list of the impacted products. g) Purchase registers in respect of the impacted products, h) Details of closing stock of all the impacted products as on 31.12.2018. 9. The DGAP has also claimed that the Respondent in his submissions/replies has stated that he had not made any reversal of the ITC till date, in relation to the closing stock of the impacted products as on 31.12.2018. He had also stated that his suppliers had increased the taxable amount by 5% to cover the impact of GST rate reduction from 5% to Nil on the impacted products. 10. The DGAP has further claimed that the complaint, various replies of the Respondent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.01.2019 might not be given while arriving at the amount of profiteering. This had been done because there was no reversal of ITC on the closing stock of inputs/input services and capital goods as on 31 .12.2018 by the Respondent which was required under the provisions of Section 17 of the CGST Act, 2017 read with Rule 42 and 43 of the CGST Rules, 2017. 14. The DGAP has further averred that the methodology adopted for determining the amount of profiteering could be explained by illustrating the calculation in respect of specific item i.e. "Frozen Kings Green Peas 500 gm" sold during the month of December, 2018 (pre-GST rate reduction) an average base price (after discount) of which was obtained by dividing the total taxable value by the total quantity sold during the period from 01.12.2018 to 31.12.2018. The average base price of this item was compared with the actual selling price of same item sold through the said channel during post-GST rate reduction period i.e. on or after 01.01.2019 as has been illustrated in the Table-A below:- Table-A (Amount in Rupees) SI.No. Description Factors Pre Rate Reduction (Before 31.12.2018) Post Rate Reduction (From 01.01.2019) 1. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profiteered amount of Rs. 2,33,515/- as is given in Table-B below:- Table-'B' S. No. State Code State Profiteered Amount (Rs.) 1 36 Telangana 210575 2 37 Andhra Pradesh (New) 22940 Grand Total 233515 17. The DGAP has further stated that the allegation of the Applicant No. 1 that the base prices of the impacted goods were increased when there was a reduction in the GST rate from 5% to Nil with the denial of the ITC w.e.f. 01.01.2019, so that the benefit of such reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in prices, was correct. The DGAP has concluded that the total amount of profiteering on account of contravention of the provisions of Section 171 of the CGST Act, 2017 covering the period from 01.01.2019 to 30.06.2019 was Rs. 2,33,515/-. 18. The DGAP has also submitted that Section 171 (1) of the CGST Act, 2017 requiring that "any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices", had been contravened by the Respondent in the present case. 19. The above Report was considered by this Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent has not submitted the receipts from the concerned Consumer Welfare Funds till date. 24. We have carefully considered the DGAP's Report, the submissions of the Respondent and the documents placed on record. It is revealed that the Respondent is engaged in the purchase and sale of frozen grocery products including the "Frozen Green Peas" and the "Frozen Sweet Corn". It is also revealed that the Applicant No. 1 had lodged a complaint with the Standing Committee on Anti-Profiteering vide his application dated 29.03.2019 that the Respondent had not passed on the benefit of GST rate reduction from 5% to Nil w.e.f. 01.01.2019 by commensurately reducing his prices and had thus resorted to profiteering. The complaint was examined by the above Committee in its meeting held on 15.05.2019 and was forwarded to the DGAP for detailed investigation. The DGAP after collecting necessary evidence has reported that the Respondent has not reduced the prices of both the above products and has thus profiteered an amount of Rs. 2,33,515/- w.e.f. 01.01.2019 to 30.06.2019, the details of which have been furnished by the DGAP vide Annexure-12 of his Report. 25. The record also reveals that the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 5% to 0% w.e.f. 01.01.2019, therefore, the commensurate benefit of GST rate reduction was not passed on to the recipients. There was no reason for the Respondent to increase his base prices exactly equal to the rate of tax reduction w.e.f. 01.01.2019. Such a coincidence is incomprehensible, strange and unheard off which shows that the Respondent has deliberately tried to pocket the benefit of tax reduction to enrich himself at the expense of the vulnerable customers. This Authority has also approved the above methodology in its various orders which involved passing on of the tax benefit. Therefore, the methodology employed by the DGAP while computing the profiteered amount is appropriate, reasonable, justifiable and in consonance with the provisions of Section 171 of the CGST Act, 2017 and hence, the same can be relied upon. 27. It is also evident that the Respondent has increased the base prices of the goods in question when the rate of GST was reduced from 5% to Nil. On account of the reduction in the GST rate w.e.f. 01.01.2019, the input tax credit reversed on the closing stock held as on 31.12.2018 by the Respondent would have become cost to the Respondent as he would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deposit of the profiteered amount has been received from the Respondent. 30. Based on the above facts the profiteering amount is determined as Rs. 2,33,515/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 as per Annexure-12 of the Report. The Respondent is therefore directed to reduce the prices of the above 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. 2,33,515/- along with the interest to be calculated at 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of Rs. 2,33,515/- as per Table-B, mentioned above and Annexure-12 of the DGAP's Report dated 23.12.2019, in terms of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest in the Central and the State Consumer Welfare Funds of State of Andhra Pradesh and Telangana. The above amount shall be deposited within a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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