Shri Surya Prakash Loonker Vs M/s Excel Rasayan Pvt. Ltd (NAA)
it is clear that the Respondent has admittedly not passed on the benefit of tax reduction since the base prices of the above two products were increased to maintain the same selling prices which were existing before the reduction in the rate of tax. The Respondent, who is a registered manufacturer, is liable to pass on the benefit to the recipients irrespective of the fact whether the base prices are still lower as compared to the pre-GST price or not. Moreover, from the documents submitted to the DGAP by the Respondent it is also established that the base prices of the two products in question were increased to maintain the same selling prices (inclusive of GST), although there was a reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017. In the present case, the Respondent has admittedly accepted the fact that there was no reduction in the prices post 15.11.2017 on any of the products sold by him. Therefore, the Authority holds that the Respondent has violated the provisions of section 171 in as much as the prices have remained the same inspite of reduction in the tax rate. His plea that the base prices were drastically lowered when GST came in effect cannot absolve him from not passing on the benefit.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The present Report, dated 04.09.2018, has been received on 07.09.2018 from the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the case are that an application dated 22.02.2018 was filed by the Applicant No. 1 before the Standing Committee, constituted under Rule 123 (1) of the above Rules alleging that the Respondent did not pass on the benefit of reduction in the GST rate applicable to detergents from 28% to 18% w.e.f. 15.11.2017 but increased the base prices of the detergents sold by him, so that there was no reduction in the prices to the recipients. In support of his allegation, the Applicant No. 1 submitted copies of two sale invoices of Fortune ADW Detergent 1 Kg. and Fortune Rinse Aid 500 ml. bearing No. 6413 dated 07.09.2017 and No. 17497 dated 26.12.2017 respectively, issued by the Respondent. After examining the application, the Standing Committee on Anti-Profiteering, as per the minutes of it’s meeting dated 28.2.2018, forwarded the same to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017.
2. The DGAP, on receipt of the application, issued notice to the Respondent seeking his reply as to whether the benefit of reduction of GST rate has been passed on to the consumers or not? The Respondent had replied vide his letters dated 11.04.2018 and 19.05.2018 that prior to coming into force of the GST, he was a SSI unit, manufacturing synthetic detergents falling under Chapter 34 of the erstwhile Central Excise Tariff Act, 1944 and that he had been availing SSI exemption and charging VAT @ 12.5 % on the base prices. He had further submitted that on introduction of the GST, 28% tax was levied and since this disturbed his pricing pattern he had reduced the base prices. He had also stated that w.e.f. 15.11.2017, when the GST rate on his products in question was reduced from 28% to 18%, though the base prices were increased, they were much less than the base prices in the Pre-GST era
3. The DGAP’s report submitted that the Respondent had also filed details of invoice-wise outward taxable supplies (other than zero rated) and State-wise details for all the products from 01.11.2017 to 31.03.2018 along with copies of GSTR-1, GSTR-3B, Audited Balance Sheet and the Sample invoices. The DGAP after examining the facts of the case and the record available has reported that on scrutiny of the outward sales data of the Respondent covering the period w.e.f. 01.11.2017 to 14.11.2017, it was noticed that the base prices of Fortune ADW Detergent 1 Kg. and Fortune Rinse Aid 500 ml. were Rs.171.80 and Rs.117.18 respectively, prior to 15.11.2017. Taking this base price into account the cum-tax price after reduction of GST rate from 28% to 18% should have been Rs.202.72 for Fortune ADW Detergent 1Kg. and Rs.138.27 for Fortune Rinse Aid 500 ml. The report further states that the Respondent instead of reducing the base prices sold 20,315 units of Fortune ADW Detergent 1 Kg. and 11,214 Units of Fortune Rinse Aid 500 ml. at the increased base prices across various States. Thus, by increasing the base prices of the said products consequent to the reduction in the GST rate, the benefit of reduction in the GST rate from 28% to 18% was not passed on to the recipients. The report also submitted that the total amount of profiteering covering the period between 15.11.2017 to 31.03.2018, came out to be Rs.4,64,849.74, but the Applicant No. 1 was supplied Fortune ADW Detergent 1 kg. at the price of Rs.186.99 and Fortune Rinse Aid 500 ml. at the price of Rs.127.49 which were lower than the commensurate cum-tax prices of these products and therefore, the Applicant was not eligible for any refund.
4. The above Report was considered by the Authority in it’s meeting held on 11.09.2018 and it was decided to hear the interested parties on 26.09.2018, however no one appeared on behalf of the Respondent & Applicant No.1. Another Notice dated 03.10.2018 was issued and accordingly hearing was held on 12.10.2018. Sh. Rakesh Upadhyaya, Director and Sh. Prabhat Kumar, Advocate, appeared on behalf of the Respondent, no one appeared on behalf of the Applicant No.1, and Ms. Gayatri, Deputy Commissioner appeared on behalf of the DGAP.
5. The Respondent in his written submissions dated 10.10.2018 submitted that he was a SSI unit manufacturing detergents and was availing benefit of SSI units granted under the Central Excise Act, 1944 and therefore, he was selling his products after charging VAT @ 12.5% on the base prices. He has also submitted that w.e.f. the introduction of the GST from 1st July 2017 his products were levied GST @ 28% which had caused confusion and disturbed his pricing pattern. He has further submitted that though in the Pre GST era of VAT, which was levied @ 12.5% the rate of tax was increased to 28% in the GST era, but he had not increased the base prices and absorbed the increased burden of taxes from 12.5% to 28% himself. He has also claimed that in the same financial year 2017-18 he had three rates of tax viz. 12.5% prior to July, 28% from July to November and 18% from 15th November onwards, however during this entire period, the prices to the consumers had remained the same and accordingly, the consumers had paid lower prices even though the rate of tax was enhanced. He has also quoted the Hon’ble Finance Minister stating that the GST rate of 28% was tax neutral and only pertained to those units which were paying 12% Central Excise Duty and VAT @ 12.5%. However, this rate did not apply to him as he was availing exemption under the SSI notification. The above submissions of the Respondent were forwarded to the DGAP for reply who vide his submission dated 22.10.2018 stated that the Respondent has reiterated the earlier submissions and nothing more was to be added by the DGAP. Final price to the consumers, as per the submissions made by the Respondent, is as per the table given below:-
