TMI Blog2020 (6) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... ble-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 period of 3 months from the date of this order failing which the same shall be recovered by the concerned Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017. Penalty - HELD THAT:- The Respondent has denied the benefit of reduction in the tax rate to his buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under section 171 (3A) of the CGST Act, 2017, and therefore, he is liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. - Case No. 34/2020 - - - Dated:- 26-6-2020 - DR. B. N. SHARMA, CHAIRMAN, SH. J. C. CHA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, Summons under Section 70 of CGST Act, 2017 read with Rule 132 of the above Rules, were issued to Sh. R. Satish, Managing Director of the Respondent to appear in the DGAP's office on 11.11.2019 and to submit the requisite documents/information. In compliance to the Summons, Sh. R. Satish did not appear in the DGAP's office on 11.11.2019 and neither submitted any documents/information. 5. The DGAP has also submitted that Summons under Section 70 of CGST Act, 2017 read with Rule 132 of the above Rules, were, again issued to Sh. R. Satish to appear in the DGAP's office on 20.11.2019 and to submit the requisite documents/information. In compliance to the second Summons, Sh. R. Satish again did not appear in the DGAP's office on 20.11.2019 but vide e-mail dated 19.11.2019 requested for another date. 6. The DGAP has further submitted that third Summons under Section 70 of CGST Act, 2017 read with Rule 132 of the above Rules, were issued to Sh. R. Satish to appear in the DGAP's office on 02.12.2019 and to submit the requisite documents/information. In compliance to the third Summons, the authorised representative of the Respondent namely Smt. Geetha Srinivasan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST rate to his recipients, in terms of Section 171 of the CGST Act, 2017. 11. The DGAP has also contended that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the Frozen Green Peas and Frozen Sweet Corn falling under the HSN 071021000 and 07104000, from 5% to Nil with the denial of ITC w.e.f. 01.01.2019, vide Notification No. 25/2018-Central Tax (Rate) dated 31.12.2018. 12. The DGAP has further contended that it was important to examine Section 171 of the CGST Act, 2017 which governed the anti- profiteering provisions under the GST. Section 171 (1) of the CGST Act, 2017 reads as 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. Thus, the legal requirement was abundantly clear that in the event of benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of input tax credit. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 011611 3. Notification No. C 25/2018 4. Total quantity of item sold D 574 5. Total taxable value E 57242 6. Average base price (without GST) F=E/D 99.72 7. GST Rate G 5% Nil 8. Commensurate Selling price (post Rate reduction-with GST) H=F*1.00 99.72 9. Invoice No. I 335 10. Invoice Date J 18.01.2019 11. Total quantity (above invoice) K 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit the Demand Drafts in the concerned Consumer Welfare Funds and to submit a copy of the receipts of the same before this Authority. The Respondent 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 ₹ 2,33,515/- w.e.f. 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utward supplies made available by the Respondent it has been found that he has increased the base prices of his products when the rate of GST was reduced 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 11.02.2020 for depositing the above amount in the Central and State Consumer Welfare Funds of Andhra Pradesh and Telangana. However, no confirmation of the deposit of the profiteered amount has been received from the Respondent. 30. Based on the above facts the profiteering amount is determined as ₹ 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 ₹ 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 ₹ 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 Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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