9911796707
TMI Blog2021 (1) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Tax (Rate) dated 14.11.2017 by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017. 2. The DGAP has reported that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 02.05.2019, a Notice under Rule 129 of the Rules was issued by the DGAP on 13.05.2019, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in GST rate w.e.f. 15.11.2017 had not been passed on to his recipients by way of a commensurate reduction in prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all documents in support of his reply. Further, the Respondent was afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period 21.05.2019 to 23.05.2019. The Authorized Representative of the Respondent availed of the said opportunity on 22.05.2019. 3. The DGAP had further reported that the period covered in the current investigation was from 15.11.2017 to 30.04.2019 and the time limit to complete the investigation was extended up to 01.02.2020 by the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd keeping in view the factors above, the prices might be dynamic on the same date (for different properties) or for the same property (on different dates). It signified that differentiation in the prices of tickets according to the film, the day and the time of the show as also the location of the property was completely business-driven. Thus in his case, no two supplies were comparable and prices were extremely dynamic and could go up and down depending upon the parameters stated above and any price change, therefore, could not be related to any profiteering by him. d. That the meaning/definition of the term 'profiteering' was given in various scholarly references and that even in terms of Section 171 of the CGST Act, his case did'nt fit the criteria of a case of profiteering. e. That before 15 Nov 2017, the supply of food and beverage by him was liable to GST rate of 18% with full ITC allowance, whereas w.e.f. 15 Nov 2017, his supply of food and beverages had become liable to GST at 5% without ITC, which had a far-reaching impact on his business and profitability on account of the reduction in tax on outward supplies; and the increase in the cost of his direct and indirect p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loss Incurred by the Respondent Table-'C (Amounts in Rs.) Particulars Tea Georgia Popcorn Base Price Before the change in GST rates (A) 76.27 220.34 Loss of ITC 17.21% 17.21% Loss of ITC (Amount) (B) 13.13 37.92 Prices should have been revised to (C = A+B) 89.40 258.26 GST 5% on above (D = 5% of C) 4.47 12.91 The price that should have been charged to the Customer (E = C+D) 93.87 271.17 Actual Price Charged (F) 90.00 260.00 Excess Benefit Passed on the to Customer (E-F) 3.87 11.17 j. That as illustrated above, no incremental profit was made by him, and that the ITC loss parallel to the rate change event - had actually resulted in overall losses to him since he had passed on the benefit to the customers; that that fact that he was making losses was overlooked by the Screening and Standing Committee, thus, the very basis of reference for detailed investigation to the DGAP was flawed. k. that due to the very nature of the business of entertainment he kept evolving his offerings to patrons by opening new units/ properties or by revamping/ resizing the existing units/ properties as also by adding/ deleting premium elements and offering new food and beve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Multiplex wise item-wise sales register for the period July 2017 to April 2019 for all the states. (f) Actual ITC loss sheet and excess loss incurred due to benefit passed on. (g) Input Tax Credit register for July 2017 to November 2017. (h) Copy of Sample invoices of ITC availed during November 2017. (i) Copy of Balance Sheets for the FY 2016-17 & 2017-18. (j) Copy of Maharashtra GST Registration. (k) Reconciliation of F&B sales and Non-F&B sales with GST Returns. (I) Details of ITC Reversed on Stock of 14 November 2017 in proportion to expected use in F&B business. 6. The DGAP has further reported that the Respondent has also submitted that he was a listed company and his business data constitutes price sensitive information in terms of the listing agreement, accordingly, any public access or reporting should be prohibited; that the data dealt with his margin and profitability scenario, therefore, was also of direct interest to competitors and its publication could hurt his commercial interests and interests of the shareholders/public at large in as much any misuse by the competition (intended or inadvertent) would lead to erosion of shareholders' wealth; that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected by the suppliers was required to be deposited in the Consumer Welfare Fund; that he had not examined the cost component included in the base prices but had only factored the denial of ITC to the pre rate reduction base price since Anti-profiteering provisions attempted neither to regulate the prices nor to disregard any business outcomes. 10. It was also stated by the DGAP that the concern over the long period of investigation was frivolous since the period of Investigation has not been prescribed either in the CGST Act. 2017 or in the corresponding Rules/Notifications; that he had received the reference from the Standing Committee on Anti-profiteering recommending a detailed investigation into the instant matter on 02.05.2019; hence the period from 15.11.2017 up to the latest month of receipt of reference was taken up for investigation, i.e. from 15.11.2017 to 30.04.2019; that the said fact has been conveyed to the Respondent. 11. The DGAP also stated that the contention of the Respondent that no methodology & procedure had been prescribed for such an investigation was found incorrect as the power to determine Methodology & Procedure as per Rule 126 of the Rules, had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Standing Committee; that Rule 133 (2) reads as follows- "An opportunity on hearing shall be granted to the interested parties by the Authority where any request was received in writing from such interested parties". 15. The DGAP has also reported that the Respondent's submissions related to his having opened new units/ properties or supplied new food items and beverages, etc. have been duly considered in the investigation and the profiteering has been computed only for those goods and services which were being supplied in the pre-tax rate reduction period, i.e. during the period 01.07.2017 to 14.11.2017. 16. The DGAP has also reported that the Respondent has argued that he had incurred ITC loss of 17% (approx.) and by keeping the final prices charged from customers unchanged on the eve of the reduction in the GST rate and later, he had passed on the benefit of the reduced rate of tax; that he had computed the ITC as a percentage of the total taxable turnover of the Respondent for the period July 2017 to October 2017. 17. The DGAP has reported that the Respondent had contended that he had different base prices in respect of his supplies depending on factors such as Category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % before 15.11.2017 and at a reduced rate of 5% w.e.f. 15.11.2017 was correct, this in no way established that the commensurate benefit of the reduction in the GST rate had been passed on by him to his customers. On the contrary, the fact was that the customers should have paid a lower final price after the GST rate was reduced to 5% but the final item-wise prices remained unchanged for the customers and hence it was clear that the benefit was not passed on to them by the Respondent. DGAP has added that thus the only point for determination was whether the increase in the item-wise base prices was solely on account of denial of the ITC. 20. The DGAP has further reported that the assessment of the impact of denial of the ITC required the determination of ITC in respect of "restaurant service" as a percentage of the taxable turnover from the outward supply of "products" during the pre-GST rate reduction period. To illustrate, if the ITC in respect of restaurant service was 10% of the taxable turnover of the Respondent till 14.11.2017 (which became unavailable w.e.f. 15.11.2017) and the increase in the pre-GST rate reduction base price w.e.f. 15.11.2017, was up to 10%, one could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the DGAP. Finally, the ratio of ITC to the net taxable turnover had been taken for determining the impact of denial of ITC for the period from July 2017 to October 2017. On this basis, the finding was that ITC amounting to Rs. 8,92,55,966/- was available to the Respondent during the period July 2017 to October 2017 which was approximately 9.70% of the net taxable turnover of restaurant service (Rs. 92,01,72,389/-) supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the said ITC was not available to the Respondent. A summary of the computation of the ratio of ITC to the taxable turnover of the Respondent done by the DGAP is given in Table-D' below: Table-'D' (Amount in Rs.) Particulars July-2017 Aug.-2017 Sept.-2017 October-2017 Total ITC Availed as per GSTR-3B (A) 5,10,45,836 8,64,73,023 12,02,04,147 12,48,44,525 38.25,67,531 ITC availed Exclusively on Non Restaurant Services (B) 32,21,451 1,12,90,601 3,40,34,664 4,17,10,519 9,02,57,234 ITC availed Exclusively on Restaurant Services (C) 40,14,836 76,62,990 1,02,80,402 94,28,274 3,13,86,503 ITC availed on Common inputs, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established the fact of profiteering, the next step for him, was to quantify the same. In this regard, the methodology adopted could be explained by illustrating the calculation in respect of a specific item i.e., SAMOSA (2PCS.) sold in a particular multiplex i.e. MUMBAI METRO CINEMA, during the period 01.11.2017 to 14.11.2017 (pre-GST rate reduction) was taken by the DGAP and an average base price (after discount) was worked out by dividing the total taxable value by the total quantity of the said item sold by the Respondent during the above period. The average base price of this item was compared with the actual selling price of this item sold in the same Multiplex during the post-GST rate reduction period i.e. on or after 15.11.2017 as is illustrated in the Table-'E' below: Table-`E' (Amount in Rupees) SI. No. Description Factors Pre Rate Reduction (01.11.2017 to 14.11.2017) Post Rate Reduction (From 15.11.2017) 1. Item Description A SAMOSA (2PCS.) 2. Multiplex Name B MUMBAI METRO CINEMA 3. The total quantity of the item sold C 347 4. Total taxable value (after Discount) D 41,170/- 5. Average base price (without GST) E=(D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Table- 'F' below:- Table- 'F' S.No. Name of State State Code Total Profiteering (Rs.) 1 Andhra Pradesh 37 21,91,020 2 Chhattisgarh 22 2,52,833 3 Delhi 7 16,46,621 4 Goa 30 19,13,126 5 Gujarat 24 21,72,745 6 Haryana 6 11,93,313 7 Jharkhand 20 4,96,181 8 Karnataka 29 31,02,637 9 Kerala 32 2,61,609 10 Madhya Pradesh 23 7,16,906 11 Maharashtra 27 99,20,757 12 Orissa 21 9,82,190 13 Punjab 3 6,16,561 14 Rajasthan 8 23,84,474 15 Tamil Nadu 33 20,72,177 16 Telangana 36 11,26,811 17 Uttar Pradesh 9 13,88,348 18 West Bengal 19 60,92,005 Grand Total 3,85,30,314 27. The DGAP has further reported that thus the allegation of profiteering made by Applicant No. 1 stood confirmed against the Respondent and that the quantum of profiteering, inclusive of GST, worked out to Rs. 3,85,30,314/- in terms of Section 171(1) of the CGST Act, 2017 which reads as follows-"any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices". 28. The above Report of the DGAP dated 31.01.2020 was considered by this Authority and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods or services which is a clear indication that proceedings could be initiated only in respect of those goods which were described in the Notice; that, however, in the present proceedings, the Notice issued nowhere mentioned that an investigation was being initiated for all the items; that this indicated that while the scope of the proceedings was dictated or restricted by clear reference to the description of the subject products in the Notice itself, DGAP has suo-moto expanded the scope improperly. 30. That he wished to rely on the following orders passed by the Authority wherein the investigation has been restricted only to the products against which the complaint was filed: * Sh. Rishi Gupta v. M/s Flipkart Internet Pvt. Ltd. * Sh. Ankur Jain v. M/s Kunj Lub Marketing Pvt. Ltd. * Sh. Sandeep Puri v. M/s Glenmark Pharmaceutical Ltd. 31. The Respondent has further submitted that if the manner of doing a particular act was prescribed under any statute, the act must be done unambiguously in the manner prescribed or should not be done at all. Assumption/ presumption about the scope of the investigation could not be left to the mercy of interpretation, where the rules warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. The said amendment, which, was prospectively applicable, has been extracted herein below: "(5) (a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Anti-profiteering referred to in sub-rule (6) of rule 129, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be recorded in writing, within the time limit specified in sub-rule (1), direct the Director General of Anti-profiteering to cause investigation or inquiry with regard to such other goods or services or both, in accordance with the provisions of the Act and these rules." 33. The Respondent reiterated that, had the DGAP been given the powers to expand the scope of the investigation as it deemed fit, there would have been no need to insert sub-rule 5 of Rule 133 granting powers (only) to this to expand the scope of investigations. Hence, even after the amendment, it was only this Authority that has been given the power to expand the scope of investigation; however, before the Authority did so, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is enabled to deal with cases in which the amount of income concealed did not exceed the sum of Rs. 25,000. In other cases, it is the Inspecting Assistant Commissioner who would have jurisdiction to deal with penalty proceedings. Thus, those cases in which the income concealed was in excess of Rs. 1,000 but below Rs. 25,000 which were originally within the jurisdiction of the Inspecting Assistant Commissioner are now to be dealt with by the Income-tax Officer. The amendment had thus enlarged the jurisdiction of the Income-tax Officer. Being a question dealing with the jurisdiction of an officer to deal with a case we are unable to agree with the learned counsel that the amendment was retrospective in effect in the sense that it would apply even to a case where the offence or infringement was committed prior to the amendment." 34. Further, the Respondent has submitted that in the case of Purbanchal Cables and Conductors Pvt. Ltd. v. Assam State Electricity Board, the Hon'ble Supreme Court declared that any substantive law shall operate prospectively unless the retrospective operation was clearly made out in the language of the statute. The Respondent had also claimed that in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning to the Subject Goods. It is, however, clarified that the NAPA's inquiry as far as the Subject Goods is concerned will proceed in accordance with law." 37. The Respondent has further submitted that the DGAP's jurisdiction was circumscribed by the specific powers granted under the aforementioned provisions. Therefore, the authorities could not confer on themselves additional jurisdiction vested other than as provided under the law. In this regard, reference was made to the case of Northern Plastics Limited v. Hindustan Photo Films Mfg. Co. Ltd. wherein the Hon'ble Supreme Court inter-alia held that the Tribunal being a creature of the statute and deriving its jurisdiction and powers from the statute could not venture into an exercise beyond the mandate of the statute. The Respondent also submitted that it has provided the complete information/ details as sought by the DGAP as a responsible corporate assessee and in good order to facilitate the investigation all along. The Respondent further submitted that this act should, by no stretch of the imagination, be considered as the acquiescence of the fact that the DGAP has jurisdictional powers to investigate in respect of all produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and went to the very root of the investigation. The Respondent further submitted that the entire investigation and the proceedings were, therefore, liable to be quashed on this ground alone. 41. The Respondent also stated that the initiation of the proceedings was flawed and time-barred. The Screening Committee had not adhered to the time limit prescribed under Rule 128 of the CGST Rules. The Screening Committee was legally bound to examine a complaint strictly within a period of two months from the date of receipt of such complaint. 42. The Respondent had also submitted that the FAQs released by this Authority on its website against Question No. 3, mentioned the fact that the Screening Committee was mandatorily required to complete its investigation within a period of two months. "The Committees shall complete the investigation within a period of two months from the date of the receipt of a written application or within such extended period not exceeding a further period of one month for reasons to be recorded in writing as may be allowed by the Authority." 43. It was further claimed by the Respondent that Additional Commissioner of State Tax (Member of Screening Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doned even by the Courts. In the case of Singh Enterprises v. CCE, the issue raised before the Hon'ble Supreme Court was whether the High Court has the power to condone the delay after the lapse of the prescribed extension of 30 days. The Hon'ble Supreme Court at Para 8 inter-alia observed as under: "8. The Commissioner of Central Excise (Appeals) as also the Tribunal being creatures of statute are not vested with jurisdiction to condone the delay beyond the permissible period provided under the statute. The period up to which the prayer for condonation can be accepted is statutorily provided. It was submitted that the logic of Section 5 of the Limitation Act, 1963 (in short "the Limitation Act") can be availed for condonation of delay. The first proviso to Section 35 makes the position clear that the appeal has to be preferred within three months from the date of communication to him of the decision or order. However, if the Commissioner is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of 60 days, he can allow it to be presented within a further period of 30 days. In other words, this clearly shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged delay, as it would irreversibly affect their defence. Further, vide an amendment dated 28.06.2019, the said period of two months could be extended only for a month by this Authority with reasons to be recorded in writing. Understandably, the purpose of giving reasons in writing was to ensure that the power to extend the period of limitation was exercised for valid reasons based on material considerations and that the power was not abused by irrelevant considerations or extraneous purposes. 49. The Respondent submitted that after the lapse of the period of two months, the Screening Committee was not vested with the right to examine the matter any longer. He further claimed that no reasons for the expansion of this period were ever recorded and none were supplied to the Respondent or formed part of the record. Even otherwise, as stated earlier, the extended period had also lapsed, and the Screening Committee had lost its jurisdiction to proceed any further in the matter. On the expiry of the limitation period, the right of the Screening Committee to examine the matter was extinguished, and a very valuable right has come to vest in the Respondent that the investigation could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period of limitation expires." 51. The Respondent has further submitted that a similar proposition concerning immunity from being subjected to further investigation and extinction of the right of the officer to investigate on the expiry of the period of limitation had been espoused in the case of Bharat Heavy Electricals Limited v. CCT as well as in the case of Thirumalai Chemicals v. UOI. 52. The Respondent has also placed reliance on the decision of the Hon'ble Madras High Court in the case of A. M. Ahamed & Co. v. Commissioner of Customs (Imports), Chennai wherein the proceedings initiated after the legally prescribed time limit was set aside on the ground that the notice issued by the department were time-barred. The relevant extract of the ruling in the case of A. M. Ahamed (supra) is quoted herein below: "25. In the case on hand, it is not the contention of the respondents that the time limit prescribed in Regulation 22(1) is only directory and not mandatory. It is not even the contention of the respondents that the time limit prescribed in Regulation 22(1) need not be strictly adhered to. On the question that the first respondent is duty bound to initiate proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiation of proceedings; that since the maximum possible time limit (subject to procedural aspects) available with the DGAP itself was 6 months under the Rules, it followed that if the investigation could not be completed and the report was not submitted within such period, the investigation has to retire owing to the law of limitation. However, the investigation was continually pursued thereafter until the submissions of the impugned Report. The Impugned Report, thus, ought to be set aside on this very basis since the stipulated time limit was paramount as per statutory provisions and the DGAP has failed to adhere to the same. The Respondent also claimed that the Impugned Report, so funished, was thus null & void and must be adjudged as bad in law. 56. Further, it was submitted by the Respondent that the initial 3 month's time limit was enhanced to 6 months vide Notification No. 31/2019 - Central Tax dated 28.06.2019. However, it was a common principle of law that any amendment to the fiscal statutes had to be applied prospectively unless the amended provisions expressly provide for retroactive application. Moreover, in the instant case, since the amendment had an impact imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itting that the condition (a) above was satisfied and hence, the essence would be a lawful grant of extension; that it was his understanding of the common legal procedures that wherein a statute contained the power to grant of such extensions, no such extension which would prejudice and adversely impact the interest of the parties could be approved unilaterally without according an opportunity of representation to the party so adversely impacted; that in the instant case, the extension was sought and approved between DGAP and this Authority without his knowledge and without according him an opportunity to represent his case and averments; that he was deprived of an opportunity to present his case against the grant of such extension; that he wished to rely on the ruling of Hon'ble Madras High Court in Gaunir Impex Private Limited v. Commissioner of Customs (Imports), Tuticorin, wherein the Hon'ble High Court had an occasion to examine whether in a scenario where the statute allowed time bound issuance of show cause notice (concerning seized goods), could the said period be extended without following the principles of natural justice. Following were the remarks of the Hon'ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine any methodology and procedure in respect of the calculation of the profiteering amount. The `Procedure and Methodology issued on 19.07.2018 by this Authority only provided the procedure pertaining to investigation and hearing but prescribes no method pertaining to the calculation of the profiteered amount and there had been no indication on how to conclude that there was profiteering due to change in the rate of tax and whether such computation had to be done invoice-wise, product-wise, business vertical-wise or state-wise, etc. The statutory provisions, the CGST Rules, and even the methodology prescribed were completely silent on the computation provision according to which it could be concluded that a supplier has indulged in profiteering. The Respondent was left to the subjective discretion of the DGAP without any guiding factors/ instructions or safeguards. In absence of any guidelines in the CGST Act or the CGST Rules, the power given to this Authority to determine methodology to a case of "excessive delegation" of powers. 65. The Respondent has also averred that it was not only his case that a basic need of having a mechanism to compute 'profiteering' with proper checks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995. 67. The Respondent has also submitted that similar anti-profiteering provisions existed in Australia and the Australian Competition and Consumer Commission entrusted with overseeing the price responses pursuant to the implementation of GST, laid down guidelines to provide greater certainty for determination/ quantification of profiteering. This included the net dollar margin method and the price margin method which were the fundamental principles for the determination of price variances and changes. Similarly, under the erstwhile Malaysian GST law, a proper mechanism. with formulae, was provided under the Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profits) Regulations 2018. Any profit charged over and above the determined 'Net Profit Margin' during a given time frame was considered as 'unreasonably high profit' and was liable for penal action under the law. 68. For his next contention, the Respondent has placed reliance on (a) the decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise and Customs Kerala v. Larsen and Toubro Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any heed to commercial/ business realities or mathematical principles; that there was a complete lack of transparency and an obvious disconnect in the approach followed by the DGAP which varies from case to case; for instance, in the present case, the DGAP had considered an exceedingly long period of investigation of nearly 1.5 years from 15.11.2017 to 30.04.2019 and the only reason provided in the impugned Report was that it was according to the date on which reference was received from Standing Committee recommending investigation by the DGAP. 71. The Respondent has further averred that the DGAP, being a specialist in carrying out anti-profiteering investigations, cannot be believed to be oblivious of the fact that the forwarding of the complaint along with the recommendation from the Screening Committee to the Standing Committee, was itself time-barred. It appeared to the Respondent that the DGAP had willfully chosen to ignore the contravention of Rule 128 of the CGST Rules by the Standing Committee. 72. The Respondent has also cited the following cases as examples and contended that the DGAP has been considering different periods of investigation in different cases investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision of GST rates. 75. It has been further argued by the Respondent that the anti-profiteering provisions were introduced to contain the profiteering impact of any favourable change in the rate of tax or allowance of input tax credits i.e. by pushing businesses to pass on the benefit accrued. Given this, it would merit perceiving the impact of these provisions only on such commercial contracts (for buying and selling of goods/ services), which existed and were not completely serviced at the time of change in the rate of tax and/ or ITC allowance. All subsequent supplies/ sale contracts under such existing contracts would warrant compliance with the anti-profiteering provisions. 76. The Respondent has further submitted that in those contracts which were negotiated/ executed after the new tax rate regime came into effect, the prices were agreed to in the post-tax-rate reduction period as per Section 64A of the Sale of Goods Act, 1930, and these agreed prices could not be further examined for profiteering as for such new contracts in which the conditions of Section 171(1) of the CGST Act were not triggered and that since the provisions of Section 171 of the Act, ibid, did not en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified event, and (b) The benefit was 'willfully' not passed on to the recipient by a commensurate reduction in prices (i.e. the prescribed action in Section 171(1) of the CGST Act); that profiteering could be confirmed only if the benefit has not been passed on to the recipients willfully by the supplier, implying thereby that a mala-fide intent on part of the supplier must be proved. 80. The Respondent has further submitted that earning profits through lawful means was not a sin; that the provisions of Section 171 of the CGST Act could be triggered only in a case where a registered person made exorbitant profits through unlawful means; that the term 'profiteering' was not defined anywhere under the GST law or the Rules made thereunder; that only a marginal note to Section 171 mentioned the term "Anti Profiteering measure"; that it was a settled law that marginal notes could be referred to for understanding the intention of the legislature, as decided in the case of Commissioner of Income Tax, Gujarat v. Vadilal Lallubhai, wherein the Hon'ble Court has held that a marginal note indicated as to what exactly was the mischief that was intended to be remedied; that he also relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kbuster film * Popular film * Regular film or others * Date and timing of supply * The First 1-3 days from film release were generally more rewarding * Few days after word of mouth spreads about the film, the revenues started picking up * Later days were generally less occupied and less rewarding * Weekends were more rewarding than weekdays * Holidays (including the festival period) were more rewarding than regular days * Other miscellaneous factors * Location of the property (or target customers) * Movie screening language (original or dubbed) * Target Customer & Competition etc. 83. The Respondent has also reiterated his submission made before the DGAP that in the business of entertainment and leisure, the marginal utility changed every minute/ hour/ day depending upon the offering, and hence, there was no consistency in scenarios & considerations for pricing, therefore, any comparison was not just unwarranted but impossible. In other words, the demand/ supply scenario changed with each film or each show, which was different from the other and hence, not comparable for pricing considerations. Given this, every supply was unique and no comparison could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and as a response to the pricing strategy of the competitors; that the DGAP had failed to consider factors, such as the increase in the input costs, electricity consumed, fuel, rent, etc. on account of general inflation, but has only considered the impact of denial of ITC; that unless all the costs were considered, the finding of the DGAP was not tenable; that his business data (culled from his audited financial statements) clearly demonstrated that over time his margins have shrunk as detailed in the Chart below:- CHART (Amount in INR Crores) Particulars FY 2017- 18 FY 2018- 19 F&B Revenue 306 436 F&B Cost 74 112 Total Cost (in proportion of revenues) 24.18% 25.69% Note: Financial facts & figures taken from published and audited financial statement. That the data in the above Chart showed that his costs had been increasing in the post-tax rate reduction period due to denial of ITC and his margins were shrinking: that this aspect ought to have been considered in alleging/ determining the amount of profiteering. 89. The Respondent has further submitted that he placed reliance on the decision of this Authority in the case of Kumar Gandhary v. KRBL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prastha Gas Limited & Ors., wherein it was held that in the absence of any statutory power to fix tariffs, a delegated authority could not regulate the tariffs and any such action was ultra vires pf the Constitutional provisions; that in his case, the price revisions, if any, had happened only in the ordinary course of business and the same should not be seen as a contravention of Section 171 of the CGST Act; that his case was triggered by the amendment of two GST aspects that directly impacted his business and his margins and these aspects were GST rate reduction and his ineligibility to avail ITC qua the food & beverage business with effect from 15.11.2017; that the cumulative impact of the two aspects was the key to the determination of profiteering, if any, as explained in the illustration below: Particulars Up to 14.11.2017 15.11.2017 onwards Gross Price of supplies 100 100 Tax included in price above at 18% & 5% respectively 15.25 4.76 Base price realized by the Respondent 84.75 95.24 (%) Increase in prices [(95.24 - 84.75) / 95.24] 11.01% 93. Citing the above illustration, the Respondent has submitted that if the ITC loss was more than or equivalent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance. Given this, the law had no prescription on how to segregate the ITC attributable or co-relatable only to the F & B business. In the absence of such a prescription, the DGAP has erred in arbitrarily vivisecting the ITC pool for F & B business, which was not tenable under the law. 96. The Respondent has further contended that if the above contentions had been considered in the computation, the percentage of ITC to Turnover would stand modified as under:- Particulars Data as per Impugned Report (refer Para 27) ITC corresponding to Invoices Dated Between July-October 2017 availed in later months Total Total ITC Availed as per GSTR-3B Total Outward 38,25,67,531 8,19,83,201 46,45,50,732 Taxable Turnover as per GSTR-1 (as duly reconciled at Annexure 22 of the Impugned Report) 4,13,09,24,536 4,13,09,24,536 ITC (A) 11.25% 97. It was submitted by the Respondent that the impact of ITC @11.25% ought to have been considered by DGAP while computing the amount of profiteering but the DGAP has erred in the computation and as such the computation needed to be revisited. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,536 4,13,09,24,536 Total Restaurant Taxable Turnover as per SKU Wise Sale Register F 92,01,72,389 92,01,72,389 Total Turnover other than restaurant service G = E-F 3,21,07,52,147 3,21,07,52,147 Proportionate ITC availed towards restaurant Service H - D*F/E 5,789,69,463 (refer Page 22 of Impugned Report) 64,12,796 6,42,82,259 Total ITC availed towards Restaurant I=C +H 8,92,55,966 1,01,22,026 9,93,77,992 Net Outward Taxable Turnover for the period July-October 2017 J=F 92,01,72,389 92,01,72,389 The ratio of Input Tax Credit to Net Outward Taxable Turnover K=I/J 9.70% 10.80% 100. The Respondent submitted that the aforesaid details were duly furnished before the DGAP vide his letter dated 30.09.2019 and subsequently a sample invoice verification was also done by DGAP; that ITC for July-October 2017 invoices, which was availed belatedly in later periods, ought to have been considered by the DGAP to arrive at the correct position, on the same lines as decided by this Authority in its Order No. 14/2018 dated 16.11.2018 (more specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g close to 10.8%. 104. Reiterating his contentions, the Respondent requested this Authority to order the DGAP to re-visit the computation vis-a-vis the ITC loss considered. He also added that the highlighting of the computational anomalies should in no way be construed to its admission of profiteering. in any manner whatsoever. 105. The Respondent also submitted that while arriving at the total alleged profiteering amount, a notional 5% amount had been incorrectly included in the profiteered amount by the DGAP on the ground that it represented the excess GST collected by him, based on the increased base prices, from his recipients. The Respondent has submitted that the amount already paid to the Government in terms of Section 76(1) of the CGST Act 2017 and hence it could not be held that he has profiteered from such amount since he had not retained the same; He has added that he placed reliance on the decision of the Hon'ble Apex Court in the case of R.S. Joshi, Sales Tax Officer, Gujarat v. Ajit Mills Limited, wherein the Hon'ble Supreme Court has analyzed the term "collected" meant in the context of the Sales Tax legislation of Gujarat as follows:- "Section 37(1) uses the expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at consequentially, the alleged profiteering amount would reduce by Rs. 18,34,777/- (3,85,30,314 X 5/105). 109. The Respondent, whilst reiterating all his submissions and averments, requested this Authority to set aside the Report of the DGAP dated 31.01.2020. 110. The submissions filed by the Respondent were forwarded to the DGAP for filing his clarifications under Rule 133(2A) of the CGST Rules, 2017. The DGAP has filed his point-wise clarifications dated 23.03.2020 and the same are re-iterated as under: a) Para- 'A': DGAP has exceeded its power by investigating products beyond contours of the complaint which goes to the very root of its jurisdiction. Clarification by DGAP: The submission of the Respondent in this regard was refuted by highlighting the contents of Rule 129(1) of the CGST Rules, 2017 in which it was clearly stated that the Standing Committee on being satisfied that the supplier had not passed on the benefit of tax reduction on the goods and services or the benefit of Input Tax Credit to the recipients commensurately, would refer the matter to the DGAP for a detailed investigation. Thus, on the receipt of the reference from the Standing Committee, NOI was iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: - "6. The time limit to complete the investigation was extended up to 01.02.2020 by the National Anti-profiteering Authority, in terms of Rule 129(6) of the Rules, vide letter F.No. 22011/NAA/19/2018/6019 dated 31.10.2019". Thus, the submission of the Respondent that the report of the DGAP was time-barred was bereft of facts. d) Para-`D': No Methodology prescribed to derive profiteering; thus, leading to an arbitrary exercise of powers by DGAP. Clarification by DGAP: The contention of the Respondent of not prescribing the Methodology & Procedure for investigation is incorrect. In this regard, it was submitted that the power to determine Methodology & Procedure as per Rule 126 of the Central Goods and Services Tax Rules, 2017 has been conferred on this Authority by Central Government in the exercise of its powers given under section 164 of Central Goods and Services Tax Act, 2017, on the recommendations of the GST Council which was a Constitutional body created under the 101st Amendment of the Constitution. This Authority. in the exercise of the power delegated to it under the above Rule, had notified the Methodology and Procedure, vide Notification dated 28.03.2018 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 72,389/-) supplied during the same period... " .............Further, the analysis of the details of item-wise outward taxable supplies during the period of 15.11.2017 to 30.04.2019, reveals that the Respondent had increased the base prices of different items supplied as a part of restaurant service to make up for the denial of input tax credit post-GST rate reduction. The pre and post GST rate reduction prices of the items sold as a part of restaurant service during the period 15.11.2017 to 31.03.2019 were compared and it is established that the Respondent increased the base prices by more than 9.70% i.e., by more than what is required to offset the impact of denial of input tax credit in respect of 1434 items (out of a total of 1650 items) sold during the same period. Thus, the conclusion is that in respect of these items, the commensurate benefit of reduction in rate of tax from 18% to 5% had not been passed on. It is also clear that there was no profiteering in regard to the remaining items on which there was either no increase in base price or the increase in base price is less or equal to the denial of input tax credit, or these were new products launched in many states o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it, which is an uncontested fact, requires the determination of the input tax credit in respect of "restaurant service" as a percentage of the taxable turnover from the outward supply of "products" during the pre-GST rate reduction period. To illustrate, if the input tax credit in respect of restaurant service was 10% of the taxable turnover of the Respondent till 14.11.2017 (which became unavailable w.e.f 15.11.2017) and the increase in the pre-GST rate reduction base price w.e.f. 15.11.2017, is up to 10%, one can conclude that there is no profiteering. However, if the increase in the pre-GST rate reduction base price w.e.f. 15.11.2017, is by 14%, the extent of profiteering would be 14% - 10% = 4% of the turnover. Therefore, this exercise to work out the input tax credit in respect of restaurant service as a percentage of the taxable turnover from products during the pre-GST rate reduction period has to be carried out, though by taking into consideration the period from 01.07.2017 to 31.10.2017 and not up to 14.11.2017. This has been done for the following reasons: 1) The Respondent submitted that he was required to reverse an amount of Rs. 1,35,90,052/- on the closing stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of input tax credit as a percentage of the total taxable turnover in Para-26 of his Report dated 31.01.2020. j) Regarding the request of the Respondent for considering the actual ITC loss data for the period 15.11.2017 to 31.03.2019, the DGAP has stated that the same was not tenable as the same could only be computed after the end of the period i.e. on or after April 2019 which could not be factored in on the eve of GST rate reduction i.e. on 15.11.2017. DGAP has clarified that he has computed the input tax credit as a percentage of the total taxable turnover of the Respondent for the period July 2017 to October 2017 for reasons cited in Paras 26 & 27 of his Report dated 31.01.2020. k) Regarding the contention of the Respondent that 5% GST has been incorrectly added to the profiteering amount, the DGAP has clarified that Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017, required the supplier of goods or services to pass on the benefit of the tax rate reduction to the recipients by way of commensurate reduction in price. Price includes both, the base price and the tax paid on it. If any supplier has charged more tax from the recipients, the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Order reads as follows:- "1. The interim order dated 19th July 2019 is made absolute during the pendency of the writ petition. The application is disposed of" ; that the DGAP has not interpreted the Order of the Hon'ble Delhi High Court correctly. 112.3 That the insertion of sub-rule (5) under Rule 133 of the CGST Rules 2017, effected vide Notification No. 31/2019- Central Tax dated 28.06.2019, expressly granted powers only to this Authority (and not to the DGAP) as this Authority could expand the scope of the investigation; that the DGAP has been silent on this issue. 112.4 That the DGAP appeared to be taking the shelter of Rule 129(1) of the CGST Rules 2017 to decide the scope of its investigation; that the said Rule did not provide any validity to the action of the DGAP; that on the contrary, with the insertion of sub-rule (5) under Rule 133, the intent of the law became much clearer as no other Rule of the Rules ibid, had such an expansion of the scope of profiteering investigation or else the said Rule would not have been required. 112.5 That the legal position as demonstrated by him in relevant context had been duly buttressed and strengthened by the available j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the DGAP himself acknowledges that the time limit allowed for completion of an investigation, without extension, was 3 months only; that the relevant Rule was amended to provide six months without establishing the legal basis of its claim. The Authority might, therefore, note that the DGAP has failed to explain the legitimacy of its position. 112.9 that the DGAP has altered its position as per his own convenience between different investigation matters and various aspects of the investigation. At this juncture, it wished to refer to the case of S. Ganapathy vs. Mahindra Lifestyle Developers Limited9, wherein the DGAP opined that one of the many amendments brought by Notification No. 31/2019 - Central Tax dated 28.06.2019, should apply prospectively and would not have any bearing on ongoing investigations. The relevant text from the said judgment is extracted below: "Though there was a time frame for investigation and submission of Report in case of a reference received from the Standing Committee (which was duly adhere to in the initial investigation), there was no such timeline for the examination of the claims as per the directions of this Authority and for the first tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent was 12.35%; whereas the actual increase in the base selling price was only 11.01%. Leave alone profiteering, the Respondent could not even fully recoup the actual loss suffered by it. b. An uneven approach had been adopted by the DGAP for computing the percentage of ITC availed and the average selling price before the tax rate reduction. While the sales of one item has been considered for 4 months (July 2017 to October 2017), in the case of another item the computation is based on the sales data for October 2017. Due to this inconsistent approach, the DGAP has incorrectly arrived at the eligible ITC percentage of 9.70%, whereas it should be 10.49%. c. The DGAP has failed to consider the eligible ITC for the period 01.07.2017 to 14.11.2017, which was availed on or after 15.11.2017, in the computation of the ratio of ITC to turnover. Due to this flaw, a lower eligible ITC percentage of 9.70% was determined instead of 10.80%. d. The Respondent has further submitted that the computation of ITC loss percentage should be based on actual numbers as reported by the Respondent in the periodic GST returns including reversal of ITC on closing stock of goods as of 14.11.2017; ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided above, the eligibility to avail ITC must be determined based on the date of receipt of underlying supply and not concerning any other date such as the date of availing ITC in the books of account. Additionally, Section 16(4) empowered the taxpayer to avail ITC in respect of a financial year by earlier of (a) September of the following year or (b) filing of Annual return. Th Respondent had appropriately availed ITC within the given limitation period. 118. Given the above, the Respondent has contended that it would be judicious to consider the ITC on invoices dated 01.07.2017 to 14.11.2017, which was availed in later periods to arrive at the correct position. Such an approach was merited by past action of DGAP, which had been approved by this Authority in the case of Hardcastle Restaurants Pvt. Ltd., as stated in para 9 and para 30 of the order. The approach was meritorious since it ensured that there was no selective bias, sampling errors and hence, the results so obtained were just & reasonable. 119. Further, the Respondent has placed reliance on the decision of Hon'ble Chennai Tribunal in the case of Same Duetz-Fahr India Pvt. Ltd., wherein it was upheld that the eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epingly ignored the business peculiarities. Basis the same. in the first place no amount of profiteering could be determined given the incomparability of any two supplies by the Respondent. The supplies, it may be noted, were rendered incomparable owing to the sheer nature of business and varying utility of each supply (as perceived by the customer since it was in the business of entertainment). The business of entertainment, was never static, and hence, that alone is the primary defense for non-maintainability of comparisons and the inapplicability of profiteering provisions on the same. The decision of the Authority, accordingly, would be of huge relevance and the Respondent crave for justice with full faith in this Authority. The relevance of a fair decision, in favour of the Respondent appreciating the business peculiarities and legal averments submitted, was further advanced given the impact of pandemic and consequent lockdowns on its business. The Cinema exhibition sector too had borne the brunt of the pandemic. While the sector was among the first businesses to get impacted due to a country-wide lockdown, it was amply clear now that it would be among the last ones to be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... data and not on actual data is bereft of facts. The ratio of input tax credit to the net taxable turnover has been computed on the basis of actual data submitted by the Respondent. He also reiterated that the Respondent's contention of considering actual ITC loss data for the period 15.11.2017 to 31.03.2018 is not tenable as the same can only be computed only after the end of period i.e. on or after April, 2018 which cannot be factored in on the eve of GST rate reduction i.e. on 15.11.2017. The DGAP has computed the input tax credit as a percentage of the total taxable turnover for the period July, 2017 to October, 2017. (ii) With regard to the Respondent submission that ITC against invoices of July to Oct., 2017 period, which are booked in later periods also be taken into consideration, he submitted that Section 16(2) the Central Goods and Services Tax Act, 2017 prescribes certain conditions for entitlement of ITC which are: a. Respondent is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; b. Respondent has received the goods or services or both. c. subject to the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC of July, 2017 to October, 2017 availed in 32,405 6,37,689 24,84,290 71,79,538 1,03,33,922 the month of November, 2017 GSTR-3B (Annex-23) (F) Less: Common Input Tax Credit pertaining to prior July, 2017 (6,72,096) (1,87,777) (29,461) - (8,89,334) but availed in July,2017 to October, 2017 GSTR-3B (Annex- 24) (G) Net ITC availed on Common inputs, input services and capital goods (H)=(E+F-G) 4,31,69,858 6,79,69,344 7,83,43,910 8,08,85,270 27,03,68,382 Total Outward Taxable Turnover as per GSTR-1 (I) 93,73,86,472 1,08,47,21,802 1,01,26,41,557 1,09,61,74,705 4,13,09,24,536 Total Restaurant Taxable Turnover as per SKU Wise Sale Register (J) 21,65,99,800 24,03,35,295 21,27,81,452 25,04,55,842 92,01,72,389 Total Turnover other than restaurant service (K)= (I) - (J) 72,07,86,672 84,43,86,507 79,98,60,105 84,57,18,863 3,21,07,52,147 Proportionate ITC availed towards restaurant Service (L)= (H*J/1) 6,02,25,143 Total ITC availed towards Restaurant Service (M) = (C+D+L) 9,40,64,163 Net Outward Taxable Turnover for the period July, 2017 to October, 2017 (N) = (J) 92,01,72,389 Ratio of Input Tax Credit to N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a period of time inculding in our case where the prices have been revised (including downwards) purely out of commercial considerations. As per DGAP's view once the rate of tax has been lowered, any subsequent price increase (for indefinite period) would fall within purview of profiteering provisions. He requested the Authority take cognizance of his other legal submissions regarding scope of the investigation; the investigation being time barred; Lacunae in procedures and arbitrary methodology of computation of profiteering amounts; etc The Respondent further submitted that regarding ITC allowance the DGAP has partially acceded to his submissions/ argument on the manner of computation of ITC loss %. However the DGAP again failed to be set out a legal basis for his new approach. The DGAP has once again erred in its approach by only partially accepting Respondent's claim regarding ITC loss (%). Such approach, of rejecting the balance claim, is devoid of legal merits and ought to be set aside. He also reiterated his earlier submissions regarding ITC loss (%) which are as follow:- a. ITC eligibility on procurement is determined qua the outward supplies for which such procurements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrary exercise of powers by DGAP. 5. Provision of Section 171(1) cannot be applied to the present case in absence of any transitional supply contract. 6. Anti-profiteering provision, if at all, can be triggered only in instances where an unlawful manner of business is established. 7. Adopting 18 months as the period of investigation to determine alleged profiteering acts as a price control mechanism and is clearly violative of the right to trade. 8. The loss on account of its disallowance is higher than the revision in prices. 9. Incorrect addition of 5% GST to the alleged profiteering amount. 10. Proceedings/Notice to be kept in abeyance pending finality of various petitions 127. We have carefully considered all the Reports furnished by the DGAP, the submissions made by the Respondent, and the other material placed on record. On examining the various submission we find that the following issues need to be addressed:- (a)Whether the Respondent has passed on the commensurate benefit of reduction in the rate of tax to his customers? (b)Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent? 128. It is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and completeness of the computation could not be ascertained and therefore it could not be relied upon. (b) The invoice-wise outward taxable turnover in November 2017 was not provided by the Respondent to compute taxable turnover for the period 01.11.2017 to 14.11.2017. (c) On several invoices, the credit was taken between 01.11.2017 to 14.11.2017 but it pertained to services availed during the whole month of November 2017. Accordingly, the ratio of ITC to the net taxable turnover has been computed for determining the impact of denial of ITC, by taking in to consideration the ITC and the turnover which was available/obtained by the Respondent till 31.10.2017. As per the case record, ITC amounting to 8,92,55,966/- was available to the Respondent during the period from July 2017 to October 2017 which was approximately 9.70% of the net taxable turnover of the restaurant service amounting to 92,01,72,389/- supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the said ITC was not available to the Respondent. 131. It is further revealed from the analysis of the details of item-wise outward taxable suppli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit as a percentage of the total taxable turnover of the Respondent for the period July 2017 to October 2017 for the reasons cited in paras 26 & 27 of the DGAP report dated 31.01.2020. 133. The Respondent has submitted the DGAP has wrongly calculated the loss of ITC and failed to consider ITC loss booked between 15.11.2017 to 31.03.2018 and accordingly calculated the loss of ITC as 9.70% which should have been 13.88%. Further the DGAP vide its supplementary Report dated 08.10.2020 has submitted that he had inadvertently not considered the ITC availed during the period 01-14 Nov 2017, pertaining to invoices issued from July 2017 to Oct 2017 and hence accepted the revised ITC loss as 10.22% instead of 9.70%. Further the Respondent's contention of considering actual ITC loss data for the period 15.11.2017 to 31.03.2018 was not tenable as the same could only be computed after the end of period i.e. on or after April, 2018 which could not be factored in on the eve of GST rate reduction i.e. on 15.11.2017. The DGAP has computed the input tax credit as a percentage of the total taxable turnover for the period July, 2017 to October, 2017. Further we agree with the DGAP that ITC against i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctober 2017. Therefore, the DGAP has re-computed the ratio of Input Tax Credit to Net Outward Taxable Turnover after adding the amount of ITC pertaining to the invoices issued from July 2017 to October 2017 but availed during 01-14 November 2017 and also excluding the amount of ITC pertaining to the period before July 2017 which was availed during the period from July 2017 to October 2017 as per GSTR-3B returns. Accordingly, the ratio of Input Tax Credit to Net Outward Taxable Turnover was determined as 10.22% as per Table- 'D (revised)' as is given below: Table-'D (Revised)' Particulars July-2017 August-2017 September- 2017 October-2017 Total ITC Availed as per GSTR-3B (A) 5,10,45,836 8,64,73,023 12,02,04,147 12,48,44,525 38,25,67,531 ITC availed Exclusively on Non Restaurant Services (B) 32,21,451 1,12,90.601 3,40,34,664 4,17,10,519 9,02,57,234 ITC availed Exclusively on Restaurant Services (C) 40,14,836 76.62,990 1,02,80,402 94,28,274 3,13,86,503 Add: ITC Exclusively on Restaurant Services of July, 2017 to October, 2017 availed in the month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er words, the revised profiteered amount comes to Rs. 3,10,56,939/- (including GST on the base profiteered amount). The details of the computation are given in Annexure-25 (Confidential) of the DGAP Report. The place (State or Union Territory) of the supply-wise break-up of the total profiteered amount of Rs. 3,10,56,939/- is furnished in Table- `F (revised)' below: Table- `F (Revised)' S.No. Name of State State Code Total Profiteering (Rs.) 1 Andhra Pradesh 37 17,66,048 2 Chhattisgarh 22 2,03,793 3 Delhi 7 13,27,241 4 Goa 30 15,42,054 5 Gujarat 24 17,51,318 6 Haryana 6 9,61,857 7 Jharkhand 20 3,99,941 8 Karnataka 29 25,00,847 9 Kerala 32 2,10,867 10 Madhya Pradesh 23 5,77,855 11 Maharashtra 27 79,96,518 12 Orissa 21 7,91,684 13 Punjab 3 4,96,972 14 Rajasthan 8 19,21,980 15 Tamil Nadu 33 16,70,255 16 Telangana 36 9,08,253 17 Uttar Pradesh 9 11,19,063 18 West Bengal 19 49,10,394 Grand Total 3,10,56,939 135. The Respondent has also argued that the DGAP has exceeded its power by investigating products beyond contours of the complaint which goes to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the investigation shall be limited to the products against which complaint has been received. On the contrary, every product on which the rate of tax has been reduced is required to be investigated by the DGAP and report submitted to this Authority to determine whether the above benefits have been passed on as per the provisions of Section 171 of the above Act. Moreover, Section 171 (2) of the above Act empowers this Authority to examine all such cases in which the benefit of tax and ITC is required to be passed on. Since the account of ITC is kept for all the products in one common ledger/Register the same cannot be apportioned product-wise hence, all the products being supplied by the Respondent are required to be investigated to determine whether the benefit of tax reduction after duly considering the denial of ITC has been passed on or not. Rule 133 (5) is a mere clarification of the provisions of Section 171 (2) and hence, the DGAP has rightly conducted his investigation covering all the products in respect of which the rate of tax was reduced, with prior notice to the Respondent and hence, no order was required to be passed under Rule 133 (5) by this Authority. The Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty which has been clearly mentioned in para-6 of the DGAP report dated 31.01.2020. Thus, the submission of the Respondent that the report of the DGAP is time-barred is bereft of facts. 138. The Respondent has further submitted that the CGST is a substantive law in nature and substantive law could not be retrospectively amended. He also placed reliance on the cases of Purbanchal Cables and Conductors Pvt. Ltd. v. Assam State Electricity Board and Continental Commercial Corporation v. ITO Supra. However the above mentioned cases are of no assistance to the Respondent as the Notification No. 31/2019- Central Tax dated 28.06.2019 has come into force with immediate effect for the pending proceedings and was not retrospectively implemented. The Respondent submitted that the period of limitation and the condonation period when statutorily prescribed has to be strictly adhered to and cannot be relaxed. He also placed reliance on the cases of CCE v. Hongo India Pvt. Limited and another, Amchong Tea Estate v. UOI, Simplex Infrastructure Limited v. UOI, Esha Bhattacharjee v. Managing Committee of Raghunathpur Nafar Academy and others, State of Punjab v. Shreyans Industries Ltd., Bharat Heavy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the rate of tax and ITC or computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act, 2017 itself which provides that "Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." It is clear from the plain reading of the above provision that it mentions "reduction in the rate of tax or benefit of ITC" which means that if any reduction in the rate of tax is ordered by the Central or the State Governments or a registered supplier avails the benefit of additional ITC the same have to be passed on by him to his recipients since both the above benefits are being given by the above Governments out of their tax revenue. It also provides that the above benefits are to be passed on any supply i.e. on each Stock Keeping Unit (SKU) of each product or unit of construction or service to every buyer and in case they are not passed on, the quantum of denial of these benefits or the profiteered amount has to be computed for which investigation has to be conducted in respect of all such SKUs/units/services by the DGAP. What would be the 'pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dology' which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed mathematical formula, in respect of all the Sectors or the SKUs or the services, can be set for passing on the above benefits or for computation of the profiteered amount, as the facts of each case are different. In the case of one real estate project, date of start and completion of the project, price of the flat/shop, mode of payment of price or installments, stage of completion of the project, rates of taxes pre and post GST implementation, amount of CENVAT and ITC availed/available, total saleable area, area sold and the taxable turnover received before and after the GST implementation would always be different from the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to the other project. Therefore, no set procedure or mathematical methodology can be framed for determining the benefit of additional ITC which has to be passed on to the buyers of the units. Moreover, this Authority under Rule 126 of the CGST Rules has been empowered to 'determine' Methodology & Procedure an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Commissioner of Central Excise and Customs Kerala v. Larsen and Toubro Limited supra wherein it has been held that in the absence of machinery provisions for computation of taxable value, the levy of tax would become non-existent. Reliance was also placed on the cases of State of Uttar Pradesh v. Singhara Singh, State of Jharkhand v. Ambay Cements, Petroleum and Natural Gas Regulatory Board v. Indraprastha Gas Limited & Ors and Commissioner of Income Tax, Bangalore v. B. C. Srinivasa Shetty supra. However, the above quoted cases are not being followed as the facts of the present case are different from the above-quoted cases. The Respondent has failed to understand that Section 171 is not a charging section and anti-profiteering provisions do not levy any tax. Section 171 (1) provides for only passing on the benefit of tax reduction or additional ITC by a commensurate reduction in the price. 142. The Respondent has also argued that the provisions of Section 171 (1) cannot be applied to the present case in the absence of any transitional supply contract. The contention of the Respondent is incorrect, as they are applicable in all such cases in which the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 15.11.2017 to 30.04.2019 has been rightly taken by the DGAP for computation of the profiteered amount. 145. The Respondent has also argued that the right to trade was a fundamental right guaranteed under Article 19 (1) (g) of the Constitution which included the right to determine prices that could not be taken away without any explicit authority under the law. Therefore, this form of price control was a violation of Article 19 (1) (g). In this connection, it would be relevant to mention that the Respondent has full right to fix his prices under Article 19 (1) (g) of the Constitution but he has no right to appropriate the benefit of tax reduction under the garb of the above right. The DGAP has not acted in any way as a price controlling authority as it does not have the mandate to do so. Under Section 171 read with Rule 129 of the above Rules, the DGAP has only been mandated to investigate whether both the benefits of tax reduction and ITC which are the sacrifices of precious tax revenue made from the kitty of the Central and the State Governments have been passed on to the end consumers who bear the burden of the tax or not. The intent of this provision is the welfare of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised his prices by adding more than denial of ITC as is evident from the above discussion. It is also clear from the above narration that the Respondent has increased the base prices of 1434 items more than the loss on account of ITC disallowance. Further, with effect from 15.11.2017, Respondent was not allowed to avail ITC in terms of Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, therefore, in terms of provisions of Section 16(2)(a) Respondent was not eligible to avail ITC w.e.f. 15.11.2017 on the strength of invoices received post 15.11.2017 when the aforesaid notification debarred the Respondent from ITC availment. As Respondent has received the taxable invoices post 15.11.2017 when he was ineligible to avail ITC in terms of Notification No. 46/2017 Central Tax (Rate) dated 14.11.2017, therefore the same cannot be considered for computation of denial of Input Tax Credit to net turnover ratio. 147. Further, the Respondent has contended that the incorrect addition of 5% GST to the alleged profiteering amount has been done. This contention of the Respondent is not correct because the provisions of Section 171 (1) and (2) of the CGST Act, 2017 require that the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mensurately in terms of Rule 133 (3) (a) of the above Rules. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent is directed to deposit an amount of Rs. 3,10,56,939/- in two equal parts of Rs. 1,55,28,470/- each in the Central Consumer Welfare Fund and the State Consumer Welfare Funds as mentioned in the Table 'F' Revised, as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The above amount of Rs. 3,10,56,939/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned CGST/SGST Commissioner. 150. It is evident from the above narration of facts that the Respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and hence he has committed an offence under section 171 (3A) of the CGST Act. 2017, and therefore, he is liable to penal action under the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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