TMI Blog2020 (9) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... on ticket was above one hundred rupees w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Therefore, the Respondent is liable to pass on the benefit of the above tax reduction to his customers in terms of Section 171 (1) of the above Act. It is also apparent that the DGAP has carried out the present investigation w.e.f. 01.01.2019 to 31.07.2019. The profiteered amount is determined as ₹ 4,20,731/- for the period from 01.01.2019 to 06.01 2019 as mentioned in Tables-B to D of the DGAP's Report dated 31.01.2020 as per the provisions of Section 171 (1) read with Rule 133 (1) of the CGST Rules, 2017. The Respondent has reduced his prices commensurately w.e.f. 07.01.2019 in terms of Rule 133 (3) (a) of the above Rules therefore, no further direction is required to be passed on this account. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent has voluntarily deposited the profiteered amount of ₹ 4,20,731/- along with interest of ₹ 10,065/- in the CWFs of the Central and the State Government in accordance with the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. Penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 2. The DGAP has stated in his Report that the Standing Committee on Anti-profiteering has examined the above application and on being prima facie satisfied, had referred it to the DGAP to conduct a detailed investigation. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 05.08.2019, a notice under Rule 129 (3) of the above Rules was issued by the DGAP on 14.08.2019 calling upon the Respondent to respond as to whether he admitted that he had not passed on the benefit of reduction in GST rate w.e.f. 01.01.2019 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 to furnish all documents in support of his reply. The Respondent was also allowed to inspect the non-confidential evidence/information which formed the basis of the said notice, during the period from 21.08.2019 to 23.08.2019, which was availed of by the Respondent on 26.08.2019. Further, vide e-mail dated 06.01.2020, the Applicant No. 1 was also afforded an opportunity to inspect the non-confidential documents furnished by the Respondent on 14.01.2020 or 15.01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GSTR-I 3B Returns for the period from December, 2018 to July, 2019. b. Movie wise ticket wise data for the period from December, 2018 to July, 2019. c. Sample copies of tickets pre and post 01/01/2019. d. Government Order No. 43 dated 15.10.2009 G. O. No. 169 dated 09.10.2012 approving the ticket prices. e. Copies of representations made before the Principal Secretary (Home), Government of Telangana Licensing Authority, Commissioner of Police, Hyderabad. f. Copies of Cheque Bank Statement for deposition of differential amount of ₹ 4,20,731/- along with interest of ₹ 10,065/- to PAO (HQ), CBIC in the Consumer Welfare Fund. g. Copy of order dated 14.06.2019 passed by Hon'ble High Court of Telangana in WP No. 11805 of 2019 along with copy of Writ petition. 6. The DGAP vide notice dated 14.08.2019 had also intimated the Respondent to provide a non-confidential summary of the information/documents furnished by him in terms of Rule 130 of the CGST Rules, 2017. However, the Respondent had not classified any of his information/ documents as confidential in terms of Rule 130 of the Rules. 7. The DGAP has also reported that he has examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the tickets sold during post-GST rate reduction i.e. on or after 01.01.2019. The DGAP has furnished the illustration of the methodology adopted while computing profiteering, in the Table-'A' below:- Table-'A' (Amount in Rupees) Sl. No. Description Factors Pre Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (From 01.01.2019) Pre Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (From 01.01.2019) 1. Multiplex Name A Hyderabad MP Hyderabad GVK One 2. Ticket Category B Executive (2D) Royal (3D) 3. Ticket MRP C 150/- 150/- 280/- 280/- 4. Total No. of tickets sold D 56,230 2,771 5. Total taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.06.2019) had also been arrived at in similar way for all the Multiplexes. The details of the same has been furnished by the DGAP vide Table-'B', 'C' 'D' as has been mentioned below:- Hyderabad MP (Table-'B') (Amount in Rupees) Sl. No. Description Factors Pre Rate Reduction 01.12.2018 to 31.12.2018 Post Rate Reduction 01.01.2019 to 06.01.2019 Post Rate Reduction 07.01.2019 to 31.07.2019 Pre Rate Reduction 01.12.2018 to 31.12.2018 Post Rate Reduction 01.01.2019 to 06.01.2019 Post Rate Reduction 07.01.2019 to 31.07.2019 1. Class of Tickets A Executive (2D) Executive (3D) 2. Ticket MRP B 150/- 150/- 138/- 200/- 200/- 184/- 3. Total No. of tickets sold C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Tickets A Executive (2D) Executive (3D) 2. Ticket MRP B 150/- 150/- 138/- 180/- 188/- 166/- 3. Total No. of tickets sold C 66,791 14,923 5,21,204 38,747 3,024 1,06,558 4. Total taxable value (after Discount, if any) D 78,26,569 18,97,012 6,09,49,596 54,48,603 4,61,281 1,49,90,579 5. Average base price (without GST) E=D/C 117.18/- 127.12/- 116.94/- 140.63/- 152.54/- 140.68/- 6. GST Rate F 28% 18% 18% 28% 18% 18% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E=D/C 195.30/- 211.86/- 194.92/- 218.74/- 237.28/- 218.64/- 6. GST Rate F 28% 18% 18% 28% 18% 18% 7. Actual Selling price (post rate reduction) (including GST) G=E* (1+F) 250/- 250/- 230/- 280/- 280/- 258/- 8. Commensurate Selling price (post Rate reduction) (including GST) H=118 % of E 230.45/- 230.45/- 258.12/- 258.12/- 9. Excess amount charged or Profiteering per Ticket I=G-H 19.55/- - 21.88/- - 10. Total J=C*I 29,521 - 5,426 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The DGAP has also intimated that as per the details of outward supplied submitted by the Respondent, it was observed that the Respondent had been supplying services in the State of Telangana 15. The investigation Report submitted by the DGAP was received by this Authority on 31.01.2020 and it was decided to accord an opportunity of hearing to the Applicants and the Respondent on 27.02.2020. Notice dated 05.02.2020 was also issued to the Respondent directing him to explain why the Report dated 31.01.2020 furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. Sh. Rohit Jain and Sh. Adarsh Somani, Advocates represented the Respondent. Vide his submissions dated 27.02.2020 the Respondent has submitted:- a. That pursuant to the change in the GST rate, he had reduced the prices by giving effect to the lower rate of GST in all the states, where the prices were not regulated. He had also enclosed the sample tickets (pre and post rate change) showing the reduced prices which was also acknowledged by the DGAP. b. That in terms of Section 171 of the CGST Act, 2017, he had reduced his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 (1) of the above Act. It is also apparent that the DGAP has carried out the present investigation w.e.f. 01.01.2019 to 31.07.2019. 18. It is also evident that the Respondent was selling two class of tickets in his Multiplexes, namely, 'Executive' and 'Royal'. For computing the profiteered amount the DGAP has taken the class wise number of tickets which the Respondent has sold w.e.f. 01.12.2019 to 31.12.2019 during the pre rate reduction period and calculated the average base price of each class of tickets by dividing the total taxable value with the total number of tickets sold during the above period. He has compared the average pre rate reduction base prices of the tickets with the actual selling prices of the tickets sold during the post reduction period i.e. after 01.01.2019 and assessed the profiteered amount on each class of ticket as is evident from the perusal of Table-'A' supra where profiteering of ₹ 11.73 and ₹ 21.88 respectively has been computed on the 'Executive' and 'Royal' classes of tickets. The mathematical methodology employed by the DGAP to compute the profiteered amount is correct, appropriate, reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. It is clear from the plain reading of the above provision that it mentions reduction in the rate of tax or benefit of ITC which means that if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails benefit of additional ITC the same have to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their tax revenue. It also provides that the above benefits are to be passed on any supply i.e. on each Stock Keeping Unit (SKU) of each product or unit of construction or service to every buyer and in case they are not passed on, the quantum of denial of these benefits or the profiteered amount has to be computed for which investigation has to be conducted in respect of all such SKUs/units/services by the DGAP What would be the 'profiteered amount' has been cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and Methodology' which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed mathematical formula, in respect of all the Sectors or the SKUs or the services, can be set for passing on the above benefits or for computation of the profiteered amount, as the facts of each case are different. Moreover, this Authority under Rule 126 has been empowered to 'determine' Methodology Procedure and not to 'prescribe' it. Similarly, the facts of the cases relating to the sectors of Fast Moving Consumer Goods (FMCG), restaurant service, construction service and cinema service are completely different from each other and therefore, the mathematical methodology adopted in the case of one sector cannot be applied to the other sector. Moreover, both the above benefits are being given by the Central as well as the State Governments as a special concession out of their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s voluntarily deposited the profiteered amount of ₹ 4,20,731/- along with interest of ₹ 10,065/- in the CWFs of the Central and the State Government in accordance with the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. 23. It is clear from the above that the Respondent has contravened the provisions of Section 171 (1) of the CGST Act, 2017. However, since, the penalty prescribed under Section 171 (3A) of the CGST Act, 2017 for violation of the above provisions has come in to force w.e.f. 01.01.2020 and the infringement pertains to the period from 01.01.2019 to 06.01.2019 and the Respondent has also deposited the profiteered amount alongwith the interest therefore, no penalty is proposed to be imposed on the Respondent. 24. 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 from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on 31.01.2019 the order was to be passed on or before 30.07.2020. However, due to prevalent pandemic of COVID-19 in the Country this order could not be passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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