TMI Blog2020 (6) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... cord that the Applicant No. 1 had filed an application under Rule 128 (1) of the CGST Rules, 2017 before the Standing Committee on Anti-profiteering alleging that the Respondent had not passed on the benefit of reductions in the GST rates to his customers but had instead increased the base prices of his products by keeping the Maximum Retail Prices (MRPs) unchanged. The above Applicant had also submitted invoices showing both the pre and post GST rate reduction prices claiming that the Respondent had not reduced the MRPs. It is clear from the narration of the facts that the profiteered amount has been computed by comparing the average pre rate reduction base prices of the impacted products with the monthly average post rate reduction base prices in respect of both the tax reductions. The mathematical methodology adopted by the DGAP to compute the profiteered amount is not in line with the methodology adopted by the DGAP himself in similar cases of profiteering wherein the average pre rate reduction base prices have been compared with the actual post rate reduction prices to compute the profiteered amount. Further, in case the mathematical methodology of comparing the average to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 18% w.e.f. 27.07.2018 and instead had increased the base prices of the paints sold by him thus denying the benefit of commensurate reduction in the cum-tax price (inclusive of 18% GST) to the recipients. In support of his allegation, the Applicant No. 1 submitted copies of two sale invoices of AB6 APEX 20 LTR Paint, one dated 23.07.2018 and the other dated 27.07.2018, issued by the Respondent, which revealed that the Respondent had increased the per-unit base price from ₹ 4,062.73/- to ₹ 4,322.25/- when the rate of GST was reduced from 28% to 18% w.e.f. 27.07.2018. The Standing Committee, upon prima facie satisfying itself, that the allegation of profiteering needed to be investigated, forwarded the same to the DGAP for detailed investigation vide its minutes dated 06.09.2018. 2. The DGAP, on receipt of the above minutes, issued a notice dated 15.10.2018 to the Respondent seeking his reply as to whether the benefit of reduction in the rate of tax was not passed on to the recipient. The notice also sought to suo-moto determine the quantum of benefit to be passed on if the Respondent had failed to pass on the same. The Respondent was also allowed to inspect the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was some component of coloring, cost of which was added over and above the base value of the Paints which led to change in the taxable value of every invoice. Therefore, the Respondent claimed that the prices of the items vary on account of the different colours used for the same basic product. Further, the Respondent submitted copies of invoices to show that the prices had not increased on or after 27.07.2018 (in the post-reduction period) for the same items containing the same colours. 7. The Respondent also submitted that the process of identifying those bills which had the same colour combination for those items which were taken by the DGAP in the Report was a time consuming process due to which the Respondent was able to produce only sample copies of the invoices. He also stated that the average value method followed by the DGAP was not appropriate in this case as the prices containing the same base paints varied due to the effect of the cost of the colour therein. The Respondent also pleaded that either the profiteered amount should be calculated based on the base price of the items for which the calculation sheet has already been submitted or based on the comparison of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther clarification. 11. Moreover, during the hearings, the Respondent had produced a list of items with the sale prices before 27.07.2018 and after 27.07.2018 where the pre GST rate reduction prices were higher than the post GST rate reduction prices for the period August 2018 to September 2018. The facts and figures submitted by the Respondent before the Authority during the course of the hearings appeared to be at variance with the facts and figures taken by the DGAP for its calculations. Besides, it was noted that the Respondent had claimed that the prerate reduction and post-rate reduction sale prices of similar coloured paints needed to be compared to arrive at the correct figure of profiteering. The Respondent had also submitted that even though the price of basic white colour paint remained constant, the prices of the end products varied on account of the differences in prices associated with different colours. The DGAP in his Report dated 31.05.2019 head clearly stated that none of the documents filed by the Respondent before the Authority, had been submitted before him at the time of the investigation. Therefore in the interest of justice and to determine the profiteere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allegation, in this case, was that the base prices of the products were increased when there was a reduction in the GST rate from 28% to 18% w.e-f. 27.07.2018, so that the benefit of the reduction in the tax rate was not passed on to the recipients by way of commensurate reduction in prices. The DGAP has thus found that the Respondent had increased the base prices of the goods consequent to the reduction in GST rate, the commensurate benefit of reduction in GST rate from 28% to 18%, was not passed on by the Respondent to the recipients which have been furnished as the details in Annexure-15 to the DGAP s Report dated 29.03.2019. The total amount of profiteering covering the period 27.07.2018 to 30.09.2018 has been worked out as ₹ 3,76,360/-. 15. was not passed on by the Respondent to the recipients which have been furnished as the details in Annexure-15 to the DGAP s Report dated 29.03.2019. The total amount of profiteering covering the period 27.07.2018 to 30.09.2018 has been worked out as ₹ 3,76,360/-. The DGAP has further stated that the submission made by the Respondent regarding variations in the prices on account of the addition of colour to his products cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rices (MRPs) unchanged. The above Applicant had also submitted invoices showing both the pre and post GST rate reduction prices claiming that the Respondent had not reduced the MRPs. 19. The above application was scrutinised by the Standing Committee on Anti-profiteering in its meeting held on 06.09.2018 and it was resolved to refer the application to the DGAP for detailed investigation under Rule 129 (1) of the above Rules. 20. The DGAP after issuing notice to the Respondent has carried out detailed investigation in the allegations made against the Respondent and furnished his Report on 29.03.2019 under Rule 129 (8) of the above Rules. The DGAP had stated in his Report that perusal of the Price Lists effective as on 26.07.2018 and 27.07.2018 as well as the details of the outward sales data submitted by the Respondent showed that the base prices of the products under investigation were not maintained by the Respondent after the GST rates were reduced but instead, they were increased. Thus, there has been no reduction in the prices commensurate with the reduction in the GST rates as was required under Section 171 (1) of the Act. The DGAP has further Stated that although the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehemently argued that the DGAP did not consider his submissions made before him in his Report and also argued that the procedure followed by the DGAP to compute the profiteering was not correct. Accordingly, vide its Order dated 02.07.2019 this Authority had directed the DGAP to reinvestigate the above case under Rule 133 (4) of the CGST Rules, 2017 and to submit clear cut findings on the above issues. Accordingly, the DGAP has carried out reinvestigation and submitted his Report on 10.10.2019 which has been mentioned supra. Perusal of the Report dated 10.10.2019 shows that the DGAP has clearly illustrated by taking the example of two products namely HQ2 ULTIMA 20LTR PAINT and BIRLA WALLCARE PUTTY 40 in Table-A above that he has considered the Average selling price of every impacted product for the period 01.07.2018 to 26.07.2018 and compare it with the month-wise average selling price of the same product for the period 27.07.2018 to 30.09.2018. In this manner, the DGAP has computed the month-wise profiteering amount for every product separately as per Annexure-15 of his Report dated 29.03.2019. 24. It is further evident from the Reports dated 29.03.2019 and 10.10.2019 that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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