TMI Blog2022 (6) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 171 of the Act. There is no dispute relating to the fact that the Respondent has increased the base prices of the admission tickets in respect of the regular category and continues to charge the cine-goers at the prevailing rates despite a reduction in the GST w.e.f. 1.1.2019 vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. The Respondent in the written submissions as well as during the personal hearing has admitted the above-said liability of excess collection during the period 1.1.2019 to 30.4.2020. The Authority finds that the Respondent has been profiteering by way of increasing the base prices of the tickets (Services) by not reducing the selling price of the tickets (Services) commensurately in the regular category, despite the rate reduction in GST rate on Services by way of admission to exhibition of cinematograph films where the price of admission ticket was one hundred rupees or above, from 28% to 180/0 w.e.f. 01.01.2019. From the Table 'B' above, it is evident that the base prices of the admission tickets were indeed increased, as a result of which the benefit of reduction in GST rate from 28% to 18% and 18% to 12% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 to 30.04.2020. Application disposed off. - Case No. 21/2022 - - - Dated:- 20-6-2022 - SH. AMAND SHAH, TECHNICAL MEMBER AND CHAIRMAN. SH. PRAMOD KUMAR SINGH, TECHNICAL MEMBER. SH. HITESH SHAH, TECHNICAL MEMBER. Present:- 1. None for Applicants No. 1 2. 2. Shri Venkata Kameswara Rao, Superintendent for the DGAP. 3. Shri Shyamdhar Pal and Shri Keshav Malloo, Chartered Accountants for the Respondent. ORDER 1. The present Report dated 21.12.2020 has been received from the Director General of Anti-Profiteering (DGAP), who has conducted a detailed investigation in respect of two applications filed by Applicant No.1 and Applicant No.2 under Rule 128 of the CGST Rules, 2017, alleging profiteering by the Respondent to supply of Services by way of admission to exhibition of cinematography films . 2. The DGAP in his report dated 31.12.2020 has inter alia, stated that:- (i) Applicant No. 1 2 had alleged that the Respondent did not pass on the benefit of reduction in the GST rate on Services by way of admission to exhibition of cinematograph fi lms , which was reduced w.e.f. 1.1.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner and no other separate charges were allowed or permitted. Further, all the taxes calculated on the price were as per the proportion of taxes from time to time and had to be paid. The tax was worked out as prescribed under the relevant Act. In the case of GST, the tax was calculated in the proportion of 18/118 or 28/128, as the case might be prescribed under Rule 35 of the CGST Rules, 2017. The price fixed by the Government was a fixed amount and did not have any break up of basic price, GST, Total, etc. i.e. no GST was collected from the customer. The Respondent had also submitted the copy of the license dated 31.05.2017 granted to him by the licensing authority, whereby prices for the shows were fixed. Thus, the price was fixed by the Government of Telangana only and had to be charged irrespective of the tax rates from time to time and the increased liability was to be borne by the cinema screens only. b. That he had collected prices fixed as per the license per Order No. GO. Ms. No. 54, Home (Gen. A) Department, dated 26.04.2017, wherein the Government of Telangana accorded permission for the rate of admission to Recliner and Regular Seats, details of which have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the maximum liability that could arise on him under the anti-profiteering provisions, in any case, could only be Rs. 9,71,532/- in respect of Executive Category and Rs. 87,142/- in the case of the Gold Category, which could be claimed to have been retained by him. Particulars Executive Gold Amount collected 150.00 200.00 Amount to be collected actually 138.26 183.94 11.74 16.04 Basic Amount excess collected (per ticket) 9.94 13.25 GST amount excess collected and deposited (per ticket) 1.80 2.81 11.74 16.06 No. of tickets sold from 01.01.2019 to 03.02.2019 97,753 6,576 Total Basic Amount excess collected 9,71,532.27 87,142.03 Total GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices . Thus, the legal requirement was that in the event of a benefit of ITC or a reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could obviously be only in terms of money, such that the final price payable by a consumer gets reduced commensurate with the reduction in the tax rate. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method that a supplier could adopt to pass on such benefits. From 01.01.2019, the Respondent, in terms of Section 171 of the CGST Act, 2017, was bound to maintain the Base price of the tickets across all class of seats/slots, and GST should have been charged on the pre-rate reduction Base prices. The Respondent can charge the maximum price fixed by the State Government, which was inclusive of taxes, as applicable, and had paid the same to the Government, which was reflected in his statutory returns. Thus, the Respondent had collected as well as paid the GST. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r increase in rates from the licensing authority. There were altogether six such movies where ticket prices had been revised upward by the Respondent. These included one Sye Raa Narasimha Reddy which was amongst those for which sample request letters had been submitted to the DGAP. Accordingly, the base prices for these movies shall have to be treated the same as for all others, and it has been categorised as exceptions in this Report. (v) The issue was the determination and quantification of profiteering by the Respondent, if any, for failing to pass on the benefit of the reduction in the rate of tax on the Services by way of admission to exhibition of cinematography films where price of admission ticket was above one hundred rupees from 28% to 18% w.e.f. 01.01.2019 and Services by way of admission exhibition of cinematograph films where price of admission ticket was one hundred rupees or less from 18% to 12% w.e.f, 01.01.2019. From the sales data made available, it appeared that the Respondent increased the bases price of the admission tickets when the GST rate was reduced from 28% to 18% w.e.f. 01.01.2019 in the manner illustrated in Table2A below. From the Table-'A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in table 'B' below amounts to 1,31,292/- for Recliner Category, 11,52,707/- for Regular Category and 84,18,946/- for exceptions in both the categories of tickets. The total amount of net higher sales realization due to an increase in the base prices of the movie tickets, despite the reduction in GST rate from 28% to 18% or in other words, the profiteered amount comes to 97,02,945/-. The brief of the computation has been furnished in the Table 'B' below:- Table-B Sr.No. Category 01.01.2019 to 30.04.2020 Base Price per unit in pre-rate-reduction (Excl.GST) Commensurate Price per unit post-rate reduction Actual Selling Price post-rate-reduction Profiteering per unit (Incl.GST) Qty Sold. Total Profiteering (in Rs.) A B C D=C*118% E F=E-D G H=F*G 1 Recliner 156.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent had, inter-alia submitted:- (i) 'Regular category' - Recliner and regular seats:- a. That a perusal of working of the amount of profiteering given in Table 'A' and Table `B' of the Report dated 31.12.2020 shows that it was sub-categorized into the Regular category:- Recliner seats (Gold class) and Regular seats (Executive class), and 'Exceptions Category', which also had two sub-heads of recliner seats (Gold class) and Regular seats (Executive class). The working amount of profiteering under 'Regular Category' for the recliner and regular seats has been summarized herein below:- Sr.No. Category Ticket Price before 1-1-2019 Ticket Price After 1-1-2019 Alleged profiteering per ticket No. of tickets sold Total profiteering A Recliner (Gold Class) 200 200 15.63 8400 1,31,292 B Regular (Executive class) 150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.73 15.63 No. of tickets sold from 01.01.2019 to 03.02.2019 97,753 6,576 Total Basic Amount excess collected 9,71,665 87,132 10,58,797 Total GST amount excess collected and deposited 1,74,977.87 15,650.88 1,90,628.75 Grand Total 11,46,642.87 1,02,782.88 12,49,425.75 e. Given the above, the total excess amounts collected from the consumers came to Rs. 12,49,425.75/-, out of which Rs. 1,90,628.75/- was towards the amount of GST which had already been paid to the Central Govt. and the net basic amount excess collected i.e. Rs.10,58,797/- could at maximum be asked to be deposited on account of profiteering under the 'Regular Category' as against the demand of Rs. 12,83,999/- under this category. f. That there was also a difference in the number of tickets sold as taken in the Notice and as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.01.2019. Accordingly, wherever any ticket prices were fixed by authorities before 01.01.2019, they were based on considering the applicable GST rate of 28%, and the same were required to be re-computed as on 01.01.2019 by applying GST @ 18% on the base prices applicable before 01.01.2019. In other words, wherever the ticket prices were fixed by the administration or any other forum after 01.01.2019 then it had an inbuilt component of GST @ 18% only, which had been made applicable from 01.01.2019 and in such a situation, no allegation of profiteering could sustain. c. That under the 'Exception Category', the allegation of profiteering could sustain only where the ticket prices for 'Exception Category' were applied/sanctioned before 01.01.2019 when GST rate was 28%, and then, based on such applied/sanctioned ticket prices, the tickets were sold for shows on or after 01.01.2019 when the GST rate was reduced from 28% to 18%. d. That in the present case, no such situation prevails. For all the tickets sold under the 'Exception Category' for shows on or after 01.01.2019, the application/sanctions for exceptional rates were always made on or after 01.01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applicable because such an exception prices did not pertain to the pre 01.01.2019 period when the GST rate was 28%. The corresponding application/sanction/fixation pertained to the post 01.01.2019 period when the GST rate was already 18% and therefore it was submitted that such rate under the exception category was decided by considering the GST rate of 18% only and therefore, the question of profiteering did not arise. g. That the alleged demand of profiteering to the extent of Rs. 84.18,946/- under the exception category was liable to be struck down. (iii) That the issue was arising out of a bonafide understanding of the law and hence penalty could not be proposed:- a. That the excess amount collected by the Respondent from the consumers was due to a bonafide understanding as the provisions were new and it was a settled principle of law that if any dispute was arising out of a bonafide dispute of interpretation of the provisions of law then in such circumstances, a penalty cannot be proposed. Reliance could be placed on the following case laws in this regard: UNIFLEX CABLES LTD vs. COMMISSIONER OF CENTRAL EXCISE, SURAT-II reported at 2011-TIOL-85-SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the ratio of the same applied to the present situation as well, and hence; the penalty proposed on the Respondent was liable to be dropped. 5. Copy of the above submissions dated 06.02.2021 filed by the Respondent was supplied to the DGAP for supplementary Report under Rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarifications dated 16.03.2021 on the Respondent's submissions and, inter-alia clarified:- a. That the profiteering had been calculated for the investigation period i.e. till April 2020 as indicated in the Notice of initiation of investigation dated 03.06.2020 based on the rates prescribed by the Government of Telangana communicated vide order no. GO. Ms. No. 54, Home (Gen A) Department, dated 26.04.2017. b. Section 171 (1) of CGST Act, 2017 states that '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': Accordingly, the Respondent at the first instance would have reduced the basic price commensurate to the reduction in the rate of tax and should have passed on the benefit to the recipients as envisaged under sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that the ticket prices were revised giving the effect to the reduction in GST rates from 04.02.2019 and therefore the dispute under this category related only to the period 01.01.2019 to 03.02.2019. b. That the fact of excess collection on account of GST and its payment to the Government as submitted in para 22 (i)(c) supra was not disputed in this rejoinder and since such payment of GST had already been made to the Government, therefore, the balance excess amount as mentioned in para22(i)(c) supra could be said to be the maximum amount retained by the Respondent which could only be asked to be paid back. c. That 49.65% of the ticket value pertained to the distributor therefore, the demand for recovery of the profiteered amount in the hands of Respondent should be made maximum to the extent of 50.35% of such amount. d. Representative copies of orders issued after 01.01.2019 granting permission for price increase were already enclosed with his submissions dated 06.02.2021 which demonstrated that no profiteering had been made under the 'Exception Category' because such ticket prices were permitted when the tax rate had already been reduced to 18%. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- in case of Regular (Executive Class) b. From Rs. 200/- to Rs. 350/- in the case of Recliner (Gold class) Telangana High Court Order dated 27.03.2020 2 Darbar (Telugu) 2,84,655 Average Ticket Price inclusive of GST has been increased : a. From Rs. 150/- to Rs. 200/- in case of Regular (Executive Class) b. From Rs. 200/- to Rs. 350/- in the case of Recliner (Gold class) Telangana High Court Order dated 27.03.2020 3 Sari Leru Neekevvaru (Telugu) 16,93,027 Average Ticket Price inclusive of GST has been increased : a. From Rs. 150/- to Rs. 200/- in case of Regular (Executive Class) b. From Rs. 200/- to Rs. 350/- inthe case of Recliner (Gold class) Telangana High Court Order dated 27.03.2020 4 Saaho (Telugu) 16,90,227 Average Ticket Price inclusive of GST has been increased : a. From Rs. 150/- to Rs. 200/- in case of Regular (Executive Class) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered: Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority. Explanation .- For the purposes 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Court of Telangana in its Common order dated 27.03.2020 in the case of W.P.No.15101/2019 clubbed with other Writ Petitions dismissed the writ petitions as infructuous. The GST department of State or Centre or DGAP or NM were not the Respondents in the said Writ Petition. 15.The Commissioner of Police, Cyberabad, Hyderabad vide letter No. A4/03/Cinemas/Cyb/2018-19 dated 20.11.2019 has a fixed rate of admission ticket of Rs 75 per seat along with other conditions. The Respondent submitted a copy of letter no. GH H/CP/2019-20 dated 21.11.2019 written by M/s Global Home and Hearth Pvt. Ltd., Ameerpet, Hyderabad to the Commissioner of Police, Cyberabad Commissionerate, Cyberabad, Ranga Reddy District requesting an increase in the ticket prices for screening in multiplex theater by him. The letter dated 21.11.2019 was written by the Respondent in response to the letter dated 20.11.2019 he received from the Commissioner of Police, Hyderabad fixing the said rate. In the letter dated 21.11.2019 it was intimated that kindly refer to your permission for screening Cinemas in 4 screens with a total capacity of 1078 people in our premises number 6-9-30, Balanagar, opposite I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g has admitted the above-said liability of excess collection during the period 1.1.2019 to 30.4.2020. 17. With regard to the fixation of admission ticket rates for the 'Exception Category', it is claimed by the Respondent that no such category existed before 1.1.2019, and hence the admission ticket rates were not available for comparison post 1.1.2019. It was further claimed by the Respondent that the fixation of the ticket rates for the exception category has taken into consideration the prevalent GST rate of 18% and hence no amount of profiteering can be made out against them. To verify the above-said claim, the Authority has looked into various documents submitted by the Respondent to the DGAP. It is found that the DGAP vide Notice dated 4.6.2020 had demanded various documents and details from the Respondent during the course of the investigation, which also included a pricelist of the movie admission tickets pre-and-post 1.1.2019 and invoices for the period before 1.1.2019. However, it appears from the perusal of the records submitted along with the Investigation Report dated 31.12.2020 of the DGAP that the relevant documents or information relating to the 'Excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 621 (Tri. - Ahmd.) c. Komal2- STRAW BOARD MILL BOARD INDS. vs. COMMR. OF C. EX., LUDHIANA reported at 2005 (16) E.L.T. 584 (Tri. - Del.) d. COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH vs. PILOT PRODUCTS reported at 2005 (182) E.L.T. 59 (Tri. Del.) e. SPORTS LEISURE APPAREL LTD. vs. COMMISSIONER OF C. EX., NOIDA reported at 2005 (180) E.L.T. 429 (Tri. Del.) for the waiver of penalty. In this regard, it is to mention that the facts of the above cases referred by the Respondent are related to the matters like excise duty, etc. and the facts of the case laws cited above are different from the present case. Therefore, the contention of the Respondent is not tenable and hence rejected. 21.The Respondent also submitted that no penalty ought to be imposed on the Respondent as Section 171 (3) of the CGST Act could not be applied to the present case. In this regard it is to mention that vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come into force w.e.f. 01.01.2020, by inserting Section 171 (3A). The investigation in the case covers the period from 01.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of 12,83,999/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. The Respondent is further directed to refund an amount of Rs. 11.73/- each to Applicant Nos. 1 2 along with interest to be calculated @ 18% from the date of when the said amount was collected by him from the above Applicants till the above amount is paid. Since the rest of the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of Rs. 6,41,988/- in the Central Consumer Welfare Fund (CWF) and Rs. 6,41,988/- in the Telangana State CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. The above amount shall be deposited within a period of 3 months from the date of receipt of this Order failing which the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the CGST/Telangana GST Act, 2017. 25.The Authority finds that the Respondent has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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