TMI Blog2020 (4) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... verified by the DGAP as per the provisions of Section 17 (2) of the CGST Act, 2017 read with Rule 42 of 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 the 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. Investigation on the above issues shall be completed by the DGAP within a period of 3 months from the date of passing of this order and Report submitted under Rule 129 (6) of the CGST Rules, 2017. The Respondent is also directed to extend full co-operation to the DGAP during the course of the investigation - As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. - I.O. No. 15/2020 - - - Dated:- 20-4-2020 - DR. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER AND SH. AMAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 to 31.03.2019. b. Sample invoices, pre and post 27.07.2018. c. GSTR-I and GSTR-3B Returns for the period from 01.07.2018 to 31.03.2019. d. Outward supply data of the closing stock. e. ASIN-wise details of credit reversal in respect of closing stock. 6. The DGAP has further intimated that the Central Government, on the recommendation of the GST Council had reduced the GST rate on the Sanitary towels (pads) or sanitary napkins, tampons from 12% to Nil w.e.f. 27.07.2018, vide Sr. No. 146A of the Schedule attached to Notification No. 19/2018-Central Tax (Rate) dated 26.07.2018 which has also not been contested by the Respondent. 7. The DGAP has also submitted that the Respondent has contended that in the case of M/S Unicharm India Pvt. Ltd. M/S Apollo Hospitals Enterprise Ltd., the DGAP had limited the investigation of M/S Apollo Hospitals Enterprise Ltd. (being retailer), to the closing stock of Sanitary Napkins available as on 26.07.2018 and in his case also as he was also a retailer, the investigation should be limited to the stock held as on 26.07.2018 and sold thereafter by him. The DGAP has further submitted that in the above case the profiteering was calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent never went beyond the reduced MRP affixed by the manufacturer, it could not be said that he has profiteered under Section 171 of the CGST Act merely because he chose to offer a lower discount at the time of second purchase by the Applicant No. 1. In this context The DGAP has observed that the legislative intent behind Section 171 of the CGST Act, 2017 was to pass on the benefit of tax rate reduction by way of commensurate reduction in prices. Mere charging of GST at the reduced/nil rate was not sufficient to pass on the benefit of tax rate reduction. Even when the GST was nil, the benefit which ought to have been passed on to the recipient, could still be denied by increasing the base price. He has further stated that the discount was offered on the MRP which was the maximum price at which the goods could be sold in retail. The value of transaction between the manufacturer and the wholesaler or the wholesaler and the retailer would invariably be less than the MRP. Therefore, regardless of whether the MRP was printed/marked on the product or not, the pre and post-tax rate reduction transaction values were to be compared to determine the amount of profiteering. The DGAP has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12% to NIL w.e.f. 27.07.2018. The DGAP has illustrated that during the pre-rate reduction period (01.07.2018 to 26.07.2018), the Respondent has purchased the goods Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count) at an average base price of Rs. 66.91/- while the average selling price of the same goods during the said period was Rs. 67.99/-. Thus, the profit margin for the Respondent during the pre-rate reduction period was Rs. 1.08/- per unit. 12. The DGAP has further stated that as on 26.07.2018, the Respondent had a closing stock of 47 units of the Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count) . As the rate of tax on the Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count) was reduced from 12% to NIL w.e.f. 27.07.2018, the Respondent was not entitled to avail input tax credit on this closing stock. Hence, the commensurate price of the closing stock of Whisper Ultra Overnight Sanitary Pads XL Plus wings (7 Count) as on 26.07.2018 should have been the sum total of Rs. 66.91/- (basic purchase price), Rs. 8.03/- (increase in cost due to denial of input tax credit @12% of the basic purchase price of Rs. 66.91/-) and Rs. 1.08/- (profit ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Profiteering 1 O I-Jammu Kashmir 6528 227 6755 2 02-HimachaI Pradesh 9093 619 9712 3 03-Pun ab 28330 1568 29898 4 04-Chandi arh 12910 1047 13957 5 05-Uttarakhand 17800 816 18615 6 06-H ana 98001 7457 105458 7 07-De1hi 169397 13020 182417 8 08-Ra asthan 47283 2182 49465 9 09-Uttar Pradesh 121030 6751 127780 10 10-Bihar 23253 1245 24498 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 33-Tami1 Nadu 213109 23189 236298 33 34-Pondiche 6113 546 6659 34 35-Andaman Nicobar Islands 1820 258 2078 35 36-TeIan ana 130818 13056 143873 36 37-Andhra Pradesh 32199 1842 34041 Total 1817165 143868 1961033 14. Thus, the DGAP has concluded that the base prices of the Sanitary Napkins were increased by the Respondent when there was a reduction in the GST rate from 12% to Nil w.e.f. 27.07.2018, therefore, the commensurate benefit of GST rate reduction was not passed on to the recipients. The total amount of profiteering covering the period from 27.07.2018 to 31.03.2019, has been computed to be Rs. 19,61,033/- (Nineteen Lakh Sixty-One Thousand and ThirtyThree only) (Rs. Rs. 18, 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investigation conducted by the DGAP and the present proceedings were beyond the provisions of Section 171 of the CGST Act, 2017 which could not be invoked in the present case. (B) That the method adopted by the DGAP was unworkable in the present case as the Respondent was a retailer selling at highly dynamic prices and hence the investigation ought to be dropped as the sales were made by him at varying discounts given from the MRPs fixed by the manufacturers. (C) That the provisions of Section 171 of the above Act were not applicable as the goods had been exempted from the levy of GST. Therefore, the investigation should be limited to the closing stock. (D) That the period of investigation chosen by the DGAP w.e.f. 27.07.2018 to 31.03.2019 was arbitrary. (E) That in the present case the profiteering should have been examined at the HSN level and not line item wise for each transaction. The DGAP had also resorted to 'Zeroing' which was incorrect. (F) That the loss of common Input Tax Credit (ITC) was required to be taken into consideration as the same was component of his cost after the exemption of GST. The DGAP had failed to consider the cost of common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee (Respondent) and recomputed. 21. Perusal of the Report dated 17.12.2019 filed by the DGAP also shows that in reply to the Paras G.2. 1 to G.2.5 mentioned by the Respondent in his above written submissions, the DGAP has admitted that On preliminary verification it is seen that the Noticee's (Respondent's) claim is genuine and correct. But it was committed as the Noticee (Respondent) supplied total outward supply data for the period 27.07.2018 to 31.03.2019 and simultaneously also provided outward supply data for the closing stock. However, the total sales data was not provided excluding the details of closing stock. As a result the profiteering on closing stock was computed twice. 22. It is clear from the Report dated 17.12.2019 filed by the DGAP that the above three issues mentioned in the Paras supra are required to be further investigated by the DGAP and only then this Authority can determine the profiteered amount as per the provisions of Section 171 of the CGST Act, 2017 read with Rule 133 of the CGST Rules, 2017. Accordingly, this Authority directs the DGAP to carry out further investigation under Ruel 133 (4) of the above Rules, on the following issues:- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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