TMI Blog2020 (12) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent would not be entitled to the benefit of ITC on the above service w.e.f. 15.11.2017. Accordingly, the Respondent was required to pass on the benefit of tax reduction to his recipients as per the provisions of Section 171 of the CGST Act, 2017 and its consequences if he did not pass on the benefit. On the basis of the analysis of the details of the product-wise outward taxable supplies made during the period between 15.11.2017 to31.01.2018, the DGAP had found that the Respondent had increased the base prices of the items supplied by him to neutralise the effect of ITC of 9.11% which was not available to him after the rate reduction w.e.f. 15.11.2017. The DGAP had compared the pre and post GST rate reduction average prices of the items sold during the period between 15.11.2017 to 31.01.2018 and after taking into account the entire quantity of the products sold during the above period, he had found that the Respondent had increased the average output taxable value i.e. the base price by 10.45% to offset the denial of input tax credit of 9.11% as was evident from Annexure-36 of the Report. Therefore, the DGAP had concluded that the Respondent had not passed on the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit. Therefore, the above contention of the Respondent is not maintainable. There are several statutory bodies which exercise quasi-judicial functions but they are not required to be composed of Judicial Members. There is no Judicial Member in the SEBI which has been constituted under the Securities and Exchange Board of India Act, 1992. Neither the statute nor any decision of the Court requires the SEBI to be composed of a Judicial Member simply because it also performs quasi-judicial functions under the Act apart from its other roles - the TRAI which also performs quasi-judicial functions has been constituted under the Telecom Regulatory Authority Act, 1997 but does not have a Judicial Member. Section 3 of the said Act provides for the composition of the Authority. Again, the Medical Council of India has been constituted under the Indian Medical Council Act, 1956. The various disciplinary powers which it exercises under the Act can be said to be quasi-judicial in nature but it does not require a Judicial Member in its Council. The constitution and composition of the Council is provided in Section 3 of the said Act. The Institute of Chartered Accountants of India has been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot claim that he was not required to pass on the benefit of tax reduction. Power to frame methodology and procedure is generally and widely available to all the judicial, quasi-judicial and other statutory bodies and no favour has been shown to this Authority by granting it power to frame its own methodology and procedure under Rule 126. Such a power has been conferred on the GST Tribunal under Section 111 (1) of the CGST Act, 2017 and the Competition Commission under Section 36 of the Competition Act, 2002. This Authority has similarly framed its methodology and procedure under Rule 126 vide Notification dated 28.03.2018. The Respondent does not have the power of legislature to frame the methodology and procedure and hence any such methodology and procedure suggested by him cannot be accepted being illogical, arbitrary, inequitable and being ultra vires of Section 171 and Article 14 of the Constitution. The Respondent had wrongly claimed that he had passed on the benefit at the entity level whereas the evidence on record shows otherwise. The Respondent is liable to pass on the benefit of GST rate reduction from 18% to 5% with denial of benefit of ITC, as was notified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Representatives, Sh. Dinesh Agarwal, CA and Sh. Mayank Jain, Advocate for the Respondent. ORDER 1. A Report dated 15.06.2018 was received from the Applicant No. 5 i.e. the Director General of Safeguards (DGSG), now re-designated as Director General of Anti-Profiteering (hereinafter referred to as the DGAP) under Rule 129 (6) of the Central Goods Services Tax (CGST) Rules, 2017. The brief facts of the case were that the Applicants No. 1 2 through their e-mails both dated 23.11.2017 and Applicants No. 3 4 vide their e-mails dated 15.11.2017 and 17.11.2017 respectively had filed complaints alleging that though the rate of Goods and Services Tax (GST) on Restaurant Services had been reduced from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the prices of the products which were being sold by him and had maintained the same prices which he was charging before the above reduction. They had also claimed that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. 2. The above applications were examined by the Standing Committee on A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commensurate benefit arising out of the reduction in the rate of tax had been passed on to the customers. c. That the price revision made by him w.e.f. 15.11.2017 did not fall within the purview of Section 171 of the above Act as this provision applied in only those cases where the contract of supply/sale had been entered in to prior to the change in the rate of tax or ITC. He had also claimed that any such change did not amount to automatic change in the price unless it was agreed to by both the parties as per Section 64 A of the Sale of Goods Act, 1930. He had further claimed that any attempt to regulate the sale prices of the products being sold by him would violate his right to carry on trade as per Article 19 (1) (g) of the Constitution and the provisions of Section 171 were not similar to the laws framed for controlling prices as per List Ill of Schedule VII of the Constitution. d. That the cost of food and beverages had gone up due to the abrupt denial of ITC which had constrained him to increase the base prices to negate this impact and such increase was also not commensurate with the increase in the costs. He had also contended that the cost of the restaurant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 171 amounted to controlling the prices and thus infringed his right to trade under Article 19 (1) (g) of the Constitution was also not correct as this Section nowhere provided for control on the prices and its operation was limited to the extent of ensuring that the benefits of tax reduction and ITC were passed on to the consumers by way of commensurate reduction in the prices. The DGAP had further stated that the Central Govt. on the recommendation of the GST Council vide its Notification No. 26/2017-Central Tax (Rate) dated 14.11.2017 had reduced the rate of tax on restaurant services from 18% to 5% w.e.f. 15.11.2017 with the condition that the benefit of ITC would not be available on this service. 7. The DGAP had also submitted that the Respondent was selling 1,844 products and after comparing the price lists published before and after 15.11.2017 when the rate of tax was reduced, which was indicated in Annexure-32, the Respondent had increased the base prices in respect of 1,774 (96.20%) products. He had further submitted that although the Respondent had charged GST @ 5% on and after 15.11.2017 but due to increase in the base price the customers were forced to pay the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed in November, 2017 as per GSTR-3B Return and (iii) ₹ 0.22 Crore on account of rent for which bills were to be raised in March, 2018. 10. The DGAP had also informed that on the scrutiny of the GSTR-1 and GSTR-3B Returns and the ITC registers produced by the Respondent it was found that the ITC amounting to ₹ 33.96 Crore was available to the Respondent during the period between July, 2017 to October, 2017 which was approximately 9.11% of the taxable value of service of ₹ 372.62 Crore supplied by the Respondent during the same period excluding the inter-unit branch transfers. The rate of tax on the restaurant services was reduced from 18% to 5% w.e,f. 15.11.2017 and the benefit of ITC was not available to the Respondent w.e.f. the above date. The DGAP had calculated the ratio of denial of ITC as under.- (Amount in Rs.) Particulars Jul, 2017 Aug., 2017 Sept., 2017 Oct., 2017 Total ITC Availed as per GSTR-3B (A) 5,40,24,699 8,00,76,997 9,10,56,885 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect of denial of ITC after the rate reduction. The DGAP had compared the pre and post GST rate reduction prices of the items sold during the period between 15.11.2017 to 31.01.2018 and after taking into account the entire quantity of the products sold during the above period, had found that the Respondent had increased the average output taxable value i.e. the base prices by 10.45% to offset the denial of input tax credit of 9.11% as was evident from Annexure-36 of the Report. Therefore, the DGAP had concluded that the Respondent had not passed on the benefit of reduction in the rate of tax from 18% to 5% as he had increased the base prices by more than 9.11% to 10.45% i.e. more than the denial of ITC in respect of 1,730 items out of total 1,844 items i.e. 93.82% of the total items supplied by him before and after 15.11.2017. 12. The DGAP had also stated that on the basis of the pre and post reduction in CST rates, the impact of the denial of ITC and the details of the outward supplies made during the period between 15.11.2017 to 31.01.2018, as per the GSTR-I or GSTR-3B Returns of the Respondent, the amount of net higher sale realization due to increase in the base prices of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit had been passed on to them. It had also been claimed by the Respondent that the DGAP had admitted that there was no incremental ITC available and therefore no benefit was to be passed on by the Respondent. He had further claimed that despite admission that Section 171 nowhere aimed at price regulation and its purpose was only to ensure that benefit of reduction in the rate of tax or ITC was passed on to the recipients by way of commensurate reduction in the prices, the DGAP had gone in to the computation of base price by invoking the marginal note, i.e. Anti-Profiteering Measure which was illegal. He had further claimed that as per the settled law pronounced on the interpretation of the statutes, marginal notes were considered as internal aid to construction and while construing such provisions, the first and the foremost rule was of literal construction and in case the provision was unambiguous and the legislative intent was clear, the other rules of construction were not be called into aid since they were to be called for aid only when the legislative intention was not clear. The Respondent had also cited the law settled in the cases of Commissioner of income Tax v. Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 04.05.2018 passed by this Authority in the case of Kumar Gandharv others v. KRBL Limited = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY , but in spite of furnishing evidence no other factor was taken in to consideration. He had further claimed that while determining cost of a product, tax was just one component and the other factors had been ignored and therefore, the entire exercise undertaken by the DGAP needed to be dismissed as the DGAP had lost sight of the true meaning of the word profit . 16. The Respondent had also pleaded that the DGAP had concluded that the turnover had increased by ₹ 24,81,33,857/- solely due to the increase in the base prices by 10.45%, which could not be taken as profit accruing to the Respondent as there was increase in the (a) Royalty, as the Respondent was paying royalty to M/s. McDonald s India Pvt. Ltd. which was 3.99% of the restaurant turnover and amounted to incremental royalty of 99,00,540/- on the incremental turnover attributed solely to the price increase during the year 2017-18 (b) Variable rent, which was 3.29% of the restaurant turnover, whereby he had paid an incremental rent of ₹ 81,63,604/- on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been defined as under:- 1. Profiteering Any conduct or practice involving the acquisition of excessive profits Mount vs Welsh To seek or obtain excessive profits, one who is given to making excessive profits Law Lexicon The taking advantage of unusual or exceptional circumstances to make excessive profits Black s Law Dictionary Make or seek to make an excessive profit Shorter Oxford English Dictionary Profiteering would mean taking advantage of unusual or exceptional circumstances to make excessive profits. Islamic Academy of Education vs State of Karnataka The Respondent had further pleaded that he had not made excessive and/ or unreasonable profit as he was hardly making profit, as the tax incremental cost computed by the DGAP was 9.11% as against the incremental price margin of 9.43% and hence he had benefited only by 0.32%. He had also averred that the increased tax cost warranted revision in the prices to offset the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be given to him. He had further claimed that the GST liability on variable rent would be accounted for either on a monthly or yearly basis, although it was accruing daily which constituted 3.29% of the restaurant turnover which the Respondent would be denied. 19. The Respondent had also pleaded that during the period between July-October 2017, he had made inter-unit branch transfers of ₹ 49,26,86,384/- on which GST of ₹ 7,30,30,443/-was paid which had been wrongly excluded while computing the ratio of ITC denial to taxable turnover, being mere book entries, as he had suffered incremental cost on the mark up price. He had further pleaded that he had availed of ITC of ₹ 6,46,90,974/- on the inward supplies of ₹ 47,15,04,275/- which were used to make outward inter-unit branch transfers valued at ₹ 50,90,43,209/- on which GST of ₹ 7,03,22,927/- was paid and thus, he had paid additional GST of ₹ 56,31,954/- on inward supplies which had been denied to him by the DGAP. He had also alleged that the period of investigation had been arbitrarily taken from 1 July 2017 to 31 October 2017 on the ground that the break-up of the closing stock of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase in sales prices 9.43 % 9.43% Impact due to denial of ITC 12.24% 10.1%~10.3 Net marginal Gain/(Loss) (2.81%) (0.67~0.87%) 21. He had also argued that the calculation of the profiteered amount of ₹ 7.49 Crore was not correct as the DGAP had ignored the reduction in the prices made by him which had led to reduction in the profiteered amount and also due to the reason that the DGAP had calculated the profiteered amount @ 105%, i.e. base price + 5% GST when the 5% GST had already been deposited in the Government account and not retained by him and hence, no profiteering could be alleged on it. He had also admitted that on the basis the above submissions, the amount of alleged profiteering stood reduced to ₹ 3,17,03,988/-. 22. The Respondent had also contended that the relevant provisions of the CGST Act, 2017 or the CGST Rules, 2017 did not prescribe the methodology to be followed by the registered suppliers in order to comply with the anti-profiteering requirements. He had further contended that R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h pertaining to the period between 1 July 2017-14 November 2017 which could not be availed due to change in the tax regime. He had further submitted that Section 16 of the CGST Act provided for availment of the ITC up to a period of one year and hence he was entitled to claim the above ITC. He had also stated that the receipt of the goods and services had to be determined under the provisions of Section 12 and 13 of the CGST Act, 2017 as per which earlier of the date of issue of the invoice or the date of the receipt of payment was to be considered as time of supply and since the Respondent had claimed credit of ITC in respect of all such invoices which were dated on or before 14 November 2017 but accounted in the books of account on or after 14 November 2017, he should be allowed to avail the same. He had further stated that he was barred from taking benefit of ITC on inward supplies received after 14 November 2017 as per Section 12 and 13 of the CGST Act, 2017 which could not be construed as curtailing his vested right of availing the ITC for the inward supplies received on or before 14 November 2017. He had also cited the cases of Eicher Motors Ltd. v. Union of India 1999 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Jul, 2017 Aug., 2017 Sept., 2017 Oct., 2017 1-14 Nov -17 Total ITC Availed as per GSTR-3B (A) 5,40,24,699 8,00,76,997 9,10,56,885 11,08,97,125 5,77,33,663 39,44,87,119 Add: ITC of July, 2017 to October, 2017 availed in the month of November, 2017 GSTR-3B ( Anex-34 ) (B) 68,74,072 1,36,41,705 2,01,97,587 4,43,97,474 8,51,10,838 Add: ITC of July, 2017 to October, 2017 to 14 November availed in the month of December, 2017 2,37,237 7,08,187 9,47,249 22,49,103 1,14,39,498 1,55,81,273 Add: ITC of July 2017 to 14 November 2017 availed in the month of January 2018 4,55,861 5,73,870 10,57,272 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Denial of Input Tax Credit to Net Outward Taxable Turnover (I)=(E/H) 5.17 7.95 11.16 14.72 14.21 10.27 He had also claimed that the net effect of the denial of ITC was 10.27% to 12.24% whereas the net incremental revenue was only 9.43% and hence there was no profiteering. 28. The DGAP in his replies dated 08.08.2018 and 20.08.2018 filed in response to the submissions made by the Respondent had stated that Section 171 required passing on of the benefit of reduction in the rate of GST by way of a commensurate reduction in the prices and in this case the prices were not reduced. He had also stated that he had not examined the cost component included in the base price and hence there was no interference with the right of the Respondent to fix prices of his products and freely carry on his trade. He had further stated that he had only added the quantum of denial of ITC to the pre rate reduction price. He had also submitted that the Respondent had carried forward Transitional Credit of ₹ 5.18 Crore on 1st July, 2017 for the stock held on 30.06.2017 and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crease in the cost of inputs including royalty, variable rent and other expenses was a factor in the determination of the price but it was independent of the output GST rate and hence it could not be claimed that the elements of cost unrelated to GST where affected by the change in the output GST rate and therefore, the increase in the cost of inputs claimed by the Respondent had not been considered. 30. The DGAP had also submitted that full benefit of ITC was allowed after implementation of the GST w.e.f. 01.07.2017 on the purchase of Inputs, Input Services and Capital Goods which the Respondent had availed. He had further submitted that the Respondent had informed that he carried the same level of inventory on 30 th June 2017 and 31 st October 2017 and therefore, for computing the ratio of denial of ITC to the taxable turnover, the ITC for the period from July, 2017 to October, 2017, as furnished by him in the GSTR-3B Returns had been considered by adding the amount of ITC pertaining to the period from July, 2017 to October, 2017 but availed in the month of November, 2017 as per the GSTR-3B Return and excluding the amount of tax paid on inter-unit branch transfers as per Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices on the date of availing ITC, in contravention of the provisions of Section 16 (2) (a) of the CGST Act, 2017 and therefore, the ITC pertaining to the invoices issued on or after 1st November 2017 and availed during 1-14 November 2017 had been left out. He had also intimated that the net turnover for the above period had also been left out and therefore, this had no bearing on computation of denial of ITC ratio to the turnover during the period from 1 st July 2017 to 31 st October 2017. The DGAP had also claimed that the law did not provide a supplier any flexibility to suo moto decide on any other modality to pass on the benefit of ITC or reduction in the rate of tax to the recipients except by commensurate reduction in the price and hence computation of the marginal gain/loss as per the financial statements could not be considered in view of the statutory provisions. He had further claimed that a supplier did not have discretion to pass on the benefit of input tax credit or reduction in the rate of tax on one product, by reducing the price of another product. He had also contended that price included both basic price and also the tax charged on it and therefore, any excess a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Therefore, it was respectfully submitted that the law settled in the cases of Commissioner of income Tax v. Calcutta Knitwears, Union of India v. National Federation of the Blind, Commissioner of Income-Tax v. Ahmedbhai Umarbhai Co., N. C. Dhoundial v. Union of India, Sarabjit Rick Singh v. Union of India and R. Krishnaiah v. State of Andhra Pradesh supra was not applicable in the facts of the present case as no strict interpretation of the provisions of Section 171 was required as they were simple and clear, their meaning and message was absolutely unambiguous and hence no weightage was required to be given to the marginal note. The intent of legislature showed that it proposed to hold the suppliers accountable for passing on both the above benefits as both of them have been given out of the public exchequer and any breach of the same will fall foul of the above Section. 33. The Respondent had also claimed that the provisions of Section 171 were applicable only in the case of the contracts of sale which had been entered in to prior to the change in the rate of tax and both the parties had agreed to such change as per the provisions of Section 64 A of the Sale of Goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage increase in the base prices by 10.45%. The claim made by the Respondent was incorrect as the DGAP had taken the above amount as additional sale realisation made by the Respondent on account of the increase in the prices and not the profiteered amount as this amount had been assessed to be ₹ 7,49,27,786/- only as per Annexure-37 of the Report submitted by the DGAP. Since the above amount of ₹ 24,81,33,857/- had not been taken as profiteering by the DGAP there was hardly any question of considering the costs incurred by the Respondent on royalty, variable rent or other variable expenses nor the DGAP could consider them. The Respondent was trying to confuse the issue by comparing the incremental revenue earned by him with the amount of profiteering. Since he had earned incremental revenue he should also have made arrangements for meeting the above expenses from the revenue earned by him. 36. The Respondent had also tried to define profiteering as a conduct or practice for making excessive profits. The present conduct of the Respondent squarely fell in the definitions mentioned by the Respondent as he had not only realised his usual margin of profit which he was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... output tax liability on inter-unit branch transfer turnover had been excluded from the ITC on the one hand and the inter-unit branch transfer turnover had been excluded from the outward taxable turnover on the other hand which had neutralised the impact of branch transfer transactions on the computation of ratio of ITC to total taxable turnover and hence amounts of ₹ 49,26,86,384/- and ₹ 47,15,04,275/- had rightly not been included in the calculations. Perusal of Annexure-36 and 37 attached with the Report showed that they had been framed by taking in to account the Information pertaining to the period between 01.11.2017 to 30.11.2017 and hence the contention of the Respondent that all the information required by the DGAP had been supplied was correct although this information was not mentioned in the GSTR-3B Return by him. Since the calculation of profiteering had been made after duly considering the above period there was no ground to claim that the ratio of denial of ITC would jump to 10.29% or 10.06%. 39. The Respondent had also claimed that due to sudden denial of the ITC the prices were required to be revised as there was significant change in the costs, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had already promulgated the Methodology and Procedure vide it s Notification dated 28.03.2017 which had been prominently displayed on its website. It was regrettable that the Respondent was raising this issue without consulting the website. The Respondent had also claimed that the provisions of Section 171 and Rules 122-137 could not be enforced in the absence of machinery provisions which also proved that the Respondent had not read the above provisions carefully. As discussed above the provisions of Section 171 and the above Rules were very clear and unambiguous under which a comprehensive machinery comprising of the State specific Screening Committees, Standing Committee, Directorate General of Anti-Profiteering and Commissioners of Central GST and State Tax had been constituted/established under the above Rules to take cognizance of the complaints made on profiteering, their investigation and for enforcement of the orders passed by this Authority. The law settled in the cases of CIT v. B. C. Srinivasa Shetty and Commissioner of Central Excise v. Larsen Toubro Ltd. supra was not applicable as specific and adequate anti-profiteering machinery had been provided under the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absolute figures and hence there should be no problem in reducing the prices commensurately, therefore, there was no question of its assessment as a trend or in percentage terms. The provisions of Section 171 were only concerned about passing on the above two benefits and have no connection with the fixing of the price of the product and hence the issues of market conditions, demand and supply, and rising/falling input costs were not required to be taken in to account while determining the amount of profiteering. The Respondent could not raise these issues by arbitrarily raising his prices on the intervening night of 14/15th November, 2017 on the eve of the reduction in the rate of tax. He could have very well raised his prices on the basis of the above factors anytime between 01.04.2017 to 14.11.2017 which he had not done. 42. The Respondent had also suggested that this Authority should provide for appropriate machinery for recovery of ITC of ₹ 22 Lakh which he could not avail. In this connection it was made clear that this Authority was not the appropriate forum before which such issue can be raised. The Respondent could always approach the competent forum to redress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which could not be challenged. The amount of profiteering had been meticulously assessed on each and every product by the DGAP and therefore, the same could be fully relied upon. The calculation of ratio of denial of ITC had been worked out as 10.27% by the Respondent in the Table submitted by him, however, the same could not be accepted as it included the ITC to which the Respondent was not entitled and also the inter unit branch transfers which had not been taken in to account by the DGAP. 46. In view of the above discussion the quantum of profiteering illegally obtained by the Respondent was determined by this Authority vide its order dated 16.11.2018 as ₹ 7,49,27,786/- as per the details mentioned supra as per the provisions of Rule 133 (1) of the CGST Rules, 2017 as the Respondent had failed to pass on the benefit of tax reduction to his customers. Accordingly, the Respondent was directed to reduce his prices by way of commensurate reduction keeping in view the reduced rate of tax and the denial of benefit of ITC as per Rule 133 (3) (a). Since the complainants were not identifiable the Respondent was further directed to deposit the above amount as per the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date. This Authority had filed Transfer Applications No. 290-292/2020 before the Hon ble Supreme Court for transfer of the above Writ Petition to the Hon ble High Court of Delhi as a number of similar Writ Petitions were pending before it. The Hon ble Supreme Court had transferred the above Writ Petition to the Hon ble High Court of Delhi vide its order dated 19.02.2020 which was listed as Writ Petition (C) No. 3909/2020 before the Hon ble High Court of Delhi. The above Writ Petition was listed before the Hon ble High Court on 06.07.2020 when it was withdrawn by the Petitioner with the liberty to raise all issues before this Authority. Therefore, no effective hearings could take place from 25.11.2019 to 13.07.2020, when regular proceedings were started in the present case. 49. During the present proceedings the Respondent has filed written submissions dated 23.10.2019, 13.11.2019 and 25.11.2019 which have been consolidated by him vide his written submissions dated 04.12.2019 which are enumerated as under:- l. That the order dated 16.11.2018 passed by this Authority was assailed by him before the Hon ble High Court of Bombay, which vide its Judgement dated 01.10.2019 has rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed under Rule 122 of the CGST Rules, it was competent to examine vires thereof and therefore, the same should be examined by this Authority and held to be illegal in light of the above decisions. VI. That comparison of this Authority with other authorities was devoid of merits and was entirely immaterial to the question of composition of the this Authority and hence, any examination should be done in the light of the settled judicial precedents referred above. VII. That the last date of passing of the order in the present case was on or before 17.09.2018 as the order was required to be passed within a period of three (3) months from the date of receipt of the Report from the DGAP i.e. 18.06. 2018. The proceedings have therefore abated and could not be revived under these remand proceedings. VIII. That the Hon ble High Court of Bombay has observed that the term profiteering has been used in a pejorative sense and such a finding could severely dent the business reputation. In effect, the order of the Hon ble High Court was that the business reputation should not be dented merely on the basis of assumptions and presumptions but must be based on credible, cog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 16.11.2018, this Authority has observed that It is also apparent from the record that the DGAP has calculated the ratio of ITC to the total taxable turnover pertaining to the period between July 2017 to October 2017 as 9.11% on the basis of GSTR-3B returns filed by the Respondent. However, he has claimed that the above ratio should have been calculated on the basis on ITC availed by him either in the month of October 2017 or during the month of September and October which would be 13.82% or 12.82% respectively which would show that he has not profiteered. Respondent has not given any reason to explain why the above months should be picked up selectively. The only reason for the above contention appears to be that the Respondent wants to hide the fact that he has increased his prices more than the denial of benefit of ITC. However, vide Para 18 it has been recorded that the Respondent has also stated that DGAP has found the net increase in the cost due to denial of ITC was 9.11% which was arrived at on the basis of ITC availed during the month of July 2017 to October 2017. He had further stated that the quantum of ITC during the months of July and August were very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of methodology which might have been prescribed or determined. He has not been provided any computation methodology till date. He has merely furnished the information sought by the DGAP from time to time without knowing as to how the information was being used, interpreted and applied. XV. That the actual loss of the ITC and actual incremental revenue due to increase in the price rise for the month of December 2017 and January 2018 was being submitted for consideration of this Authority. Actual loss of the ITC has been computed as under from the GSTR-2A Returns uploaded by the Respondent:- MONTH ITC DETAILS ADD: ITC reflecting in subsequent months NET ITC (Rs.) (after reduction on account of credit Nots) CGST (Rs.) SGST (Rs.) IGST (Rs.) Dec - 2017 3,26,84,893 3,26,84,895 4,60,06,884 1,78,649 11,14,23,937 Jan-2018 2,62,67,453 2,62,67,453 3,62,25,82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e loss of ITC and thereby, he has incurred a loss of Z 2,88,95,990/-. This clearly proved beyond doubt that the Respondent has not profiteered and the conclusions drawn by the DGAP were imaginary based on extrapolation and trend which deserved to be rejected by this Authority. XIX. That without prejudice to the above the preliminary issues raised in his submissions dated 23.10.2019 should be appropriately responded and the matter should be proceeded with only after he has been provided with the adequate response on the issues raised in the above submissions including the following:- (i) Whether this Authority would take cognisance of unsubstantiated complaints not referred by the Standing Committee on Anti-profiteering? Out of four complainants, only one pertaining to McCaf Reg Latte was referred by the Standing Committee and even that complaint was not in the prescribed format. (ii) What was supply under investigation i.e. McCaf Reg Latte or Restaurant service ? (iii) If the supply under investigation was Restaurant service , would profiteering be decided for each food item or invoice or customer or store or state or at entity level? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent to file his consolidated submission by 25.06.2020. In response, the Respondent, vide his e-mail dated 13.07.2020 has filed his written submissions. This Authority vide its order dated 16.07.2020 had granted another opportunity of hearing to the Respondent on 04.08.2020. On the date of hearing i.e. 04.08.2020, the Respondent has made oral submissions and has filed written submissions date 03.08.2020. Both the submissions are being mentioned below:- a. Section 171 of the CGST Act must be interpreted to include costs including tax/ ITC, failing which it will be a violation of Article 19(1)(g) of the Constitution of India: i. That the Constitution of India under Article 19 (1) (g) guaranteed fundamental right to carry business and trade to the shareholders and promoters of the Respondent. The Hon ble Supreme Court of India has held time and again held that the word business occurring in Article 19 (1) (g) of the Constitution was to protect all activities done for profit and not for pleasure or charity. Reliance in this regard has been placed on the judgment of Sodan Singh Ors. V. New Delhi Municipal Committee Ors. (1989) 4 SCC 155. ii. That any person c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of tax to take care of the increased cost. Thus, denial of revision of price on account of increase in cost or only allowing partially for ITC loss while formulating the price under Section 171 on the date of change of rate would also amount to arbitrariness and unreasonableness, rendering all actions plainly in violation of Article 14 of the Constitution. v. That this Authority has adopted an interpretation in various cases that only tax reduction and ITC impact were to be considered while fixing the price under Section 171. In various matters, this Authority has specifically refused to consider any increase in cost. This approach was also adopted in the order dated 16.11. 2018, which was set aside by the Hon ble High Court of Bombay which has resulted in the present remand proceedings. As explained supra, costs other than tax were also to be accounted for, which has admittedly not been done in the present case, rendering the present matter plainly unconstitutional. b. Constitution of this Authority under delegated legislation is bad in law: i. That constitution of this Authority under Rule 122 of the CGST Rules suffered from the vice of excessive delegatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Legislature itself. iii. Consequently, failure to lay down the power and composition of this Authority in the CGST Act amounted to surrender of legislative power by the legislature and was consequently ultra vires Article 14 of the Constitution. C. CONSTITUTION OF AUTHORITY SANS A JUDICIAL MEMBER IS BAD IN LAW: i. That the anti-profiteering proceedings were initiated on the basis of a written complaint received under Rule 128 of the CGST Rules. As per Rule 133 of the CGST Rules, the complainant was given a copy of the DGAP s Report and was also provided an opportunity of hearing by this Authority. Rule 133 of the CGST Rules further provided for return of the amount to the recipient. Therefore, this Authority was discharging adjudicatory and quasi-judicial functions with grave consequences as also possibly a civil death as it decided a legal issue of profiteering under Section 171 of the Act with a scientific examination of evidence, facts and provisions of law with appropriate consequences. Seen in this context, this Authority was deciding a case or a dispute between two or more persons and hence, it was a Tribunal in the eyes of law. As a matter of fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . D. SECTION 171 OF THE CGST ACT SUFFERS FROM THE VICE OF EXCESSIVE DELEGATION: i. That vide Section 171 (3) of the CGST Act read with Rule 126 of the CGST Rules, it was mandated that this Authority must determine a methodology whereby it could be determined whether or not there was an act of profiteering. In the formulation of such methodology, suitable guidance should statutorily have been provided to guide the exercise of powers by this Authority in the formulation of such methodology. The failure to provide such guidance amounted to excessive delegation . That a provision which granted excessive powers to the delegate sans any prescriptions in the statute was unconstitutional and bad in law, Reliance has been placed in this regard on the case of K. T. Moopil Nair v. State of Kerala (1961) 3 SCR 77; Devi Das Gopal Krishnan and Ors. v. State of Punjab and Ors. (1967) 3 SCR 557; Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi and Anr. (1968) 3 SCR 251; and K. T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka (2011) 9 SCC 1. In the present case, no guidelines for exercise of power have been laid down in the statute i.e. the CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, detailed working sheet etc. ii. That in the present case, all the complainants have submitted copies of same invoice without any self-attested document like proof of identity, invoice, price list, detailed working sheet etc. Further, the complaint merely referred to decrease in rate of tax without any refence to denial of ITC to restaurants. There was no allegation to the effect that the increase in the base price was more than the ITC loss, and hence the complaint was neither accurate not adequate. iii. That as per the statutory scheme as set out in Rule 128 and 129 the Standing Committee must examine the accuracy and adequacy of the evidence provided in the application (complaint) and determine whether there was prima facie evidence to support the claim of the applicant (complainant). In the present case, it was apparent that no evidence has been provided by the complainants in their applications other than the two identical invoices. Therefore, there was no evidence in the present case which would enable the Standing Committee satisfaction of the requirement of Rule 128 and 129 and therefore entire proceedings were unsustainable in law. F. INVESTIGATION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cember 2017 has determined the scope of investigation as supply of restaurant service falling under the GST Tariff heading 996331, the investigation Report dealt with 1800 products. As per Entry 6 (b) of the Schedule II to the CGST Act, supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption) was a service and when such service was supplied by the restaurant, it was classified as restaurant service falling under GST Tariff heading 996331. Thus, supply of food and/or drink for human consumption was one single supply of restaurant service . The Investigation Report dealt with 1800 products, whereas scope of investigation as per initiation notification dated 29 December 2017 was supply of restaurant service and therefore, even Investigation Report itself was contrary to the scope of investigation determined by the DGAP. vi. That this Authority itself in its order dated 29 October 2018 in the Case No. 11/2018 (Yum Restaurants India Private Limited Ors.) has held that in the absence of credible evidence re a particular pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as was contrary to the initiation notification and therefore, ex-facie illegal and required to be quashed. G. LACK OF METHODOLOGY, PARAMETERS AND STANDARDS ARE BAD IN LAW: i. That Rule 126 of the CGST Rules provided that this Authority might determine a methodology and procedure for determination as to whether commensurate benefits have been passed on to the consumer. A bare perusal of this Authority s Methodology and Procedure, 2018 would show that it was purely determinative of procedural aspects such as seat of the Authority, procedure for inward receipts, service of notices etc. The substantial aspects of methodology for determining/quantifying profiteering have not been addressed in it. Failure to discharge statutory duties under Rule 126 of the CGST Rules to determine a methodology was bad in law and manifestly arbitrary. This Authority has in certain instances claimed that no methodology could be prescribed by it. The failure to formulate and communicate the method has resulted in the breach of natural justice and tainted the proceedings as lacking in fairness and transparency as has been held by the Hon ble High Court of Bombay in the order dated 01 Octo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975 and the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 which laid down clear and discrete principles for the Directorate General of Trade Remedies (a body which investigated cases of dumping and recommended imposition of appropriate duties) to follow. The absence of such principles in the statutory scheme for anti-profiteering proceedings greatly prejudiced the Respondent as a proper defence could not be mounted. Hence, this Authority must provide the methodology that was binding on all the stakeholders and only thereafter proceed with any determination. v. That the period of investigation for determination of ITC has been decided by the DGAP from 01 July 2017-31 October 2017. The period from 01 November 2017-14 November 2017 has been ignored by the DGAP, although the rate change was with effect from 15 November 2017. Hence, there being absolutely no legal reason to deny the period from 01 November 2017-14 November 2017, this Authority should include this in the period of investigation. The reasons given at Paragraph 15 of the investigation Report were factually incorrect sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd commission due to increased prices and therefore, he was not enjoying the money to that extent and consequently, this must be reduced. As an example, in the order dated 04 May 2018 of this Authority in Case No. 03/2018 (KRBL Limited), costs other than tax were also considered. viii. That as per the DGAP s Report, the ratio of ITC to turnover (9.11%) has been applied to each product individually sold after 15 November 2017. If such was the case, then ratio of ITC to turnover should also have been computed for each product individually. This was because the ITC cost of each product varied e.g. Coffee has sugar as a significant input which was liable to GST @ 12%, while French Fries have oil as a significant input, which was liable to GST @ 5%. Hence it was logical and correct to have a comparison of product-wise ITC cost against product-wise turnover or in the alternative entity-wide ITC cost against entity-wide average increase in prices. In not doing so, the DGAP has engaged in a comparison of apples and oranges. ix. That the definition of profiteering as occurring in the statute was the expression profiteered shall mean the amount determined on account of not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein at Paragraph 34 (xvii) it was noted that the DGAP has investigated the case correctly and in line with the general principals adopted by this Authority. It is prayed that this Authority may kindly expound on these general principles so as to ascertain whether such principles have indeed been followed. xii. That this Authority in order dated 25 June 2020 in Case No. 33/2020 has held at Page 42/43 that computation of commensurate reduction in prices was a pure mathematical exercise and hence, the same must be based on logical and reasoned parameters. The Hon ble Supreme Court in the case of Commissioner of Income Tax v. B. C. Srinivas Shetty 1981 SCR (2) 938 has held that without computation provisions, the statutory provision was rendered nugatory and ineffective. H. TIME BARRED PROCEEDINGS: I. That in terms of Rule 133 (1) of the CGST Rules, this Authority was required to pass an order within a period of three months from the date of receipt of the investigation Report of the DGAP issued in terms of Rule 129 (6). Vide Notification No. 31/2019-Central Tax dated 28 June 2019, the time period of three months was increased to six months. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance, there was no extension provided. Once the prescribed mandatory time period had passed, the jurisdiction of this Authority ceased to exist. Therefore, if the Authority did any act beyond the mandatory time period, the same would be without jurisdiction. Therefore, by implication, the proceedings before this Authority were time-barred and could not be resurrected. III. In the affidavit filed before the Hon ble High Court of Bombay in Writ Petition No. 3492 of 2018, this Authority has stated that the earlier order dated 16 November 2018 was within the time as clarifications were sought from the DGAP to his Report dated 18 June 2018 and the clarification was received only on 20 August 2018. As per the statutory scheme, any time taken for reference under Rule 133 (2) of the CGST Rules was not excluded in the time period stipulated under Rule 133 (1). In this regard, attention was invited to Rule 17 of the NAA Rules which empowered this Authority to summon any additional record as it deemed fit from any person, interested party, authority of the Central or the State Government, however, nowhere the NAA Rules provided that time taken under Rule 17 was to be excluded. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.69% 8.98% # 0.87% Advertising sales promotion 5,465.00 5.87% 18.00% 1.06% Royalty 3,654.20 3.93% 18.00% 0.71% Maintenance Repairs 2,903.80 3.12% 18.00% 0.56% Operating Supplies at Stores 1,382.90 1.49% 18.00% 0.15% Legal Professional Fees 765.70 0.82% 18.00% 0.27% Others 5,850.70 6.29% 11.90% 0.75% Capital cost (B) 5,669.60 1.10% Restaurant equipment 3,961.20 4.26% 18.00% 0.77% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply was from July 2017 to October 2017 and the Respondent was eligible and has availed the ITC. In case the DGAP has followed the accrual system, then he ought to have considered the ITC pertaining to July 2017 to 14 November 2017 which was to be billed in subsequent months e.g. the variable rent was billed on yearly basis and telephone company bills for the month in the subsequent month. iii. That there should have been balanced approach on branch transfers on which the additional tax suffered by the Respondent has been ignored. On the basis of the above erroneous computation the investigation Report has quantified the cost of ITC @ 9.11%. The ITC on the supplies received from 1 July 2017 till 14 November 2017 was an accrued and vested right and in terms of Section 16 (4) of the CGST Act, the Respondent was entitled to take credit thereof till 20th October 2018. The Respondent has provided thousands of invoices to the DGAP for verification and not only he was eligible but also has taken ITC thereon as mandated under Section 16 of the CGST Act. Hence, the DGAP has no right to exclude such ITC from the computation. Further, the Respondent has provided B2C outward supply invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add: Incremental tax cost on inter - unit branch transfers 922 746 905 2,573 485 5,632 Net input tax credit available for the period July, 2017 to October, 2017 (E) = (A+B-C-D) 47,396 75,091 98,236 1,44,846 61,147 4,26,716 Total outward Turnover as per GSTR-1 (F) 10,35,861 10,74,433 9,98,733 11,09,864 5,07,776 47,26,668 Less: Inter unit branch transfer included in B2B Sale as per Sale Register (G) 1,18,553 1,29,610 1,18,508 1,26,016 77,505 5,70,191 Net outward Taxable Turnover for the period July, 2017 to October, 2017 (H) = (F-G) 9,17,308 9,44,824 8,80,225 9,83,849 4,30,271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE COMPUTED BY DGAP IS ERRONEOUS: i. That in view of the denial of ITC, the production cost of the supplies has increased necessitating price revision. However, this price revision has resulted in incremental cost on (i) Royalty which the Respondent was paying to the Franchiser for using the brand McDonald s in his business. During the year 2017-18, royalty paid was 3.99% of the restaurant turnover and the Respondent was required to pay additional royalty merely because he was forced to raise base prices resulting in higher turnover (ii) Variable rent was being paid to the landlords for using their premises for operating restaurants. During the year 2017-18, variable rent paid was 3.29% of the restaurant turnover. Therefore, the Respondent was required to pay additional rent merely because he was forced to raise base prices resulting in higher turnover (iii) Other variable expenses were being paid to the various service providers like cashless/ digital payments, food aggregators etc. for using their services for restaurants. During the year 2017-18, variable expenses paid were 0.96% of the restaurant turnover. Moreover, GST was also being paid on all the above 3 servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as computed, to maintain the same margin. It was grossly unjust to ignore above additional costs which were forced on the Respondent solely on account of price increase due to denial of ITC. It could also be analyzed from another angle if the Respondent was allowed to increase his prices by 9.11%, he would be able to recover additional cost in the form of ITC + variable expenses only to the extent of 8.22%, thus resulting in net loss of 0.89% as has been demonstrated below:- Cost recovery except following 91.76 98.50 8.22 Rate GST Total Royalty 3.99% 0.72% 4.71% 4.71 5.14 0.43 Rent 3.29% 0.59% 3.88% 3.88 4.23 0.35 Other expenses 0.96% 0.17% 1.13% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % OF TURNOVER ACTUAL PROFIT/LOSS 01.07.2017 - 31.10.2017 01.11.2017 - 14.11.2017 01.07.2017 - 31.10.2017 01.11.2017 - 14.11.2017 (A) (B) (C) (D) = (B) + (C) (E) (F) (G) = (E) + (F) (H) = (D)/(F) Methodology adopted by DGAP Per DGAP 3,39,608 - 3,39,608 37,26,206 - 37,26,206 9.11% 0.32% # Per HRPL 3,39,608 44,365 3,83,974 37,26,206 4,30,271 41,56,477 9.24% 0.20% # Methodology adopted by DGAP As per financials for 2016-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Royalty 4.71% 5.67% 6.37 Rent 3.88% 4.67 5.25 Other variable expenses 1.13% 1.36 1.53 ITC loss (C) (A)-(B)-(C) DGAP 9.11% 12.32 1.13 As per financials for 2016-17 12.24% 16.55 -3.1 On the basis of October 2047 10% 13.52 -0.07 As per ITC eligibility/availment 10.27% 13.89 -0.44 Actual 10.59% 14.32 -0.87 Thus, the Respondent has actually suffered fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits and thereby indulge in profiteering. Therefore, the amount of alleged profiteering stood reduced to ₹ 3, 17,03,988/-. Detailed workings in this regard have already been provided in the submissions dated 23 July 2018. D. ARBITRARINESS AND LACK OF CONSISTENCY IN THE DGAP INVESTIGATION: i. That the order dated 05.09.2018 passed by this Authority in Case No. 09/2018 (N. P. Foods) dealt with identical factual matrix as was in the present case. Therein, the product under consideration was a food item supplied at a restaurant. Further, the same notification has led to the anti-profiteering investigation against N. P. Foods as was in the present case. Therein, for the period from 01 July 2017 to 14 November 2017, the ratio of ITC to the restaurant was computed as 11.80%. This Authority thereafter has made a categorical finding that the average output increase in prices across all the products was 12.14%. The difference of 0.34% [12.14%-11.80%] was deemed to be miniscule and not warranting action under Section 171 of the CGST Act. Accordingly, the principles of N. P. Foods supra should be equally applicable to the present facts for the reason that the Respondent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), it has been held that objective criteria proposed to be adopted has to be made known to the parties. The Hon ble Court has further observed that unless the process by which a decision was proposed to be taken was made known, the person whose views were solicited would be clueless. There were multiple instances where the Government has sought to control prices to prevent profiteering or ensure availability of essential goods at fair prices. In each such case, the relevant law has prescribed detailed methodology. A Few instances were given below by the Respondent:- LEGISLATION EXTRACT Maharashtra Unaided Private Professional Educational Institutions (Regulation of Admission and Fees) Act, 2015 Section. 15 Factors for determination of fee structure. - The Fees Regulating Authority shall determine the reasonableness of the fee structure proposed by every unaided institution, in respect of each professional course or group of courses, considering following factors: (i) the location (Urban or Rural) of the institution; (ii) the cost of land and building ; (iii) minim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anded cost of the article, in the case of an article imported from outside India or, where the article is delivered to the consignee elsewhere than at a port, that cost increased by any charges incurred for freight and octroi or other duties before delivery, or (ii) the price at which producer sold the article in the case of article produced in [India excluding the Jammu and Kashmir State] increased by any charges incurred for freight, customs, octroi or other duties before delivery, or (iii) the price at which the producer sold the article, in the case of an article which is not imported; where the sale is by a producer, the consideration exceeds the amount represented by the addition allowed by the normal trade practice in force on the 1st day of August, 1939, to the cost of production [of the article, such cost of production being deemed to be exclusive of the amount, if any, by which the price paid by the producer for any component part of the article exceeded- (i) the maximum price fixed for the component part under section 3 and in force at the time of its purchase by the purchaser; or (ii) where no maximum price has been so fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a producer disposes of an article by having it sold by auction on his behalf, the auctioneer as well as the dealer or producer shall be liable to the penalty provided by sub-section (1) of section 13, if in any such sale, there is a contravention of sub-section (1). (5.) Where any article is sold, offered for sale, or otherwise disposed of in contravention of sub-section (1), by a dealer or producer through any person employed by him or acting on his behalf, such person and also, unless they prove that they exercised due diligence to prevent such contravention, the dealer or producer, as the case may be, and any person having the charge on behalf of the dealer or producer of the place where such contravention occurred, shall be liable to punishment provided by sub-section (1) of section 13, whether or not they were present when the contravention occurred. Section 3-C of Essential Commodities Act, 1955 in respect of Sugar price control There shall be paid to that producer an amount therefor which shall be calculated with reference to such price of sugar as the Central Government may, by order, determine, having regard to- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed as a norm every year by notification in the Official Gazette in this behalf; P.M. means cost of the packing material used in the packing of concerned formulation, including process loss, and shall be fixed as a norm every year by, notification in the Official Gazette in this behalf; P.C. means packing charges worked out in accordance with established procedures of costing and shall be fixed as a norm every year by notification in the Official Gazette in this behalf; MAPE (Maximum Allowable Post-manufacturing Expenses) means all costs incurred by a manufacturer from Che stage of ex- factory cost to retailing and includes trade margin and margin for the manufacturer and it shall not exceed one hundred per cent for indigenously manufactured Scheduled formulations; E.D. means excise duty: Drug (Price Control) Order, 2013 issued under Section 3 of the Essential Commodities Act, 1955 Para 4 - Calculation of ceiling price of a scheduled formulation. Para 5 - Calculation of retail price of a new drug for existing manufacturers of scheduled formulations Para 6 - Ceiling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee and profiteering by the institution. Since the object of setting up an educational institution is by definition charitable , it is clear that an educational institution cannot charge such a fee as is not required for the purpose of fulfilling that object. To put it differently, in the establishment of an educational institution, the object should not be to make a profit, inasmuch as education is essentially charitable in nature. There can, however, be a reasonable revenue surplus, which may be generated by the educational institution for the purpose of development of education and expansion of the institution. Thus, even in case where setting up an educational institution is charitable in nature, it is permitted to have reasonable revenue surplus and such surplus does not amount to profiteering. In Para 20 of the judgment, Hon ble Supreme Court observed that Article 19(1)(g) uses the four expressions so as to cover all activities of a citizen in respect of which income or profit is generated. Thus compelling HRPL to incur loss by not allowing adjustment towards direct and indirect increase in the cost of supply would be infringing right to carry on business under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amely, that the Central Government must give consideration to the relevant factors mentioned therein before fixing the price, and thus these factors are a check on the power of the Central government if it is ever-minded to abuse the power. We are therefore of opinion that the impugned notification is not an unreasonable restriction on the petitioners right to carry on trade under Art. 19(1)(g). Shree Meenakshi Mills Ltd. Vs. Union of India [AIR 1974 SC 366] Para 76. The control of prices may have effect either on maintaining or increasing supply of commodity or securing equitable distribution and availability at fair prices. The controlled price has to retain this equilibrium in the supply and demand of the commodity. The cost of production, a reasonable return to the producer of the commodity are to be taken into account. The producer must have an incentive to produce. The fair price must be fair not only from the point of view of the consumer but also from the point of view of the producer. It is submitted that in even under the price control orders issued under Section 3 of the Essential Commodities Act to secure availabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illogical. Such a significant difference was arising as the DGAP has included the month of July 2017 in his computations, which was an outlier data as substantial inventory without GST was carried forward. It is trite that in any statistical projection, outlier data was discarded. 54. Copies of the Respondent s submissions were supplied to the DGAP for filing clarifications under Rule 133 (2A). Consequently, the DGAP has filed his clarification dated 24.08.2020 on the submissions of the Respondent dated 13.07.2020 and 03.08.2020 which are described as under:- A. Section 171 of the CGST Act must be interpreted to include costs including tax/ ITC, failing which it will be a violation of Article 19(1)(g) of the Constitution of India: Section 171(1) of the Act, envisaged that any reduction in the rate of tax or the benefit of input tax credit has to be passed on to the recipient by way of commensurate reduction in price. In other words, every recipient of goods or services has to get the benefit from the supplier. The supplier was absolutely free to exercise his right to practise any profession or to carry on any occupation, trade or business, as Article 19 (1) (g) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y this Authority have been approved by the competent Authority, the same were legal and binding on the Respondent. C. Constitution of Authority sans a Judicial Member is bad in law: This Authority has been constituted under Section 171 (2) of the CGST Act, 2017. The Parliament, the State Legislatures, the Central and the State Governments and the GST Council in their wisdom have decided the composition of this Authority without the Judicial Member which has also not been provided in the other Authorities such as TRAI or the Authorities on Advance Rulings under the Dept of Revenue, Ministry of Finance, Government of India. Moreover, the orders passed by this Authority are in full consonance of the Principles of Natural Justice and are subject to judicial review and hence, no prejudice has been caused to the Respondent by the absence of a Judicial Member in this Authority. D. Section 171 of the CGST Act suffers from the vice of excessive delegation: The Parliament has delegated the task of framing of the Rules under the CGST Act, 2017 on the Central Government as per the provisions of Section 164 of the above Act. Accordingly, the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of input tax credit has to be passed on to the recipient by way of commensurate reduction in price. In other words, every recipient of goods or services has to get the due benefit from the supplier and hence, this benefit has to be calculated for each and every product supplied. Therefore, the objective of Section 171 was to ensure that the benefit of reduction in rate of tax or benefit of input tax credit was passed on to the recipient and not retained by the supplier. The issue involved was that the Respondent did not pass on to the recipients the benefit of reduction in tax rate by not reducing the prices of the products commensurately. If the investigation was restricted to the alleged product then the recipients/customers of the other impacted products who have not made any complaint against the Respondent, would never get the commensurate benefit from the Respondent. Further, there is no stipulation in the law to restrict the investigation only to the alleged product or to the complainant/applicant. Rule 133 (5) of the CGST Rules, 2017, further clarifies the scope of expanded investigation in order to remove any doubt. The above Rule was just a re-iteration of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the methodology adopted was the best suited in the instant case based on the facts and circumstances of the case. In reply to the Respondent s objection that w.e.f. 15.11.2017 the ITC was prohibited and therefore, cost of production has increased, compelling the Respondent to revise prices, it was submitted that loss of ITC was on account of reduction in the rate of tax and the same has already been considered. After due consideration, the cost of ITC has been calculated. (iv) Submissions on DGAP s Report 1 2 Period and restriction on ITC: During investigation, the Respondent has submitted SKU wise summary sale for the period from 1-14 November, 2017 but has not submitted invoice wise B2C outward taxable supplies during this period. Therefore, net taxable turnover could not be computed on the basis of summary sales. Further, random checks of the invoices for the ITC availed in November, 2017 revealed that in some cases, credit was taken by the Respondent without being in possession of the invoices on the date of availing of ITC, in contravention of the provisions of Section 16 (2) (a) of the CGST Act, 2017. Therefore, the ITC pertaining to the invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. If such benefit was not passed on by way of reduction in prices and the benefit was appropriated by the supplier, it amounted to profiteering. The increase in cost of inputs (including royalty, variable rent and other expenses) was a factor in determination of price but this factor was independent of the output GST rate. It could not be asserted that elements of cost unrelated to GST were affected by the change in the output GST rate. Therefore, in terms of Section 171, the claimed increase in cost of inputs has not been considered, as the act of profiteering has got nothing to do with the cost component. C. Computation of the profiteered amount by DGAP is erroneous: As discussed above, the objective of Section 171 was to ensure that the benefit of reduction in rate of tax or benefit of input tax credit was passed on to the recipient and not retained by the supplier. Therefore, Section 171 of the CGST Act, 2017 required the supplier of goods or services to pass on the benefit of reduction in tax rate or input tax credit to the recipients by way of commensurate reduction in prices. If such benefit was not passed on by way of reduction in price and the benefit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se details of outward taxable supplies in respect of all GST Registrations. The Respondent himself had expressed his inability to provide the invoice wise item wise outward taxable supply data for B2C supplies due to extremely voluminous nature and had intimated that he would provide date in summarized manner on product/ SKU basis, which was considered after keeping in view the Respondent s inability to provide the details of invoice wise and item wise outward taxable supplies. Submissions dated 03.08.2020: The noticee has quoted various case laws and situations where public was put to notice by the Government beforehand as to how the price would be computed in different scenarios. However, no methodology has been determined in the present case: As discussed above, facts of each case were different for different sectors as well as in the same sector also. Hence, no fixed mechanism could have been provided for in the Act or the Rules. Thus, the methodology adopted was the best suited in the instant case based on the facts and circumstances of the case. 2. Refusal in increase in cost: The legislative intent behind Section 171 of the CGST Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. Thus, they would tend to balance out and Respondent should not have no grievance on this score. Further, for calculating the ratio of ITC to turnover, a very long period of 04 months from July, 2017 to October, 2017 has been considered and minor issues would balance out. 55, The Respondent has submitted re-joinder dated 22.09.2020 on the clarifications of the DGAP dated 24.08.2020. The submissions of the Respondent are as follows:- I. The Respondent has submitted the following Table as given below:- PARA SUBMISSION OF DGAP REJOINDER OF THE RESPONDENT Submissions of the Respondent dated 13 July 2020 II.A Section 171 of the Central Goods and Services Tax Act, 2017 ( CGST Act ) is not an affront to Article 19(1)(g) of the Constitution of India as the law only requires the benefit of tax component to be passed on and that there is no interference in the price fixation, which is the sole right of the supplier of goods/ services. Further, the DGAP has claimed that the present proceedings are legal in as much as overnight increase in prices coi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator commissions) directly attributed to change in the tax regime, however, DGAP has persistently refused to consider the same. Non-inclusion of these costs directly affects the fundamental right of the Respondent under Article 19(1)(g) of the Constitution of India, as effectively, the Respondent is being asked to bear these costs from their own pocket. Further, it is submitted that the DGAP, on the one hand states that the Respondent is eligible to increase price by 9.11%, while on the other hand, it also states that price fixation is the sole right of the supplier of goods/ services. This itself is inherently flawed and contradictory DGAP is wrongly emphasizing reduction in the rate of tax, whereas the fact of the matter is that Respondent was also disallowed to take ITC with effect from 15 November 2017. Denial of1TC resulted in increase in the direct and indirect costs, which required immediate or rather overnight increase in prices. It is further submitted that the Respondent has relied on a number of judgments of the Supreme Court and High courts, however DGAP has failed to offer any comments thereon. It is submitted that judgments of the Court are binding on all sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o natural justice and judicial review. Similarity has been alluded to TRAI in this regard. The contention is denied in toto. It has been conclusively held that absence of a judicial member in the composition renders all proceedings ex-facie illegal and void ab-initio [Revenue Bar Association vs Union of India, judgment dated 20 September 2019 of the Hon ble High Court of Madras]. Further, the mere fact that natural justice is complied with is not good reason to hold the composition as illegal. Natural justice and composition are two entirely distinct and separate tenets of law. On account of composition, the Authority is naturally biased and merely granting a hearing cannot cure this fatal error. It is further submitted that no parallel can be drawn with respect to TRAI for the reason that their orders are appealable to statutorily authorities (TDSAT) which have a judicial member. In the present, the Authority is the accuser, prosecutor and judge without an statutory appeal. In Writ petitions, Courts mostly decides question of law and, more as exception then rule, also examine question on facts when it involves gross miscarriage of justice. Ordinarily appellate Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir case, to which no responses have been provided till date. Hence, for the reasons and illegalities supra, the entire proceedings must be quashed forthwith. It is submitted that the Respondent has cited many instances where law makers provided guidance / methodology for determination of price. These facts have not been refuted by DGAP. In such circumstances, it is submitted that submission of DGAP that no fixed methodology can be prescribed as facts vary from case to case is flawed and must be rejected. II.E The Standing Committee has found a prima facie case under Rules 128 and 129 of the CGST Rules pursuant to which the investigation was carried out by the DGAP. The DGAP has also stated that further comments may be solicited from the Standing Committee. Denied in toto. Under Rule 128(1) of the CGST Rules, the Standing Committee is required to ascertain the accuracy and adequacy of the complaint filed in such form and manner as may be specified. Post such examination, if there is prima facie satisfactory evidence that benefits have not been assed, matter can be referred for further investigation. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure, 2018. Further, all seminal aspects raised by the Respondent in point vi. Have been addressed in the DGAP report dated 15 June 2018. Denied in toto. It is submitted that the Respondent has never wanted a general methodology to cover all kinds of cases and matters that the Authority is seized with. On the contrary, the Respondent asked for very specific questions applicable to their case only to which no responses have been provided. The claim of the DGAP that all such doubts have been addressed in the report dated 15 June 2018 is incorrect on facts and tantamounts to misleading the Authority. This is for the reason that (a) the questions were asked for the first time in October 2019, much after the issuance of the report dated 15 June 2018, or, in any case in the submissions made before the Authority after receipt of the said report and (b) a bare perusal of the report dated 15 June 2018 would show that no answers have been provided for. As an example, the Respondent requested for treatment of direct variable costs which do not find a whisper in the report dated 15 June 2018. Hence, this averment of the DGAP is ex-facie illegal. In addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Denied in toto. It is submitted that for calculation of the ITC to taxable turnover ratio for the period 01 November 2017 - 14 November 2017, the DGAP required (i) ITC amount and (ii) turnover of the restaurant. The Respondent has supplied the product-wise turnover of the restaurant for this restaurant (submission to DGAP dated 17 January 2018, 06 April 2018). As a matter of fact, the DGAP has prepared Annexure-36 and Annexure-37 for 01 November 2017 - 14 November 2017 also on the basis of the product-wise turnover supplied by the Respondent and therefore, absence of invoice-wise turnover cannot be a reason to exclude this period, as it is inconsequential to compute ITC amount or restaurant turnover. It is reiterated that invoice wise B2C outward taxable supplies have no bearing on the ITC computation. Re the exclusion of the ITC for the period 01 November 2017 - 14 November 2017, it is submitted that the DGAP is seeking to mislead the Authority. Per the table at Page 6 of their submissions dated 08 August 2018, the DGAP has taken the last date of taking input tax credit as 14 November 2017 and as invoices were received after this date, credit is unavailab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Denied in toto. It is an undisputed fact that the invoices were received by the Respondent with GST as they were issued subsequent to 01 July 2017, and therefore, under the GST laws, time of supply is the date of invoice. Without prejudice, it is submitted that if the ITC pertaining to the period prior to 01 July 2017 but invoiced subsequent to 01 July 2017 is excluded, then ITC pertaining to the period prior to 15 November but invoiced subsequent to 15 November 2017 must be included. However, DGAP has refused to consider the same thus, distorting balance. IIIA.(iv) (Point 4) The DGAP has sought to deny ITC on invoices which are for the period up to 14 November 2017 but Denied in toto. It is submitted that the exercise of the DGAP was to ascertain the cost of ITC and not examine the eligibility of ITC. Hence, any inward supply received by the Respondent for the period up to 14 November 2017 should have been considered by the DGAP in ascertaining the impact of ITC. It is trite that ITC is a vested right under Section 16(4) of the CGST Act, the credit on which can be claimed till the return for September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofiteered and the proceedings deserve to be quashed forthwith. III.B The DGAP has sought to deny impact of direct variable costs for the reason that the same is independent of the output GST rate. Denied in toto. Section 171 of the CGST Act requires a commensurate reduction in price and not tax . Hence, when the DGAP is analyzing the aspect of correctness of price , all factors which affect the same should be duly considered. The AUTHORITY in earlier orders has considered. The AUTHORITY in earlier orders has considered costs other than tax [ order dated 04 May 2018 in case No. 03/2018 in KRBL Limited ]. Further, Article 19(1)(g) guarantees the Notice to carry on business for profit. Non-consideration of direct variable costs in computation of the commensurate price would violate Article 19(1)(g) of the Constitution. Hence, it is imperative that other costs be factored in prior to arriving in a determination of commensurate price and profiteering. III.C The DGAP has termed their computation of profiteering as being correct for the reason that profiteering is to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to inability of the Respondent to provide details. Denied in toto. Although claimed by the DGAP, it has not been demonstrated as to how the case of N. P. Foods is different from the present facts. Both are absolutely identical in terms of the product investigated and the method of calculation of ITC. However, for reasons unknown to the Respondent, the ITC (taken at entity level) has been compared to individual product price in the present case, while in N. P. Foods the metric taken was average increase in price. Hence, for the same service, the DGAP and Authority are following differing standards without any reasons. Applying the ratio of NAP. Foods to the present facts, it is inevitable that there cannot be an allegation of profiteering. Re the aspect of comparison of average pre-rate reduction prices with average post-rate reduction prices being contrary to a plethora of orders passed by the Authority, it is submitted that the Respondent provided sale register for two months on an illustrative basis vide their letter dated 29 January 2018 to the DGAP. Should the DGAP have requisitioned, the Respondent would have provided the same. Therefore, the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade enshrined in Article 19(1)(g) of the Constitution of India as it mandates passing on the benefit of tax to the recipient. Denied in toto. As has been shown by the Respondent, prices were increased in January 2018 of certain products. This increase was based on business and commercial facts which is well within the domain of fundamental right to trade under Article 19(1)(g) of the Constitution of India. However, no adjustment has been reflected in the report. Therefore. the DGAP and the Authority are acting as price regulators, contrary to their claim that Section 171 of the CGST Act does not impose any fetters on ability of pricing. II.6 The DGAP has contended that reversal of approximately ₹ 2.15 Crores already considered for 01 November 2017 14 November 2017 cannot be expunged from the quantum of ITC as net taxable turnover for the same period has also been ignored. Denied in toto. Non-consideration of the correct ITC amount removing the impact of reversal for the period 01 November 2017 - 14 November 2017 for the reason that taxable turnover has also been excluded is absolutely illogical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, the same would have to be deducted which was possible only in case of invoice wise details. Further, random checks of the invoices for the ITC availed in November, 2017 revealed that in some cases, credit was taken by the Respondent without being in possession of these invoices on the date of availing of ITC, in contravention of the provisions of Section 16 (2) (a) of the CGST Act, 2017. Therefore, the turnover and the ITC pertaining to the invoices issued on or after 01.11.2017 and availed during 01-14th November 2017, have been left out. Reference may also be made to points A, B C on pages 3 to 7 of DGAP s Office letter No. 22011/API/5/2017/2594 dated 08.08.2018. It was not as if the entire ITC for the period from 01.11.2017 to 14.11.2017 has been denied. In fact, since for this period, both the ITC and the turnover have not been considered, it would not have any impact on ITC to turnover ratio. Para III A (iv) Point No. 4: The Respondent was eligible to avail ITC during July 2017 to 14th November 2017 for all the services he was entitled to. The Respondent was eligible to take proportional credit till the period the same was available e.g. proportional cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October 2020 Allegation of DGAP Submission of Respondent Para IIIA(iv) Point No. 1 2 Period 01 November 2017 - 14 November 2017 cannot be included for the following reasons: Denied in toto. At the outset, it is submitted that the DGAP has not raised any new and/ or additional point. A detailed rebuttal has been provided in the submissions dated 21 September 2020 and the same may be treated as part and parcel of the resent rebuttal. (a) Net taxable turnover cannot be computed on the basis of SKU Sales but on the basis of invoice sales only; (b) Input Tax Credit ( ITC ) has been taken in contravention to Section 16(2)(a) of the Central Goods and Services Tax Act, 2017)( CGST Act ) (c) As both ITC and turnover for this period have been excluded, it will have an bearing on computation of ITC cost. In addition, it is submitted that the reason for exclusion for want of invoice details is illegal as the DGAP could have directed the Respondent to provide the same. In the absence of a specific direction, the DGAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to be taken since exclusion of ITC and turnover for the month of November 2017 results in no change of the cost of ITC for the period July 2017 -October 2017. Denied in toto. It is submitted that detailed submissions have been made in the rejoinder dated 21 September 2020 and the same may be treated as part and parcel of the present submission. Further, it is reiterated that exclusion of both ITC (including reversal and transitional credits) an over for November 2017 cannot and will not result in the same ratio as has been demonstrate above. This submission of the DGAP is devoid of sense and deserves to be quashed forthwith. Para II.7 The DGAP has contended that amount of transitional credit being ₹ 5.18 Crores cannot be included in the ITC quantum since the impact of reversal of ITC done on 14 November 2017 has also been excluded and hence, balance each other out. Denied in toto. The amount of transitional credit is ₹ 5.18 Crores while that reversed is ₹ 4.18 Crores. Hence, there is no question of balancing and non-consideration has a prejudicial impact on the Respondent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made vide the said GSTIN. However, the investigation Report has covered supplies made by other GSTIN also and therefore, investigation in respect of the following GSTlNs was ultra vires of Section 171 (2) of the CGST Act:- S.No. GSTIN State 1. 24AAAFH1333H1ZZ Gujarat 2. 30AAAFH1333H1Z6 Goa 3. 22AAAFH1333H1Z3 Chhattisgarh 4. 23AAAFH1333H1Z1 Madhya Pradesh 5. 32AAAFH1333H1Z2 Kerala 6. 33AAAFH1333H1ZO Tamil Nadu 7. 29AAAFH1333H1ZP Karnataka 8. 36AAAFH1333H1ZU Telangana 9. 37AAAFH1333H1ZS Andhra Pradesh 59. We have carefully considered the complaints made by the Applicant No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the date of passing of the order by the Authority. Explanation :- 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 or both. 60. Keeping in view the above provisions of Section 171 the following issues need to be determined in the present proceedings:- (iv) Whether the Respondent has passed on the benefit of tax reduction to his customers w.e.f. 15.11.2017 as per the provisions of Section 171 (1) or not? (v) If not then what is the quantum of the profiteered amount as per the provisions of Section 171 (1) read with the Explanation attached to Section 171? (vi) Whether he is liable to the penalty prescribed under Section 171 (3A)? 61. It is also revealed that the Applicants No. 1 to 4 had lodged complaints on 15.11.2017, 17.11.2017 and 23.11.2017, alleging that the Respondent had charged price of ₹ 142/- vide invoice No. 210 dated 07.11.2017 on the product Mccafe Reg Latte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt up to 14.11.2017. The DGAP while determining the ITC as a ratio of the total taxable turnover of the Respondent had taken into account the ITC for the period from July, 2017 to October, 2017, as was shown in the GSTR-3B Returns, which had been adjusted by adding the amount of ITC which was availed in the month of November, 2017 as per GSTR-3B Return (Annexure-34) and by excluding the amount of tax which was paid on inter unit branch transfers as per the Sales Register (Annexure-33) and the input tax credit pertaining to the period before July 2017 which was availed during the period between July, 2017 to October, 2017 as per the GSTR-3B Returns (Annexure-35). 64. On the basis of the analysis of the details of the product-wise outward taxable supplies made during the period between 15.11.2017 to31.01.2018, the DGAP had found that the Respondent had increased the base prices of the items supplied by him to neutralise the effect of ITC of 9.11% which was not available to him after the rate reduction w.e.f. 15.11.2017. The DGAP had compared the pre and post GST rate reduction average prices of the items sold during the period between 15.11.2017 to 31.01.2018 and after taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty to raise all the issues before this Authority. Accordingly, the Respondent has raised the following issues vide his submissions mentioned above, which have been discussed in the subsequent paras. 67. The Respondent has stated that as per Rule 133 (1) the last date for passing of the order in this case was on or before 17.09.2018 as the order was required to be passed within a period of three (3) months from the date of receipt of the Report from the DGAP on 18.06. 2018, however, the order was passed on 16.11.2018, therefore, the proceedings have abated and could not be revived under the remand proceedings. In this connection perusal of the record shows that the Report of the DGAP was received by this Authority on 18.06.2018 and was considered by this Authority in its meeting held on 05.07.2018 and the Respondent was directed vide notice dated 05.07.2018 to appear on 24.07.2018. The Respondent had filed his written submissions on 24.07.2018 which were sent to the DGAP on 24.07.2018 for filing Report on the reply filed by the Respondent. The DGAP had filed his Report on 07/08.08.2018. The Respondent had again filed additional submissions on 09.08.2018 which were sent to the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP has to be considered as a Report under Rule 129 (6). Hence, the present proceedings have not abated and therefore, the above claim of the Respondent is not tenable. 68. In this connection it would also be relevant to mention that the time limit prescribed under Rule 133 (1) is only directory and is not mandatory as no consequences have been provided in the above Rule or the CGST Act, 2017 in case the limit of 3 months is not observed. The Hon ble High Court of Delhi while considering the time limit specifically prescribed under Rule 133 (1) vide its order dated 27.01.2020 passed in W.P. (C) 969/2020 in the case of M/s. Nestle India Ltd. another. v. Union of India others has ruled as under:- We also observe that prima facie, it appears to us that the limitation of period of six months provided in Rule 133 of the CGST Rules, 2017 within which the Authority should make its order from the date of receipt of the report of the Directorate General of Anti Profiteering, appears to be directory in as much as no consequence of non adherence of the staid period of six months is prescribed either in the CGST Act or the rules framed there under. 69. Reliance in this r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court of Karnataka in case of RNS Infrastructure v. Income Tax Settlement Commission [MANU/KA/3116/2016] is also not being relied. Hence all the claims made by the Respondents on the ground of not observing the time limit prescribed by the above Rule or its being mandatory are wrong. 71. The Respondent has also stated that the order dated 16.11.2018 was passed in a cursory manner as was evident from Para 35 and 16 of the order. Vide Para 35 it was recorded that The respondent has wrongly claimed that the DGAP had assessed that the respondent had made a profit of due to the average increase in the base price by 10.45%. The claim made by the Respondent is incorrect as the DGAP has taken the above amount as additional sales realisation made by the Respondent on account of the increase in the prices and not the profiteered amount as this amount has been assessed to be ₹ 7,49,27,786 only as per Annexure-37 of the report submitted by the DGAP. However, vide Para 16 of the same order this Authority has recorded that the respondent has also pleaded that the DGAP has concluded that the turnover has increased by ₹ 24,81,33,857 solely due to the increase in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in Para 36 of the order are absolutely correct and hence, the claim made by the Respondent on this ground is completely wrong and fallacious. 73. The Respondent has also claimed that the findings recorded in Para 37 of the order dated 16.11.2018 were not correct as he had given reasons in Para 18 of the above order for computing the ratio of ITC to turnover on the basis of the ITC availed during the month of October or September and October 2018. In this connection it would be pertinent to mention that computation of the above ratio on the basis of the ITC availed by the Respondent during the month of September or September and October had no reason except that the ratio if calculated on the basis of the ITC availed in these months would have been more than the ratio of 9.11% computed by the DGAP. The Respondent had failed to explain why the above ratio should not be calculated from the month of July to October 2018 or why it should not be computed on the basis of the ITC availed during the month of August 2018. The most appropriate, reasonable and justifiable method would have been by computing the above ratio on the basis of the ITC availed during the months from July to Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated to be loss when the Respondent has himself admitted profiteering of ₹ 3, 17,03,988/- vide Para G (Vlll) (ii) of his submissions dated 24.07.2018. Hence, the above claim of the Respondent is incorrect. 75. The Respondent has also contended that in Para 40, this Authority has wrongly observed that the Respondent has failed to provide his methodology which has been duly recorded at Para 16, 20 and 27 of the order. In this regard it would be relevant to mention that the Respondent had allegedly floated three methodologies viz. (i) on the basis of the incremental cost on royalty, rent and other expenses (ii) on the basis of the audited financial statements and (iii) on the basis of the ratio of ITC to turnover from 01.07.2017 to 14.11.2017. Perusal of the above methodologies shows that all of them were based on different parameters and they basically computed the loss and profit of the Respondent and not the amount of benefit to be passed on. Even if the Respondent had computed the denial of ITC more than 9.11% it was incumbent upon him to prove to what extent the price increase made by him has resulted in passing on the benefit of tax reduction. He had also not gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -HAPPY MEAL EGG BURGER 17.16 23.24 35.43% 13. NP6-HAPPY MEAL P PUFF 17.16 23.24 35.43% 14. NP6-HAPPY MEAL ALOO TIKKI 17.16 23.24 35.43% 15. NP6-HAPPY MEAL ALOO TIKKI 17.16 23.24 35.43% 16. NP6-HAPPY MEAL EGG BURGER 17.16 23.24 35.43% 17. NP6-HAPPY MEAL P PUFF 17.16 23.24 35.43% 18. NP6-HAPPY MEAL EGG BURGER 17.16 23.24 35.43% 19. NP6-HAPPY MEAL ALOO TIKKI 17.16 23.24 35.43% 20. HM -AMERICAN CHEESY CHK 69.92 94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes each taxable supply made to each recipient thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer on a particular product therefore he would pass less benefit or no benefit to another customer than what is actually due to that customer, on another product. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him subject to his eligibility. The term commensurate mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the price which has to be computed in respect of each product or unit or service based on the price and the rate of tax reduction or the additional ITC which has become available to a registered person. The legislature has deliberately not used the word equal or equivalent in this Section and used the word Commensurate as it had no intention that it should be used to denote proportionality and adequacy. The benefit of additional ITC would depend on the comparison of the ITC/CENVAT credit which was available to a builder in the pre-CST period with the ITC available to him in the post GST period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clear, unambiguous, mandatory and legally enforceable. The above provisions also reflect that the true intent behind the above provisions, made by the Central and the State legislatures in their respective GST Acts, is to pass on the above benefits to the common buyers who bear the burden of tax and who are unorganised, voiceless and vulnerable. The Respondent is trying to deliberately mislead by claiming that he wasrequired to carry out highly complex and exhaustive mathematical computations for passing on the benefit of tax reduction which he could not do in the absence of the methodology framed by this Authority. However, no such elaborate computation was required to be carried out as the Respondent was to maintain the base prices of the products which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person whose views were solicited would be clueless. In this behalf it would be relevant to mention that the criteria of passing on the above benefits has been clearly and unambiguously prescribed in Section 171 which has been approved by the Parliament and all the State Legislature after detailed discussions and has also been published in the Official Gazette which amounts to notice to the public at large including the Respondent. Hence, it was not required to be made known to the Respondent specifically as it is well settled that every person is supposed to know the law which governs him. Moreover, the views of the Respondent on the passing on of the benefit of tax reduction were also not required to be sought. Hence, the law settled in the above case is not being relied. 78. The Respondent has further argued that he has earned net incremental revenue of ₹ 17,68,32,498/- during the months of December 2017 and January 2018, his total loss of ITC was ₹ 20,57,28,488/- for the above two months and hence he has suffered loss of ₹ 2,88,95,990/- during these months and therefore, there was no question of profiteering by him. He has also furnished 3 Tables claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The Respondent has further pleaded that Article 19 (1) (g) guaranteed fundamental right to carry business and trade including right to earn profit and hence any law which ignored cost and restricted profit was violative of the above Article. In this connection it would be appropriate to mention that as per the provisions of Section 171 (1) the respondent is only required to pass on the benefit of tax reduction by reducing his prices commensurately. There is no mention in the above provisions that while passing on the above benefit the costs of the Respondent will also be taken in to account. Had it been the intention of the Legislature it would have provided for the same in the above Section. Moreover, there cannot be sudden increase in the cost of the Respondent on the intervening night of 14/15.11.2017 exactly equal to the price which he was charging before the rate reduction. Such a coincidence is unhear of and malafide. As per the computation of the DGAP the loss in the ITC was 9.11% and hence the Respondent should have increased his prices by not more than 9.11% and not from more than 11.91% to 12.38% as he has done in the case of Mccafe Reg Latte. There is also no connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations which can also not be adjusted against the profiteered amount as the Respondent has no such fundamental right. Reliance in this regard has also been placed on the order dated 01 June 2012 of the Hon ble High Court of Delhi in the case of Indraprastha Gas Limited v. Petroleum and Natural Gas Regulatory Board supra which is not applicable in the facts of the present case as in the above case the Board was not held competent to fix the prices of the Gas whereas no such price fixation has been done in the present case and hence the same is not being followed. Therefore, the above claim of the Respondent cannot be accepted. 82. The Respondent has further averred that the provisions of Section 171 nowhere restrained the suppliers from revising their prices coinciding with the change in the rate of tax and hence they should be free to revise their prices on the date of change in the rate of tax to take care of the increased cost. Thus, denial of revision of price on account of increase in cost or only allowing partially for ITC loss would amount to violation of Article 14. In this regard it is mentioned that the Respondent cannot pass on and withdraw the benefit of tax redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove contention of the Respondent is untenable. 84. The Respondent has further contended that constitution of this Authority under Rule 122 of the CGST Rules suffered from the vice of excessive delegation as its constitution and powers were required to be laid down under Section 171 (2). In this regard it would be pertinent to mention that Rule 122 has been framed by the Central Government under Section 164 read with Section 171 (3) of the CGST Act, 2017 on the recommendation of the GST Council which is a constitutional body established under 101st Amendment of the Constitution and comprises of all the Finance/Taxation Ministers of the States and the Union Finance Minister. Hence, the above Rule has express approval of the Parliament, all the State Legislatures, the Central and all the State Governments and the GST Council and therefore, constitution of this Authority under Rule 122 is legal and does not amount to excessive delegation. It is also mentioned that the above Rule only prescribes the qualifications of the members of the Authority whereas its constitution has been duly provided in Section 171 (2). Further it has been specifically provided in Section 171 (3) that The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitution of the NCLT/NCLAT under the provisions of the Companies Act, 1956. It was inter-alia, held by the Hon ble Court as follows:- 90. But when we say that the legislature has the competence to make laws, providing which disputes will be decided by courts, and which disputes will be decided by Tribunals, it is subject to constitutional limitations, without encroaching upon the independence of the judiciary and keeping in view the principles of the rule of law and separation of powers. If Tribunals are to be vested with judicial power hitherto vested in or exercised by courts, such Tribunals should possess the independence, security and capacity associated with courts..... Therefore, when transferring the jurisdiction exercised by courts to Tribunals, which does not involve any specialised knowledge or expertise in any field and expediting the disposal and relaxing the procedure is the only object, a provision for technical members in addition to or in substitution of judicial members would clearly be a case of dilution of and encroachment upon the independence of the judiciary and the rule of law and would be unconstitutional. (Emphasis supplied) In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts, if done by technical or non-judicial member, is clearly a dilution and encroachment on judicial domain. With great respect, Parliament cannot divest judicial functions upon technical members, devoid of the either adjudicatory experience or legal knowledge. (Emphasis supplied) The decision in the case of Namit Sharma v. Union of India (2013) 1 SCC 745 is also instructive, where the Hon ble Supreme Court was considering the requirement of a judicial mind for performing the functions and exercising the powers of the Chief Information Commission. The Hon ble Court had originally held that the Information Commissions and the Central Information Commission performed judicial functions having the trappings of a Court and hence, they must have Judicial Members. It was further held that the legislative requirement that members have knowledge and experience in their respective fields, including law, pre-supposed the requirement of a basic degree in the said field. Relevant portions of the original Judgment are reproduced herein below:- 82. Once it is held that the Information Commission is essentially quasi-judicial in nature, the Chief Information Commissioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial powers vested in the High Court were sought to be transferred to the Tribunals or judicial powers are vested in the Tribunals by an Act of the legislature, this Court has insisted that such Tribunals be manned by persons with judicial experience and training, such as High Court Judges and District Judges of some experience. 30... But, as we have seen, the powers exercised by the Information Commissions under the Act were not earlier vested in the High Court or subordinate court or any other court and are not in any case judicial powers and therefore the legislature need not provide for appointment of judicial members in the Information Commissions. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 31. Perhaps for this reason, Parliament has not provided in Sections 12(5) and 15(5) of the Act for appointment of persons with judicial experience and acumen and retired Judges of the High Court as Information Commissioners and retired Judges of the Supreme Court and Chief Justice of the High Court as Chief Information Commissioner and any direction by this Court for appointment of persons with judicial experience, training and acumen and Judges as Informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Authority has not replaced or substituted any function which the Courts were exercising hitherto (b) it was performing quasi-judicial functions but it cannot be equated with a judicial Tribunal (c) it performs its functions in a fair and reasonable manner in accordance with the Act but does not have the trappings of a Court and (d) absence of a Judicial Member does not render the constitution of this Authority unconstitutional or legally invalid. Further, there are several statutory bodies which exercise quasi-judicial functions but they are not required to be composed of Judicial Members. There is no Judicial Member in the SEBI which has been constituted under the Securities and Exchange Board of India Act, 1992. Neither the statute nor any decision of the Court requires the SEBI to be composed of a Judicial Member simply because it also performs quasi-judicial functions under the Act apart from its other roles. SEBl s composition has been provided in Section 4 (1) of the aforementioned Act. The Hon ble Supreme Court in the case of Clariant International Ltd. Anr. v. Securities and Exchange Board of India (2004) 8 SCC 524 has held that SEBI exercises its legislative po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 122 of the CGST Rules, 2017. The said Act or the Rules, nowhere mention requirement of a Judicial Member in this Authority. The Parliament, the State legislatures, the Central and the State Government as well as the GST Council in their wisdom, have not found it expedient to constitute this Authority by providing a Judicial Member in this Authority. Hence, the allegations made by the Respondent regarding the unconstitutionality of the Authority are devoid of any legal merit. Moreover, the orders passed by this Authority are subject to judicial review and hence no prejudice would be caused to the Respondent. Hence, the above contention of the Respondent is grossly misplaced and hence, it cannot be accepted. 87. Reliance in this regard has also been placed on the cases of Jaswant Sugar Mills Ltd. v. Lakshmichand Ors. and Columbia Sportswear Company v. Director of Income Tax, Bangalore supra however, the same are not being relied as no Judicial Member is required to be appointed in this Authority on the basis of the cases cited above as has been discussed in detail above. 88. Reliance in this regard has further been placed by the Respondent on the cases of L . Chandr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egation without prescription and hence the law propounded in the cases of K. T. Moopil Nair v. State of Kerala, Devi Das Gopal Krishnan and Ors. v. State of Punjab and Ors., Municipal Corporation of Delhi v. Birla Cotton, Spinning and Weaving Mills, Delhi and Anr. and K. T. Plantation Pvt. Ltd. and Anr. v. State of Karnataka supra is not being followed. 91. The Respondent has also submitted that on the issue of prescribing a methodology, a useful recourse could be made to the analogous anti-profiteering provisions in Malaysia and Australia where statutorily methodology has been prescribed for the determination of the price. In this regard it would be pertinent to mention that in both the above countries the anti-profiteering measures introduced at the time of implementing the GST had prescribed methodology to determine prices whereas no such provision has been made in this country under Section 171 as it would be hit by Article 19 (1) (g). It is strange that where on the one hand the Respondent is claiming freedom to fix his prices under the above Article and alleging violation even on passing on the benefit of tax reduction under Section 171 (1), he is advocating price cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt himself, which have not been denied by him and the bare perusal of which showed that the Respondent had charged the same price after rate reduction on Mccafe Reg Latte which he was charging before such reduction. The Applicant No. 1 to 4 while making the complaint had clearly stated that the Respondent has not passed on the benefit of tax reduction and has increased his menu prices after the rate reduction and hence he should be investigated for not passing on the above benefit. All the above Applicants had forwarded their complaints through e-mails and hence there was sufficient proof of their identity. The Form APAF-I had not been prescribed at the time of making the above complaints and hence there is no question of making the above complaints in the prescribed form. Moreover, even if had been prescribed it was not required to be filled as mere not applying on the prescribed form does not allow the Respondent to fleece his customers by denying them the benefit of tax reduction. Therefore, the above contention of the Respondent is not maintainable. 94. It has further been alleged that in terms of Rule 129, upon receiving reference from the Standing Committee, the DGAP was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices, in terms of Section 171 of the Central Goods and Services Tax Act, 2017 and the rules made thereunder. b) Responsibility for coordinating anti-profiteering work with the National Anti-profiteering Authority, the Standing Committee and the State level Screening Committees. Therefore, it is clear from the above provisions that the office of the DGAP has been charged with the responsibility of conducting detailed investigation to collect evidence necessary to determine whether both the above benefits have been passed on or not in terms of the provisions of Section 171 of the CGST Act, 2017 and the Rule 129. The above Rule has been framed by the Central Government under Section 164 of the CGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws not only against this franchise but against all franchise of fast food chains. Please carry out forensic audit of these chains of how much ITC benefit they got between 1/7 to 15/11 and how much they passed on. How much GST was collected from Customers and how much was deposited with the Govt.? (Emphasis supplied) It is absolutely clear from the above complaint that the Applicant No. 2 had not only produced the invoices issued by the Respondent, who is a MNC fast food chain, to establish that the Respondent, when the GST rate was changed to 5% across the board without ITC, had profiteered by increasing the menu rates and had applied 5% GST to either keep the customer payment same or even higher but strict action was also sought to be taken against him under the GST law. Therefore, as per the specific request of the above Applicant as well as other complainants investigation was required to be carried out in respect of all the products in respect of which the rate of tax had been reduced and the Respondent had increased their prices to deny the benefit of tax reduction and not only against the product Mccafe Reg Latte. The Respondent cannot get away by appropriating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order dated 29 October 2018 passed in the Case No. 11/2018 of Raman Khaira another v. Yum Restaurants India Private Limited by this Authority by claiming that in this case it was held that in the absence of credible evidence are a particular product, the investigation would not be meaningful and hence it had dismissed the proceedings therefore, the present case should also be dismissed. In this regard it would be appropriate to mention that there was enough accurate and adequate evidence available to launch investigation against the Respondent in the present case as has been discussed in detail above, whereas no such evidence was available in the above cited case and hence, the above case is of no help to him. 98. Reference has also been made by the Respondent to the order dated 26 September 2019 passed by this Authority in Case No. 47/2019 of Gaurav Gulati others v. M/s. Paramount Propbuilt Pvt. Ltd. by claiming that although the ITC was consolidated for all the real estate projects, the determination of profiteering was done for the project in question in which the Applicant had bought the flat. Further reference has also been made to the order dated 04 July 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed in the case of the Respondent and hence the above orders have no impact on the case of the Respondent. Moreover, as has been discussed in Para supra complaint was made by the Applicant No. 2 in respect of all the products which were being supplied by the Respondent on which the rate of tax has been reduced and hence his case is not covered by the above orders. In the case of Rahul Sharma supra the investigation was restricted to one product only on the directions of the Hon ble High Court of Delhi and hence the above case is of no help to the Respondent. 100. The Respondent has also claimed that as per the practice of this Authority, the investigation and findings should be restricted to the product complained only otherwise it would be arbitrary as per the Hon ble Supreme Court s judgement in the case of Damodar J. Malpani v. Collector of Central Excise 2002 (146) ELT 483 SC. As discussed in Paras supra all the products of the Respondent on which the rate of tax was reduced were required to be investigated as specific complaint had been made to investigate them and thus they have been rightly investigated. In this connection it would also be pertinent to mention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prices by the Respondent after reduction in the rate of tax reduction with denial of benefit of ITC was commensurate as per the provisions of Section 171 (1). In the case of Jubillant Food Works the denial of benefit of ITC was 5.75% whereas the above Respondent had increased his prices up to 84.55%. Hence, both the above cases have been decided on different facts and hence the orders passed in them cannot be said to be contradictory. 104. Further reference has also been drawn to the order dated 28 January 2020 of the Hon ble High Court of Madras in Shree Mahalaxmi Enterprises v. Union of India supra. The order passed in the above Writ Petition also pertains to the above case and hence it cannot be applied in the case of the Respondent. 105. The Respondent has also stated that the period of investigation for determination of ITC has been decided by the DGAP from 01 July 2017-31 October 2017. The period from 01 November 2017-14 November 2017 has been ignored by the DGAP although the rate change was with effect from 15 November 2017. Hence, there was no legal reason to deny the period from 01 November 2017-14 November 2017 and this period should be included in the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received the taxable invoices post 15.11.2017 he was again not eligible to avail ITC in terms of the Notification dated 14.11.2017, therefore the same cannot be considered for computation of the denial of ITC to net turnover ratio. As the Respondent has already availed ITC on the original purchase of the inputs, the same has been considered in the computation of denial of ITC to net turnover ratio. Further, output tax liability on the inter-unit branch transfers has been excluded from the ITC on the one hand and the inter-unit branch transfer turnover has also been excluded from the outward taxable turnover on the other hand which has neutralised the impact of branch transfer transactions on the computation. There was reversal of ITC on the closing stock of inputs and capital goods as on 14.11.2017 by the Respondent. This credit was not available in the GSTR-3B Return of November, 2017. The Respondent has submitted the following break-up details of ITC on the closing stock as on 14.11.2017:- Code Inventories As on 14.11.2017 (in Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 119-041 Inventory Operating Supplies (DC) 61,70,674 Total 1,93,26,696 Other Inventory 119-010001 IT Spare at HO - 119-010002 Spare at HO - 119-020 Inventory McBucks DC - 119-040003 INVENTORY - TRAINING MATERAIL - DC - 119-050 Inventory Linen Delivery Material - 119-051 Inventory Linen (DC) 66,03,722 119-051-AUTO Inventory Linen (DC) Auto - TOTAL 66,03,722 GRAND TOTAL 30,30,36,268 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 081721 01.08.2017 Trion Properties Pvt. Ltd. 20.11.2017 14.11.2017 1890 6. M-577 30.11.2017 KP Corporate Solation 07.12.2017 14.11.2017 5018 7. RNV000261 09.11.2017 Anukool India Pvt. Ltd. 21.11.2017 14.11.2017 23306 8. 17 10.11.2017 Kaveri Consultancy Services 27.11.2017 14.11.2017 7200 9. P412 07.11.2017 Visheshh Globe Pvt. Ltd. 20.11.2017 14.11.2017 842 10. 4428 13.11.2017 Wang Professional Pvt. Ltd. 23.11.2017 14.11.2017 2706 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC has been clearly mentioned in Section 16 and basis of considering it has been discussed in detail in para supra and hence the Respondent is entitled to claim only that ITC which is covered under the above Section and the Notification dated 14.11.2017 and not on the basis of the availment or entitlement as per his own perception. As the Respondent has already availed ITC on the original purchase of the inputs, it has been considered in the computation of denial of ITC to net turnover ratio. Since, both the GST paid on the inter branch transfers and the turnover of such transfers have been excluded from the computations they are not going to impact the ratio of denial of ITC. Accordingly, the incremental cost under Rule 30 has no adverse affect on the above ratio. Therefore, the above contention of the Respondent is not maintainable. 107. The Respondent has also contended that it should be clarified for calculation of the ratio of ITC to turnover, whether turnover would be taken at the gross level or after deduction of the direct variable costs. In this regard it would be relevant to mention that the direct variable costs of royalty, rent and commission were already included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the ratio of ITC to turnover on Coffee and French Fries both of which he has cited, which shows the hollowness of his claim. He has also stated that in the alternative, entity-wide ITC cost against entity-wide average increase in prices should have been computed which is also illogical as the Respondent is making supplies at the product level and not at the entity level. Moreover, as per the provisions of Section 171 (1) the benefit is required to be passed on each supply to each customer and in case it is computed at the entity level the benefit cannot be passed to every eligible customer which will be against the above provisions as well as Article 14 of the Constitution. 109. The Respondent has also argued that as per the definition of profiteering given in Section 171 it was required that there should be a determination of the ITC relevant to the goods/ service and a calculation of the commensurate price of that goods/ service. In this context it would be pertinent to mention that there is no stipulation in the definition of profiteering that the ITC should be determined on each product. The only stipulation is passing on the benefit of tax reduction by commensurate r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there are specific conditions prescribed for claiming benefit of ITC and for determination of the value of supply the above ratio cannot be computed on the basis of the financial statements or extrapolation. The ratio can also not be computed correctly on actuals unless the claims of ITC are made in consonance with the provisions of Section 16 of the Act. 112. The Respondent has also directed this Authority to explain how it has observed that the DGAP has investigated the case correctly and in line with the general principals adopted by this Authority in the case of Adarsh Marbles supra. In this regard it would be pertinent to mention that this Authority does not function under the control of the Respondent and hence it is not liable to furnish any explanation to the Respondent. The above case has been decided by taking in to account its facts which are not similar to the case of the Respondent. 113. The Respondent has also claimed that this Authority in its order dated 25 June 2020 passed in Case No. 33/2020 of Emmar MGF Land Ltd . has held at Page 42/43 that computation of commensurate reduction in prices was a pure mathematical exercise and hence, the same must be based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent has also contended that he has taken the ITC availed in the month of October 2017 as the test period to estimate the ITC impact on the future. He has taken the amount of ITC availed during the above month as ₹ 11,08,97,125/-, the total outward turnover as ₹ 1,10,98,64 117/- and ratio of ITC to turnover as 10% whereas the DGAP has taken the available ITC as ₹ 13,59,26,262/-, the turnover as ₹ 98,38,48,569/- and the ratio as 13.82%. In this connection it can be noted that the above figures have been taken by the DGAP from the GSTR-1, GSTR-3B and the ITC Register which has been furnished by the Respondent himself. Therefore, the figures taken by the Respondent for computation of the above ratio are not based on the GSTR-3B Return or as per the Table-B of para 18 of the Report of the DGAP nor the basis of taking these figures has been explained by the Respondent, therefore, they cannot be relied upon. In case the ratio of ITC to turnover is even taken as 10% as has been stated by the Respondent, although his claim is incorrect, he has increased his prices by more than 10% in respect of 1710 products as is established from Annexure-32. Hence, the rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as no ITC would be available on them as per the provisions of Section 16 as no tax had been paid on the rent till 14.11.2017. Detailed reasons for ignoring the ITC availed during the period from 1 November 2017 to 14 November 2017, restricting it to the amount availed till 31 October 2017 and excluding the ITC pertaining to the pre-GST period have been given in para supra and hence the Respondent cannot compel the DGAP to adopt his method to compute the ITC as per his whims and preferences which have no legal basis as he is bound to follow the provisions of Section 16 and hence, the above contention of the Respondent cannot be accepted. 117. The Respondent has also furnished a Table in which he has computed the ITC w.e.f. 01.07.2017 to 14.11.2017 claiming it to be based on his GSTR-3B Returns. He has also added the ITC which he has claimed to have availed in the months of November 2017 to March 2018. He has reduced the amount of tax which he has paid on the inter unit branch transfers, the Input tax credit pertaining to the period prior to July 2017 but availed from July 2017 to October 2017 as per GSTR-3B Returns and has added the incremental tax cost on the inter-unit branch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in incremental increase in (i) Royalty which he was paying to M/s. Mcdonalds India Ltd. @ 3.99% of the turnover (ii) Variable rent which was being paid @ 3.29% of the turnover and the (iii) Other variable expenses which were being paid to the service providers and which amounted to 0.96% of the turnover. Moreover, GST was also being paid on all the above 3 services @ 18% which also formed part of his cost. On the basis of the above factors the Respondent has computed the commensurate increase in the prices as per the Table submitted by him. Perusal of the Table shows that in case the percentage of denial of ITC to turnover was 9.11%, 12.24%, 10%, 10.27% and 10.59% respectively then the percentage increase required in prices to maintain the same profitability would be 10.09%, 13.56%, 11.08%, 11.38% and 11.73% respectively. In this regard it would be pertinent to mention that royalty, rent and other variable expenses already formed part of the prices which were being charged by the Respondent during the pre rate reduction period as fixation of price of any product takes in to consideration the cost of inputs, costs on account of royalty, rent and other variables, administra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 9.11% and hence the Respondent has profit margin of 0.32% as per his own admission which proves that he has profiteered to the extent of 0.32%. Therefore, the Respondent cannot claim that he was not required to pass on the benefit of tax reduction. 123. The Respondent has also computed the total amount of ITC, total amount of turnover, % of turnover and the actual profit/loss through the Table prepared by him. Vide another Table he has computed the actual profit/loss as 0.32% as per the methodology adopted by the DGAP, as 0.20% as per his own methodology, (-) 2.81% as per the financial statements, (-) 0,83% as per the ITC eligibility/availment, (-) 0.57% on the basis of month of October 2017 and (-) 1.16% on the basis of months of December 2017 and January 2018. He has also claimed that the above percentages fell under the principles of de-minimis threshold as per the case of N. P. Foods. In this context it would be relevant to mention that all the above methodologies and computations have been held to be illogical, wrong, manipulated, arbitrary and against the provisions of Section 171 (1) as has been discussed in detail in Para supra and hence, they cannot be taken cognizan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on one product from the amount of benefit which he has claimed to have passed on the other product, which will result in complete denial of benefit to the customer who has purchased a particular product on which no benefit or less benefit has been passed on. Hence the methodology of netting off cannot be applied in the case of FMCGs and the methodology of Zeroing has to be applied as the customers have to be considered as individual beneficiaries and they cannot be dumped and netted off against each other. This Authority has also clarified in its various orders that the benefit cannot be computed at the entity level as the benefit has to be passed on each product to each buyer per the provisions of Section 171 (1). Hence, the above contention of the Respondent is not correct as the Respondent cannot insist on not applying the methodology of Zeroing which has been applied in the present case as it would amount to violation of the provisions of Section 171 of the above Act as well as Article 14 of the Constitution. 126. The Respondent has also submitted that the DGAP has wrongly computed the profiteered amount @ 105% i.e. base price plus GST where as he has deposited the GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in I.O. No. 19/2020 in the case of Himalaya Drug Company. Therefore, the principle of computation adopted by the DGAP was contrary to the principles of computation judicially developed by this Authority. In this connection it is to be noted that the Respondent himself had expressed his inability to provide the invoice wise item wise outward taxable supply data for B2C supplies due to extremely voluminous nature and had intimated that he would provide data in the summarized manner on product/ SKU basis, which has forced the DGAP to compare the average prices during the pre and post rate reduction periods as is evident from Annexure-37 of the Report. The product wise turnover would not have sufficed as in cases of rejections, the same would have to be deducted, which could have been possible only in case the invoice wise details were provided by the Respondent. Further, random checks by the DGAP could not have computed the profiteered amount by comparing the average pre rate reduction prices with the actual post rate reduction prices due to non-supply of details mentioned above. The above claim of the Respondent was palpably fallacious as much bigger suppliers than him have supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rule 126. Such a power has been conferred on the GST Tribunal under Section 111 (1) of the CGST Act, 2017 and the Competition Commission under Section 36 of the Competition Act, 2002. This Authority has similarly framed its methodology and procedure under Rule 126 vide Notification dated 28.03.2018. The Respondent does not have the power of legislature to frame the methodology and procedure and hence any such methodology and procedure suggested by him cannot be accepted being illogical, arbitrary, inequitable and being ultra vires of Section 171 and Article 14 of the Constitution. The Respondent had wrongly claimed that he had passed on the benefit at the entity level whereas the evidence on record shows otherwise. Hence, the claim made by the Respondent on the basis of the above Acts and Ordinances is incorrect and hence the same is not maintainable. 129. The Respondent has further averred that refusal to consider increase in cost of inputs on the pretext that Section 171 only required this Authority to examine loss of ITC went against Article 19 (1) (g) of the Constitution of India which provided for reasonable profit to the businessman. In this regard, reliance has been pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stead he has claimed to have increased his prices on 09.01.2018 which shows complete and wilful disregard of the provisions of section 171. The Respondent has no legal right to revise his prices unless hepasses on the benefit Hence, all such increases in prices made by the Respondent amount to profiteering. The Respondent cannot increase his prices in violation of the provisions of Section 171 under the pretext of protection granted under Article 19 (1) (g) as such a claim would be hit by Article 14 of the Constitution. 132. The Respondent has also submitted that the ITC for the period from 1 November 207-14 November 2017 included ₹ 2,15,33,262/- towards reversal of ITC carried forward on the inventory as on 15 November 2017. If such reversal was ignored, ITC for the period from 1 November 2017-14 November 2017 would be ₹ 8,26,80,678/- as against ₹ 6,11,47,417/- thereby increasing the total ITC from 1 July 2017-14 November 2017 to ₹ 44,82,49,192/- from ₹ 42,67,15,930/- and ITC loss from 10.27% to 10.78%. In this connection it would be appropriate to mention that for calculation of ITC ratio, the ITC on inventory as on 01.07.2017 15.11.2017 has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 15 November 2017, rate of tax has been reduced to 5.45% (being 5% of 109.11) with a complete blockage of ITC and hence, the effective benefit of reduction in rate of tax was 3.44% (8.89% - 5.45%). In this connection it is to be noted that the benefit of tax has to be computed on each product by taking in to account its pre rate reduction base price, the denial of ITC @ 9.11%, on which the GST is to be charged @ 5% and then its commensurate price is to be fixed and charged to the customers. In case the commensurate price is not charged the actual price charged has to be taken in to account for computation of the profiteered amount. The benefit of tax cannot be claimed to be 3.44% as it cannot be calculated by comparing the pre and post reduction tax rates arbitrarily as the benefit has to accrue to the customers who are bearing the burden of tax and not to the Respondent who is not paying it from his pocket. The customers do not have any benefit of ITC which the Respondent is enjoying. In case the above claim of the Respondent is taken in to account then he had no justifiable ground to increase his post rate reduction prices by more than 3.44% to 100.09% as is evident from Anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 171 (1) is required to be computed on each product keeping in view its pre rate reduction base price including the denial of ITC and the rate of tax and then compared with the actual price charged by the Respondent including the tax during the post rate reduction period. Since, the Respondent has increased his prices from more than 9.11% to 100.09% as is evident from Annexure-32, the amount and percentage of benefit to be passed on can never be the same on each product. Perusal of Annexure-2 shows that the Respondent has applied 10.78% as the denial of ITC and then netted off the positive and negative values to claim that the net profiteered amount would be (-) 2,86,96,480/-. As has already been explained above the Respondent cannot apply netting off and the profiteered amount has to be considered on the basis of the price which is more than the pre rate reduction base price, the denial of ITC of 9.11% and the GST of 5%. The benefit is also required to be computed on every product and not at the level of restaurant service as the respondent is to reduce prices on the products and not on service. Therefore, the above claim of the Respondent is wrong and fallacious and hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. State (Place of Supply) Profiteering (In Rs.) 1. Andhra Pradesh 8,36,602 2. Chhattisgarh 3,99,904 3. Goa 8,29,314 4. Gujarat 88,48,919 5. Karnataka 1,18,30,563 6. Kerala 13,34,341 7. Madhya Pradesh 9,68,540 8. Maharashtra 3,96,68,520 9. Tamilnadu 43,19,803 10. Telangana 58,91,280 Total: 7,49,27,786 140.Accordingly, the Respondent is directed to reduce prices of all the impacted products commensurately in respect of which profiteering has been computed as per Annexure-37 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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