TMI Blog2020 (8) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced from 18% to 5%, the ITC was not available to the Respondent. The DGAP in his Report has stated that the Respondent had increased the base prices of different items by more than 11.16% i.e. by more than what was required to offset the impact of denial of ITC, supplied as a part of restaurant service, to make up for the denial of ITC post-GST rate reduction. The profiteered amount is determined as ₹ 61,67,097/- as has been computed in Annexure-15 of the DGAP s Report dated 25, 10.2019. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the Rules. Further, since the recipients of the benefit, as determined, are not identifiable, the Respondent is directed to deposit an amount of ₹ 61,67.097/- in two equal parts, in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated standing from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The aggregate amount shall be deposited, as specified above, within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017, had not been passed on to his recipients by way of commensurate reduction in prices 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 supporting documents. The Respondent was also allowed to inspect the relied upon non- confidential evidence/information or any data which formed the basis of the said notice between 21.05.2019 and 23.05.2019, which was however not availed of by the Respondent. 3. The DGAP has reported that the period covered by the current investigation was from 15.11.2017 to 30.04.2019 4. The DGAP has also reported that in response to the notice dated 14.05.2019 and subsequent reminders, the Respondent has submitted his replies vide his letters/e-mails dated 27.05.2019, 26.07.2019, 01.10.2019, 02.10.2019, 07.10.2019, 10.10.2019, 11.10.2019, 16.10.2019, 18.10.2019, 21.10.2019 and 22.10.2019. Vide the aforementioned e-mails/letters, the Respondent submitted the following documents/information: - (a) Copies of GSTR-1 Returns for the period July 2017 to April 2019. (b) Copies of GSTR-3B Returns for the period July 2017 to April 2019. (c) Copies of Electronic Credit Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not classify any of the information/documents provided by him as confidential in terms of Rule 130 of the Rules, ibid. 7. DGAP has also reported that based on a careful examination of the case records including the reference from the Standing Committee on Anti-Profiteering, various replies of the Respondent and documents/evidence placed on record, it emerged that the Respondent had around 35 restaurant outlets on the same GST registration out of which two were Subway outlets and the inquiry conducted by the Joint Commissioner (AE), CGST CX, Mumbai East was limited to the Subway outlets of the Respondent The DGAP has further reported that he had not examined outward supplies made from the other outlets by the Respondent 8. The DGAP has reported that the main issues for determination were whether the rate of GST on the service supplied by the Respondent was reduced from 18% to 5% w.e.f. 15.11.2017 and if so, whether the benefit of such reduction in the rate of GST had been commensurately passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act, 2017. 9. The DGAP has further reported that the GST rate on the restaurant service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the customers was not reduced commensurately for 94 items despite rate reduction. Therefore. the only remaining point for determination was whether the increase in base price was solely on account of denial of ITC. 11. Further, the DGAP has intimated that the assessment of the impact of denial of ITC, which was an uncontested fact, required determination of the ITC in respect of restaurant service , as a percentage of the taxable turnover from the outward supply of products , during the pre-rate reduction period. For instance, if the ITC in respect of restaurant service was 10% of the taxable turnover of a registrant till 14.11.2017 (which became unavailable to him 15.11.2017) and if the increase in the base prices w.e.f. 15.11.2017 was less than 10%, then this would not be a case of profiteering. However, if in the same example, the increase in the base prices w.e.f. 15.11,2017, was by a margin of 14%, the extent of profiteering would be 14% -10% = 4% of the turnover. In the instant case, profiteering was computed in the same manner as per the above example by taking into consideration the period from 01.07.2017 to 31.10.2017 and not up to 14.11.2017 due to the following re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offset denial of ITC. The pre and post rate reduction prices of the items sold by the Respondent during the period from 01.07.2017 to 14.11.2017 (Pre-GST rate reduction) and from 15.11.2017 to 31.03.2019 (Post-GST rate reduction) were compared and it was found that the Respondent had increased the base prices of the products supplied by him by more than what was required to offset the impact of denial of ITC in respect of items sold during the same period and hence. the commensurate benefit of reduction in the rate of tax from 18% to 5% had not been passed on. 14. The DGAP has further stated that the next step was to compute the amount of profiteering in this case. It was pertinent that as a principle, only those items, where the increase in base prices was more than what was required to offset the impact of denial of ITC, were considered and the calculation was carried out following the above principle. The extent of profiteering was worked out as per the procedure mentioned in Table-B below:- Table-B (Amount in Rs.) Name of the product (A) HARA BHARA PATTY 6 SUB (Z0358) Total Quantity sold during 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent and that the extent of profiteering was ₹ 61,67,097/- (inclusive of GST). Thus the provisions of Section 171 (1) of the CGST Act, 2017 had been contravened by the Respondent in the present case. 17. The DGAP has further reported that the inquiry conducted by the Joint Commissioner (AE), CGST CX, Mumbai East was limited only to the Subway franchise of the Respondent (Franchisee Code M61382 and 61383 ) and the outward supplies made by him out of his other outlets had not been examined. 18. The above Report of the DGAP was considered by this Authority and it was decided to hear the Respondent on 20.11.2019. A notice dated 01.11.2019 was also issued to the Respondent asking him to reply why the Report dated 25.10.2019 furnished by the DGAP should not be accepted and his liability for profiteering under Section 171 of the CGST Act, 2017 should not be fixed, However, the Respondent did not appear for the hearing and sought adjournment vide his submissions dated 18.11.2019. Sh. Shashi Mathews, Advocate, and Sh. Abhishek Boob, Advocate represented the Respondent. 19. The Respondent vide his written submissions dated 24.12.2019 stated:- a. That the said 2 outlets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning whether any reduction in the rate of tax on supply of goods or services or benefit of ITC had been passed on by a registered person by way of commensurate reduction in prices. However, to date, neither the CGST Act nor the CGST Rules nor any other form of delegated legislation had prescribed any method of computation by which an amount of profiteering could be computed. Even this Authority under the Goods and Services Tax Methodology and Procedure, 2018 which had been notified in terms of Rule 126 of the CGST Rules did not prescribe any specific methodology to be adopted in the computation of profiteering. e. That no guidelines whatsoever had been framed leaving the issue to the complete discretion of the investigating authority (i.e. the DGAP) who for the first time in his Report was devising a particular method by which it was seeking to determine an amount which was allegedly profiteered. Given the absence of knowledge of the basis on which the DGAP had to act, the Respondent was compelled to accept any procedure adopted by DGAP and the opportunity of full defence to the Respondent was also curtailed. f. That the method adopted by the DGAP had no statutory sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e initiated based on such alleged non-compliance of the law. In the absence of a prescribed methodology, there was an arbitrary exercise of the power by the DGAP without any jurisdiction, k. That pricing of the products was a complex exercise and the products were usually not priced individually and in isolation at a unit level. In a free market, several considerations such as those of demand and supply, fixed and variable costs, prices of raw materials, logistics, product range, product mix, suppliers position in the market, entity-level operational costs, market situation, inflation, consumer segment, etc. costs and benefits at an entity level, division level, and product category level were all influencers of any pricing decision, Typically. the cost of taxes was only one of the elements which determined the final price. l. That the Respondent sold his products to various categories of customers viz Individual Customers and Institutional Customers and while making such sales, the prices of the products depended on the category of each customer- Moreover, prices to an Individual Customer were always different than the prices to an Institutional Customer (who was sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ology as per which pricing of his products was arrived at and to explain the transactions entered into between him and his customers. The above manner of adjudication has deprived the Respondent with an opportunity to explain his case or give alternative data before issuance of the Report by the DGAP and the same was therefore violative of the principles of natural justice. p. That it was a well-settled principle in law that granting an opportunity of hearing was an integral part of the principles of natural justice, He has relied upon the judgment of the Hon ble Supreme Court passed in the case of Dharampal Satyapal Ltd. V. Dy- Commissioner Of C. Ex. 2015 (320) ELT 3 (SC) = 2015 (5) TMI 500 - SUPREME COURT wherein the Hon ble Supreme Court has observed that even in administrative actions, where the decision of the authority may result in civil consequences, a hearing before taking a decision was necessary- Further, in the case of Escorts Farms Ltd. v. Commissioner (2004) 4 SCC 281 = 2004 (2) TMI 683 - SUPREME COURT , the Hon ble Supreme Court has also; held that Right of hearing to a necessary patty is a valuable right. Denial of such right is serious breach of statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... base prices considered for computation of alleged profiteering were computed for the period from 01.11.2017 to 14.11.2017 (or for the month of October 2017 for products not sold in the above period), Based on the ITC ratio and the base prices, the alleged profiteering amount has been computed for the period from 15.11.2017 to 30.04.2019 (i.e. 532 days). The basis of said computation of alleged profiteering was completely arbitrary as the Respondent could not be expected to retain the same selling prices over a period of over more than 17 months. Several factors affected the selling prices, including the inflation, increase in the cost of raw materials, rent revisions, cost of manpower, response to the pricing strategy adopted by the competitors, etc. s. That this Authority in the case of Kumar Gandharv v. KRBL Ltd. (Case No. 03/2018) = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY , has itself accepted the fact that an increase in production costs was a valid consideration while determining the quantum of profiteering. t. That the provisions of Section 171 of the CGST Act coupled with the Report of the DGAP having an investigation period of almost 1 and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofiteering calculated for the period beginning from January 2018 to 30th April 2019, was on account of a legitimate increase in prices of the products sold by the Respondent, Profiteering, if any, ought to be restricted only up to 04.01.2018 and any subsequent price revisions could not be attributed to the Rate Amendment Notification, w. That the total amount of alleged profiteering of ₹ 87,856/- pertained to charging the wrong rate of tax (i.e. charging tax at the rate of 18% or 40%) despite the Rate Amendment Notification, as described below:- S.NO. YEAR PROFITEERING AMOUNT 1. 2017 (from 15.11.2017) 63,356 2. 2018 22,500 TOTAL 87,856 x. That for the period from 15.11.2017 to 04.01.2018, there was an admitted error on account of the wrong charging of tax, leading to profiteering of ₹ 87,856/- (which included the incorrectly charged tax of Rs, 56,168/- that had been duly paid to the Government, and has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged profiteering determined by the DGAP dd. That the DGAP has computed the ITC ratio by taking the total ITC available for the period from 01.07.2017 to 31.10.2017, while the Rate Amendment Notification was issued on 15.11.2017, In this regard, the reasoning provided by the DGAP for not considering the period from 01.11.2017 to 14.11.2017 was that the Respondent has failed to reverse the credit available in respect of stock a on 15.11.2017 when the Rate Amendment Notification was notified which restricted the right to avail ITC. Further, as the invoices in respect of Rent pertained to the entire month of November 2017, the same could not be computed. ee. That while computing the ITC ratio for the period from 01.07.2017 to 31.10.2017, the DGAP had himself enquired from the Respondent to provide for the proportionate ITC in respect of the 2 outlets under investigation, which was duly provided by the Respondent. ff. That the DGAP ought to have considered the ITC in respect of stock as on 15.11.2017 and the proportionate ITC for 14 days in respect of the Rent invoice for the month of November 2017. The action of the DGAP in failing to consider the ITC for the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the products described above was against the stand adopted by the DGAP. Accordingly, the profiteering amount of ₹ 2,64,384/- calculated on these 2 products ought to be dropped as these were completely new products introduced by him for the first time after 15.11.2017 and the computation in this regard was based on a comparison between incomparable product descriptions, Therefore, out of total profiteering calculated of ₹ 61,67,097/- an amount of ₹ 2,64,384/- ought to be outrightly dropped. jj. That while arriving at the profiteered amount, the DGAP has failed to appreciate that different factors at different points in time affected the costing and pricing of a product, and therefore, no straight jacket formula could be used for either arriving at a base price or for calculating profiteering, At the same time, the DGAP has also failed to appreciate that various factors had contributed to an increase in costs incurred by the Respondent. That the pricing of products was dependent on the expenses incurred by a company. Therefore, the increase in his costs ought to have been considered. kk. That the DGAP ought to have considered the additional costs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 10 8 11 Shift Manager 14 11 9 7 10 ARM/RM 14 9 8 5 9 For 2018-19 Grades Performance Category A B C D Average Team Members 11 9 7 4 8 Shift Manager 9 7 5 3 6 ARM/RM 8 6 4 2 5 mm. That the cost of rental of the outlets had also increased considerably over a period of time (average increase being 15.35% in the past 4 years). The rental cost for the Subway outlet at the Departure terminal in the past 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent should not be saddled with any liability on this account, as he was merely operating as per the terms of the Franchise Agreement. ss. That this Authority in the case of Jijrushu N. Bhattacharya v. M/s. NP Foods = 2018 (10) TMI 1338 - NATIONAL ANTI-PROFITEERING AUTHORITY , which was also a Subway franchisee (in respect of a market store) had held that there was no profiteering. Accordingly, in light of the submissions made in the above paragraphs and principles of judicial discipline, a similar finding ought to be rendered by this Authority in the facts of the present case. tt. That the whole approach of the DGAP was not only contrary to the statutory provisions but completely arbitrary and did not take into account the commercial realities. The anti-profiteering provisions were in the nature of anti-abuse provisions and could not be construed in a manner that restricted the right of a citizen to carry on trade freely in terms of Article It was well settled that the right to reasonable profit was a part of the right to trade and any methodology prescribed under Section 171 which was part of a taxing statute could not be de-hors a reasonable profit that mig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant considerations and the Report unreasonably interfered with the right to carry on trade and was violative of Article 19(1)(g) and Article 300A of the Constitution of India. xx. That the DGAP has proceeded as if Section 171 was a consumer protection measure as opposed to a business regulation measure and the DGAP has failed to appreciate that GST law could not be used to protect consumer interest at the cost of businesses being forced to incur losses by virtue of a narrow interpretation of the law. That the Repot has failed to recognize the right of a business/ registered person to balance GST benefits and losses across its products/product channels to ensure that commensurate GST benefit was passed on to its recipients across its various sales on an overall basis. 20. A supplementary report was sought from the DGAP on the above submissions made by the Respondent. In response, the DGAP, after considering the above submissions made by the Respondent, has furnished his issue-wise report, which is as below:- a. Point No. 1 to 13:- No comments have been offered since these paragraphs contained only the facts on record. b. Point No. 14 to 22.- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been covered in the paras 15, 16, and 17 of the Report dated 25.10.2019. j. Point No. 54 to 56:- The DGAP has stated that the amount of profiteering was computed only from the data submitted by the Respondent vide various replies as mentioned in the report dated 25.10.2019, k. Point No. 57 to 66:- The DGAP has stated that the cost of the items/ inputs could not change overnight on the date of the change in the tax rate. l. Point No. 67:- The DGAP has stated that the methodology adopted by him in his Report was in line with the legal principles and this methodology has been consistent throughout in all similar cases and has been approved by this Authority. Regarding the methodology prescribed by the Authority, the procedure and methodology for determination of profiteering and intent thereof were determined by the Authority on case to case basis by adopting the most appropriate and accurate method based on facts and circumstances of each case as well as the nature of the goods and services supplied- There could not be any fixed mathematical methodology formulations/methodology for determination of quantum of benefit to be passed on which could co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h effect from 15.11,2017, when the rate of tax had changed on the restaurant service. As per his submissions made at Para 42 to 45 of the Submissions dated 24.12.2019 Page 18 to 19) and Annexure 9 of Submissions dated 24.12.2019 (Page No. 218 to 220) it has been clearly pointed out that out of the total amount of alleged profiteering amounting to ₹ 61,67,097/- the amount of alleged profiteering for the period up to 04.01.2018 was admittedly ₹ 78,261/- only, That the Respondent could not be expected to restrain from making a yearly revision of prices as per the settled principles of commercial expediency as referred by the Respondent in his submissions dated 24.12.2019, which was done w.e.f. 05.01.2018, thereby leading to the computation of alleged profiteering as per the DGAP s report. c. That the amount of alleged profiteering in the present case was mostly on account of price revision made with effect from 05.01.2018 and for the first 51 days the amount of alleged profiteering was almost negligible. The alleged profiteering computed on account of price revision with effect from 05.01.2018 had led to price fixation by the DGAP, which was completely illegal an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a negligible profiteering for the period up to 04.01.2018. The considerable amount of profiteering pertained to price revision undertaken by the Respondent with effect from 05.01.2018 which was on account of several alien factors, and it was completely erroneous and arbitrary for the DGAP to factor profiteering for the price revision that has happened after more than 51 days from the date of amendment in the rate of taxes on restaurant services. 22. We have carefully considered the Report of the DGAP, the submissions made by the Respondent, and the other material placed on record. On examining the various submissions we find that the following issues need to be addressed:- a. Whether the Respondent has passed on the commensurate benefit of reduction in the rate of tax to his customers? b. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent? 23. Section 171 of the CGST Act provides as under:- (1) 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. (2). The Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n due to the cost of raw materials do not have any ramification on the computation of the amount of profiteering. Further, Section 171 of the Act, ibid, mandates that profiteering has to be calculated on each supply/transaction and therefore it has to be calculated on each actual invoice/actual supply in the relevant period, comparing the prices mentioned therein with the prevailing base prices before the reduction in the tax rate in the availability of ITC. For the computation of profiteering, the actual transaction value of a product in the pre and post-tax rate reduction period is compared- Hence, the pricing and the amount of profit/loss at the end of the supplier becomes irrelevant for the computation of profiteering. We also find it pertinent to mention that this Authority or the DGAP has no legislative mandate to fix the prices or the profit margins in respect of any supply (which are the rights of the supplier) and it is obligated by Section 171 of the CGST Act, 2017 to ensure that the benefit of the reduction in the rate of tax and/ or benefit of ITC (which is a sacrifice of revenue from the kitty of Central and State Governments in a welfare state) is passed on to the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent was (i) selling his products at different rates to different customers based on the various factors such as sales, inventory position, competitor s strategy, market penetration and customer loyalty (ii) the same customer may not have purchased the same product during the pre and the post rate reduction periods and (iii) a customer may have purchased a particular product during the pre rate reduction period and may not have purchased it in the post rate reduction period or vice versa and (iv) the average base prices computed for a period of 14 days w.e.f. 01.11.2017 to 14.11.2017 or for the previous months provide highly representative and justifiable comparable average base prices. On the basis of the average pre rate reduction base price the commensurate base price has been computed by adding denial of ITC of 11.16% and compared with the invoice wise actual base price of the product as has been illustrated in Table-B supra, However, the average pre rate reduction base price was required to be compared with the actual post rate reduction base price as the benefit is required to be passed on each product to each customer. In case average to average base price is comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach Stock Keeping Unit (SKU) or unit of construction to each buyer and in case they are not passed on, the profiteered amount has to be calculated for which investigation has to be conducted on all such impacted SKUs/units, These benefits can also not be passed on at the entity/organization/branch level as the benefits have to be passed on to each recipient at each SKU/unit level. Further, the above Section mentions any supply* which connotes each taxable supply made to each recipient thereby clearly indicating that a supplier cannot claim that he has passed on more benefit to one customer, therefore, he would pass less benefit to another customer than the benefit which is actually due to that customer, Each customer is entitled to receive the benefit of tax reduction or ITC on each SKU or unit purchased by him. The word commensurate mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each SKU or unit based on the tax reduction as well as the existing base price of the SKU or the additional ITC available. The computation of commensurate reduction in prices is purely a mathematical exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce they have to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous and mandatory which truly reflect the intent of the Central and State legislatures. Therefore, the above contention of the Respondent is frivolous and hence the same cannot be accepted. The Respondent cannot deny the benefit of tax reduction to his customers on the above untenable ground as Section 171 provides a clear cut methodology to compute both the above benefits. Further, in the present case, the methodology adopted by the DGAP for calculation of profiteering has been furnished as is given in the below table:- Table (Amount in Rs.) Name of the product (A) HARA BHARA PATTY 6 SUB (Z0358) Total Quantity sold during 01.11.2017 to 14.11.2017 (B) 158 Sum of taxable Value during 01.11.2017 to 14.11 2017 (C) 28119.26 Base Price during 01.11.2017 to 14.11.2017 (D=C/B) 177.97 Invoice Value for the Item in UI00000210 dated 09.11.2017 (E) 2310.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove 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 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. 29. The Respondent has also cited the extract from the minutes of the 17th GST Council Meeting wherein the Advisor to the Chief Minister, Punjab as well as the Chief Economic Advisor raised the issue of requirement of having a mechanism to compute profiteering with proper checks and balances. However, the issues raised by the above officers are incorrect as the methodology to compute the profiteering is itself contained in Section 171 of the CGST Act, 2017 as has been explained above. The Respondent has also pointed out that the Malaysian Government has introduced the Price Control and Anti-Profiteering (Mechanism To Determine Unreasonably High Profits for Goods) Regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pass on the benefit of tax reduction to the consumers only and have no mandate to look into fixing of prices of the products which the Respondent was free to fix. If there was an increase in his costs the Respondent should have increased his prices before 15.11.2017, however, it cannot be accepted that his costs had increased exactly on the intervening night of 14.11.2017/ 15.11.2017 when the rate reduction had happened which had forced him to increase his prices exactly equal to the reduction in the rate of such tax, Such an uncanny coincidence is unheard off and hence there is no doubt that the Respondent has increased his prices for appropriating the benefit of tax reduction to deny the above benefit to the consumers. 31. The Respondent, in support of his above contention, has also relied upon the decision of the Hon ble Supreme Court given in the case of Basant Industries v. Asst. Collector of Customs 1996 (81) ELT 195 (SC) = 1995 (1) TMI 89 - SUPREME COURT . Perusal of the above-said judgment shows that in that case, the Hon ble Supreme Court had decided on an issue of valuation in the context of taxation, in a matter which has no similarity with the case before us wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commonly for each category of sales was not proper. The discounts offered to the Institutional Customers had not been considered while undertaking the computation of the alleged profiteering amount It would be pertinent to mention here that Section 171 (1) requires that the Respondent should pass on the benefit of tax reduction from 18% to 5% w.e.f. 15.11.2017 which implies that he should have continued to charge the same base prices which he was charging on 14.11.2017 and should have charged 5% GST on them instead of 18% GST w.e.f. 15.11.2017. However, the Respondent had not done so and he had increased the base prices w.e.f. 15.11.2017 and then charged GST@5%. The above act of the Respondent amounts to denying the benefit of tax reduction. Therefore, to compute the profiteered amount the base price which was existing on 14.11.2017 was required to be compared with the base price which he had charged post rate reduction to ascertain whether the Respondent has passed on the benefit of tax reduction or not- Mere charging Of GST @5% post rate reduction does not amount to passing on of the benefit when the base price has been increased to offset the benefit. Therefore, the comparison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the profiteered amount given in the Explanation attached to Section 171 mentioned above which states that For the purpose of this section, the expression profiteered shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both! Therefore, the definition of profiteering cited by the Respondent is not applicable as the definition of profiteered amount has been clearly given in the above Explanation and hence the above claim of the Respondent is not correct. Further, the provisions of Section 171 of the CGST Act, 2017 do not force the Respondent to fix his prices and profit margins in respect of the supplies made by him. 36. The Respondent has also contended that for the purpose of computation of the quantum of profiteering, the DGAP has taken a long period of more than 17 months i.e. from 15.11.2017 to 30.04.2019. It could not be expected from him to retain the same selling prices over a period of over more than 17 months keeping in view the various factors like infl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration while determining the quantum of profiteering- In this context, it is pertinent to mention that in the above case no benefit of the increase in the cost was given, Instead, the rate of tax had been increased and hence the provisions of Section 171 (1) were not applicable as there was no tax reduction. Therefore, the facts of the above case referred by the Respondent are different from his case and hence, they cannot help him. 38. The Respondent has also pleaded that right to reasonable profit is a part of the right to trade, which is a fundamental right guaranteed under Article 19(1 of the Constitution of India and the right to trade included the right to determine prices and such right which had been granted by the Constitution of India could not be taken away without any explicit authority under the Law, Therefore, this form of price control was a violation of Article 19(1)(g) of the Constitution of India. The contention of the Respondent is not correct as this Authority or the DGAP has not acted in any way as a price controller or regulator as they don t have the mandate to regulate the same. The Respondent is free to exercise his right to practice any profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth, the base price and the tax paid. In the present case, it would be appropriate to mention that the Respondent has not only collected excess base prices from the customers which they were not required to pay due to the reduction in the rate of tax but he has also compelled them to pay additional GST on these excess base prices which they should not have paid. By doing so, the Respondent has defeated the very objective of both the Central as well as the State Governments which aimed to provide the benefit of rate reduction to the general public. The Respondent was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of tax reduction to his customers by charging excess GST. Had he not charged the excess GST the customers would have paid less price while purchasing goods from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent. Therefore, the above contention of the Respondent is untenable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not passed on 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 the tax rate reduction by way of reduced prices and Section 171 does not Offer the Respondent any leeway 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculating profiteering. The pricing of products was dependent on various factors like increase in expenses and increase in cost due to GST implementation, change in IT systems, marketing costs, operating cost, increased cost of manpower and rental cost which should be considered while arriving at the profiteering. In this connection, it would be pertinent to mention that the provisions of Section 171 (1) and (2) of the above Act require the Respondent to pass on the benefit of tax reduction to the consumers only and have no mandate to look into fixing of prices of the products which the Respondent was free to fix. If there was an increase in his costs the Respondent should have increased his prices before 15.11.2017, however, it cannot be accepted that his costs had increased exactly on the intervening night of 14.11.2017/ 15.11.2017 when the rate reduction had happened which had forced him to increase his prices exactly equal to the reduction in the rate of such tax, We thus opine that the Respondent has increased the prices of his supplies only for appropriating the benefit of tax reduction to deny the above benefit to the consumers. 46. The Respondent has also claimed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He can also fix his prices and profit margins in respect of the supplies made by him, Under Section 171 this Authority has only been mandated to ensure that both the benefits of tax reduction and ITC which are the sacrifices of precious tax revenue made from the kitty of the Central and the State Governments are passed on to the end consumers who bear the burden of the tax. This Authority is charged with the responsibility of ensuring that both the above benefits are passed on to the general public as per the provisions of Section 171 read with Rule 127 and 133 of the CGST Rules, 2017. This Authority has nowhere interfered with the business decisions of the Respondent and therefore, there is no violation of Article 19 (1) (g) of the Constitution. 49. Based on the above facts the profiteered amount is determined as ₹ 61,67,097/- as has been computed in Annexure-15 of the DGAP s Report dated 25, 10.2019. Accordingly. the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined. are not identifiable, the Respondent is directed to deposit an amount of ₹ 61,67.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also the fact that supplies from various outlets of the Respondent are being made through a single GST registration and the same ITC Pool/Electronic Credit Ledger is being used for all the supplies being made from that registration. Therefore, this Authority, in line with the provisions of Section 171(2) of the CGST Act, 2017 and as per the amended Rule 133 (5) (a) of the CGST Rules 2017 directs the DGAP to further investigate all the other outlets of the said Respondent for violation of the provisions of Section 171 of the CGST Act 2017 and to submit his Report as per the provisions of Rule 133 (5) (b) of the CGST Rules, 2017, since there are adequate reasons to believe that the Respondent may not have passed on the benefit of rate reduction to his customers in terms of Section 171(1) of the Act ibid, in the same manner as in the two outlets. 53. As per the provisions of Rule 133 (1) of the CGST Rules. 2017 this Order was required to be passed within a period of 6 months from the date of receipt of the Report furnished by the DGAP under Rule 129 (6) of the above Rules. Since the present Report has been received by this Authority on 30-10.2019, this Order was to be passed on ..... 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