Shri Ankur Jain Vs M/s. Kunj Lub Marketing Pvt. Ltd. (National Anti-Profiteering Authority)
Conclusion: Denial benefit of the reduction in GST rate to the consumers was in contravention of the provisions of Section 171 (1) of the CGST Act, 2017; therefore, respondent-company was directed to reduce the price of the product commensurate to the reduction in the rate of tax.
Held: Respondent had denied benefit of the reduction in GST rate to the consumers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and had realized more price from them than he was entitled to collect and had also compelled them to pay more GST than that they were required to pay by issuing incorrect tax invoices. As per the provisions of Section 171 of the Act the benefit has to be passed on to each recipient and the same can not be selectively granted or denied. It was also clear that the Maggi Noodle pack of 35 Gms. was distinct from a 70 Gms. pack and both the packs might be bought by the different recipients/customers and hence the benefit accruing to one customer could not be given or denied to another nor could the benefit given to one set of customers arbitrarily enhanced and set off against the another. No such adjustments were permissible under the Act. Accordingly, Respondent was directed to reduce the price of the product commensurate to the reduction in the rate of tax. Respondent had also committed offence under section 122 (1) (i) of the CGST Act, 2017 and therefore, he was liable for imposition of penalty.
FULL TEXT OF THE ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. An application through email dated 29.11.2017 was filed before the Standing Committee on Anti-profiteering under Rule 128 of the Central Goods and Services Tax (CGST) Rules, 2017 by the Applicant No. 1 stating that he had purchased Maggi Noodle packs, each weighing 35 Gms., having Maximum Retail Price (MRP) of Rs. 5/- (here-in-after referred to as “the product”) from the Respondent on 06.11.2017 vide invoice No. N1611 and on 28.11.2017 vide invoice No. N1867. The above Applicant had also alleged that prior to 15.11.2017, the Respondent was charging 18% GST on the product’s base price of Rs. 3.96/- per pack, however, after the GST rate was reduced from 18% to 12% w.e.f. 15.11.2017, the Respondent had started charging 12% GST on the product’s increased base price of Rs. 4.17/- per pack. Thus, the Applicant No. 1 had further alleged that the Respondent had increased the base price of the product from Rs. 3.96/- to Rs. 4.17/- after the GST rate applicable on the product was reduced from 18% to 12%. The Applicant had also claimed that by increasing the base price of the product it’s cum-tax price had remained unchanged at Rs. 4.67/- which showed that the Respondent had not passed on the benefit of the reduction of GST rate to him. The application was examined by the Standing Committee on Anti-Profiteering in it’s meeting held on 20.12.2017, wherein it was decided to refer the matter to the Director General of Safeguards (DGSG), now re-designated as Director General Anti-Profiteering (DGAP) in order to initiate an investigation and collect evidence necessary to determine whether the benefit of reduction in the rate of tax on the above product had been passed on by the Respondent to the Applicant or not?
2. On receipt of the reference from the Standing Committee on Anti-Profiteering, the Respondent was called upon by the DGAP to submit his reply as to whether he admitted that the benefit of reduction in the GST rate had not been passed on to the above Applicant by way of commensurate reduction in the price. The Respondent was also asked to suo-moto determine the quantum of benefit not passed on and indicate the same in his reply to the Notice. Certain documents viz. Balance Sheet, GST Returns (1 & 3B), details of outward taxable supplies etc. were also sought from the Respondent by the DGAP. Incidentally the date of invoice No. N1611 was found to be 05.11.2017 instead of 06.11.2017 on examination by the DGAP. The period covered by the current Investigation is from 15.11.2017 to 28.02.2018. The Applicant No. 1 was given an opportunity vide email dated 12.06.2018 by the DGAP to inspect the non-confidential reply furnished by the Respondent, however, he did not avail of the said opportunity, instead, he had sent a letter dated 15.06.2018, informing that he had got clarity on how the overall GST benefit had been passed on in respect of the Maggi Noodles as a whole as it was not possible to pass on the GST benefit of 25 paise on Rs. 5/- packet of Maggi Noodles. He had also informed that he was withdrawing his complaint lodged against the Respondent and with further request to close the case.
3. The Respondent had submitted replies to the Notice issued by the DGAP vide various letters and vide his letter dated 19.02.2018 he had submitted that the Applicant No. 1 was a retailer, doing business in the name and style of M/s Anil Kumar Jain & Sons and to whom the Respondent had been selling Nestle’s products. The Respondent had also submitted that he had passed on the benefit of GST rate reduction in respect of the product bearing MRP of Rs. 5/- through other packs of Maggi Noodles having different grammage. The Respondent had further submitted that in the case of the product the price reduction would have been around 21 paise to the retailer and around 25 paise to the ultimate consumer which would have been inconvenient to both the retailer and the consumer whereas on Maggi Noodles pack of 70 Gms. bearing MRP of Rs. 12/- per pack, the benefit on account of GST rate reduction for the retailer would have been approximately 56 paise against which the respondent had reduced the price by 92 paise with reduced MRP of Rs. 11/- and thus, the benefit in respect of Rs. 5/- MRP pack had been passed on by reducing the price of other packs of Maggi Noodles by more than what was required. Therefore, the Respondent had claimed that the benefit of GST rate reduction had been passed on in respect of Maggie Noodles as a whole. The Respondent had also submitted the following documents: –
a) Balance Sheet, Profit and Loss Account for the year 2016-17.
b) Copies of the GSTR- 3B returns for the period from October, 2017 to February, 2018.
c) Copies of the GSTR-1 returns for the period from October, 2017 to February, 2018.
d) GST TRAN 1 for July, 2017
e) Purchase invoices for the period from November, 2017 to March, 2018
f) Sales calculation sheet for the month of November, 2017.
g) Sample sales invoices for the month of November, 2017.
h) Price lists before 15.11.2017 and w.e.f. 15.11.2017.
4. The DGAP has analysed the application, the reply of the Respondent and the documents/evidence brought on record and has also looked into whether the rate of GST on the product was reduced w.e.f. 15.11.2017 and if so, whether the benefit of such reduction in the rate of tax had been passed on to the Applicant No. 1 in terms of Section 171 of the CGST Act, 2017 or not?. He has stated in his report that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the product from 18% to 12%, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, w.e.f. 15.11.2017 which had not been disputed by the Respondent. The DGAP has also stated that the Respondent has not contested the allegation of not passing on the benefit of reduction in the rate of GST from 18% to 12% on the product w.e.f. 15.11.2017 but instead the Respondent has contended that in the case of the product the MRP of which was Rs. 5/-, the benefit of GST rate reduction to the Applicant No. 1 as retailer and to the ultimate consumer would have been 21 paise and 25 paise respectively, which would have been inconvenient to both due to legal tender issues. The DGAP has further stated that the Respondent has contended that he has passed on the benefit of GST rate reduction in respect of 70 Gm. pack of Maggi Noodles bearing MRP of Rs. 12/- by reducing the price for the Applicant No.1 and the ultimate consumer by 92 paise and Re. 1/- respectively, which was much more than the required reduction of approximately 56 paise for the above Applicant. The DGAP has also submitted that the provisions of Section 171 of the CGST Act, 2017 required that any reduction in the 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 and the recipient in this case was the purchaser of the product, therefore, the admission of the Respondent that he has not passed on the benefit of GST rate reduction to the purchaser of the product established the allegation and the Respondent has profiteered on account of GST rate reduction in respect of the product. The DGAP has further submitted that the Maggi Noodle pack of 35 Gms. and 70 Gms. carrying MRP of Rs. 5/- and Rs. 12/- respectively were two different products and the benefit available to the buyer on one item could not be denied by offering more than the required benefit to the buyer of the other item. The DGAP has also contended that such a proposition would work against the recipients of the product and the law did not provide for such adjustments. Therefore, the DGAP has concluded that the Respondent has not passed on the benefit of GST rate reduction to the recipients of the product including the Applicant No. 1. Accordingly, the DGAP has calculated the profiteered amount of Rs. 90,778/-including the profiteered amount of Rs. 2,253/- charged by the Respondent from the Applicant No.1 as has been shown below:-
(Amount in Rs.)
