TMI Blog2022 (6) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... igation w.e.f. 27.07.2018 to 31.03.2019. This Authority had given specific direction to DGAP vide Interim Order No. 15/2020 dated 20.04.2020 to carry out investigation on the specific points that are discussed. Based on the said direction and subsequent investigation, the DGA.P has calculated that the Respondent has increased the base price of the impugned goods during the period from 27.07.2018 to 31.03.2019. Thus, the benefit of reduction in the tax rate has not been passed on to the recipients by way of commensurate reduction in the prices by the Respondent in terms of Section 171 (1) of the CGST Act, 2017 during the above period. Therefore, the DGAP had calculated the profiteered amount on the impugned item i.e. Sanitary Napkins by comparing the average pre-rate reduction base price of the impugned item with the actual selling price during the post-reduction period i.e. after 27.07.2018 by the Respondent during the period from 27.07.2018 to 31.03.2019. The mathematical methodology employed by the DGAP to compute the profiteered amount is correct, appropriate, reasonable and in consonance with the provisions of Section 171 (1) of the CGST Act, 2017. This Authority as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit of Rs. 13,07,118/-, shall be verified by the DGAP as per the provisions of Section 17 (2) of the CGST Act, 2017 read with Rule 42 of the CGST Rules, 2017 and his findings shall be recorded in the Report. iii. The issue of benefit of discounts shall be examined by the DGAP in terms of Section 15 (3) of the CGST Act, 2017 as per details submitted by the Respondent and a detailed Report shall be filed by him in this regard. iv. The profiteered amount shall be again computed by the DGAP on the closing and the fresh stocks separately and mentioned in his Report. 2. The brief facts of the case are that the Applicant No. 1 vide his complaint had alleged that the Respondent had not passed on the benefit of reduction in tax rate from 12% to Nil in the light of Notification No. 19/2018-CTR dated 26.07.2018 w.e.f. 27.07.2018 on the purchase of Stayfree Sanitary Napkins. The said complaint was examined by the Standing Committee on Anti-Profiteering in its meeting held on 27.03.2019 and forwarded to the DGAP for detailed investigation in the matter. On receipt of said reference from the Standing Committee on Anti-Profiteering, the DGAP had investigated the aforesaid matter and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t supplies, shall be attributed to the purposes of business or for effecting taxable supplies in a manner as specified in the Rule. Thus, the issue of common ITC and verification of common ITC reversal post rate reduction was to be done in terms of Rule 42(1) of the Rules. To substantiate the Respondent's claim of reversal, the amount of credit reversed by him, had been verified with the GSTR-3B Returns of the corresponding month and ledgers, as submitted by him. It is found that the ITC amount reversed in the Return was more than that of his submissions for common input tax credit reversal with respect to impugned products. Thus, the claim of reversal of credit was correct and it would impact the cost of the impugned product. To arrive at the base price for post-rate reduction, that reversal of common credit amounting to Rs. 13,02,995/- was to be distributed proportionately to the turnover of Rs. 13,15,87,568/- of the sanitary napkins during the investigation period, which is 0.99% of the turnover. Hence, the base price would increase by 0.99% for calculation of profiteering for the fresh stock. b. In respect of issue mentioned at para 1 (ii) supra, the Respondent vide hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut tax credit @ 12% of the basic purchase price of Rs. 66.91/-) and Rs. 1.08/-(profit margin for that SKU) i.e., Rs. 76.02/- per unit. Ongoing through the outward supply data of closing stock, as submitted by the Respondent, DGAP had observed that the Respondent had sold the same at Rs. 80/- per unit vide invoice no. UBO3-29100 dated 05.09.2018. Thus, the profiteering amount for Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count) for one unit is Rs. 3.98/-. Following the similar methodology, profiteering has been computed on the closing stock and the profiteered amount works out to Rs. 5,37,208/-. (ii). The profiteered amount on fresh stock: During the post-rate reduction period (27.07.2018 to 30.09.2018), the purchase price of the goods Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count) for the Respondent increased to Rs. 73.61/-. Hence, the commensurate selling price of the Respondent for the stock purchased after rate reduction w.e.f. 27.07,2018 should have been the sum of Rs 73.61/- (basic purchase price), Rs. 1.08/-(profit margin for that SKU) and Rs. 0.73 (0.99% of basic purchase price, as discussed in above, i.e. Rs. 75.42/-. Ongoing through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-Bihar 4,880 8,018 12,898 11 11-Sikkim 100 97 197 12 12-Arunachal Pradesh 130 111 241 13 13-Nagaland 123 302 425 14 14-Manipur 375 588 963 15 15-Mizoram 254 65 319 16 16-Tripura 217 292 509 17 17-Meghalaya 449 699 1,148 18 18-Assam 4,125 6,132 10,257 19 19-West Bengal 25,789 23,706 49,495 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held on 05.01.2021. Accordingly a Notice dated 05.01.2021 (enclosing the DGAP's Report dated 31.12.2020) was issued to the Respondent to explain why the above Report of the DGAP should not be accepted and his liability for profiteering should not be determined under Section 171 of the CGST Act, 2017. 5. Therefore, the Respondent vide his submissions dated 01.03.2021, has furnished his reply to this Authority, wherein the Respondent has reiterated and re-asserted the grounds taken by him in his previous submissions dated 11.11.2019 as well as Rejoinder dated 03.03.2020 and submitted that:- a. the benefit of total common credit reversed should be accorded to him. i. The DGAP has worked out the benefit of common credit reversal by working out Commensurate Base Price: Pre-exemption Profit Margin + Post- exemption Purchase Price + Common Credit Reversal (0.99% of Post- exemption Purchase Price). ii. The above said commensurate base price was then compared with the Actual Selling Price at invoice-level data in the outward supply data of the fresh stock. Line items where there was a positive difference was then considered for arriving at the alleged profite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 17(5) of the CGST Act, from the total input tax; (b) Crediting the differential input tax in the electronic credit ledger; (c) From such differential input tax credit availed, the input tax attributable exclusively to taxable supplies is segregated; (d) What remains is common credit, on which the formula prescribed in Rule 42 is to be applied to compute the common credit reversal. iii. Common credit was availed in addition to input tax credit pertaining exclusively to any supply and from the above rule, it could be seen that reversal of common credit was over and above the reversal of exclusive credits on account of exempt supplies. iv. The benefit of common credit reversed on account of exempt outward supplies of such closing stock has not been accorded to him. 6. On receipt of the above said submissions dated 01.03.2021 of the Respondent, this Authority vide its Order dated 02.03.2021 had forwarded the same to the DGAP for his clarifications under Rule 133 (2A) of the CGST Rules 2017. The DGAP vide his Report dated 16.03.2021 had submitted his clarifications as under; i. On the contention of the Respondent that the total common c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the benefit of common credit reversal should be considered for arriving at the alleged profiteering in case of closing stock which was given to him. 8. Considering the above said rejoinder 31.05.2021 of the Respondent and his request for Personal Hearing, this Authority has granted a hearing on 28.04.2022 through video conferencing to the Respondent and the Applicant No.1. However the Respondent vide his letter dated 27.04.2022, has submitted that he does not wish to contest this matter and is ready to pay the profiteered amount as computed by the DGAP in his above said Report dated 31.12.2020 without admitting the liability and requested to conclude the proceedings in the instant matter. 9. This Authority has carefully considered the above said Report dated 31.12.2020 furnished by the DGAP, the submissions made by the Respondent and the other material placed on record. On examining the various submissions the Authority finds that the following issues need to be addressed:- a. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? b. If yes, then what was the quantum of profiteering? 10. A plain reading of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmensurate reduction in the prices in terms of Section 171 (1) of the CGST Act, 2017 during the above period, by the Respondent. Further, it is also observed that the Respondent vide his letter dated 27.04.2022, has submitted that he is ready to pay the profiteered amount as calculated by the DGAP in his above said Report dated 31.12.2020. 13. As per the above discussion and findings, this Authority as per the provisions of Section 171 of the CGST Act, 2017, determines the profiteered amount as Rs. 9,84,354/- for period from 27.07.2018 to 30,03.2019 by the Respondent. The Authority finds that such amount needs to be passed on by the Respondent alongwith interest @ 18% as prescribed to the recipients of supply/customers other than the Applicant No. 1 as the profiteering in respect of the Applicant No. 1 has been found to be Nil as per the DGAP Report dated 24.09.2019. As the recipients other than the Applicant No. 1, of such supply are not identifiable, the Authority directs that, the Respondent shall deposit the said amount with interest in the Consumer Welfare Funds (CWP) of the Central and State Governments as prescribed under Rule 133 (3)(e) of the CGST Rules 2017, within thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 574 19 Consumer Welfare Fund of Assam 5128.5 20 Consumer Welfare Fund of West Bengal 24747 21 Consumer Welfare Fund of Jharkhand 3537 22 Consumer Welfare Fund of Odisha 6489.5 23 Consumer Welfare Fund of Chhattisgarh 2318 24 Consumer Welfare Fund of Madhya Pradesh 6140.5 25 Consumer Welfare Fund of Gujarat 10496 26 Consumer Welfare Fund of Daman Diu 95 27 Consumer Welfare Fund of Dadra Nagar Haveli 19 28 Consumer Welfare Fund of Maharashtra 61154.5 29 Consumer Welfare Fund of Karnataka 73495 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, the longer period shall apply. IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Section 23(4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings. Accordingly this Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017. 17. A copy each of this Order be supplied free of cost to the Respondent, Applicant No.1, the DGAP and concerned jurisdictional commissioners of CGST/SGST. File be consigned aft ..... X X X X Extracts X X X X X X X X Extracts X X X X
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