Sh. Kiran Chimirala & Director General Anti-Profiteering Vs. M/s. Jubilant Food Work Ltd. (National Anti-Profiteering Authority)
The National Anti-Profiteering Authority (NAA) passed the order on an email complaint filed by a customer that Jubilant FoodWorks had not reduced the prices of ‘Dominos Stuffed Garlic Bread’ and ‘Medium Veg Pizza’ despite a cut in GST rate from 18 percent to 5 percent.
Jubilant Food has resorted to profiteering by charging more price than what he could have charged by issuing wrong tax invoices. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoices in which the base prices were deliberately enhanced more than what he was entitled to increase due to denial of ITC and thus he had denied the benefit of reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017. Therefore, a show cause notice be issued to the Respondent to explain why penalty under the provisions of the above Section should not be imposed on him.
FULL TEXT OF THE ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The brief facts of the case are that under Rule 128 of the Central Goods and Services Tax (CGST) Rules, 2017 an application through e-mail dated 29.11.2017 (Annexure-1 of the Report) was filed by the Applicant No. 1 against the Respondent stating that he had purchased 1 SGB Stuffed GB (Garlic Bread) and 1 Med NHT Veg Extrava (Medium Veg Pizza) after paying Rs. 129/- and Rs. 440/- per item respectively vide tax Invoice No. 66065/17/66210 dated 20.10.2017 (Annexure-2 of the Report) from the restaurant being run by the Respondent in Bengaluru. He had also stated that he had purchased the above 2 items again vide tax Invoice No. 66294/17/40249 dated 19.11.2017 (Annexure-3 of the Report) by paying an amount of Rs.139/- and Rs. 485/- respectively from the Respondent. He had alleged that though the Goods & Services Tax (GST) rate on restaurant services was reduced from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the base prices of the above food items and charged the same base prices which he was charging before the rate of tax was reduced and had he maintained the same base prices which he was charging before the tax reduction the consumers would have been benefited but in this case it had not happened. He had therefore alleged that the Respondent had resorted to profiteering and accordingly action should be taken against him. He had also stated that large organisation like the Respondent should be investigated where the prices had been inflated with the reduction in the rate of tax.
2. The application was prima facie examined by the Standing Committee on Anti-profiteering in its meeting held on 20.12.2017 (Annexure-4 of the Report), wherein it was decided to forward the same to the Director General Anti-profiteering (DGAP) for further detailed investigation as it appeared to be pan India in nature. The DGAP after completing the investigation has submitted the present Report dated 16.07.2018 under Rule 129 (6) of the CGST Rules, 2017. Since the documents submitted by the Respondent were voluminous, extension for completing the investigation was sought by the DGAP which was granted by this Authority vide its order dated 04.04.2018, in terms of Rule 129 (6) of the CGST Rules, 2017.
3. The DGAP in his Report has stated that a notice under Rule 129 of the CGST Rules, 2017 was issued on 25.01.2018 (Annexure-5 of the Report) calling upon the Respondent to reply as to whether or not he admitted that the benefit of reduction in the rate of GST had been passed on by him to his recipients by way of commensurate reduction in prices. The Respondent was also asked to suo-moto determine the quantum of benefit not passed on to his customers, if any, and intimate the same in his reply. The DGAP had also asked the Respondent to furnish the required information which was supplied by him vide his letters attached as Annexures-8 to Annexure-17 with the Report including the confidential information. The Applicant No. 1 was also given an opportunity by the DGAP vide his e-mail dated 28.06.2018 (Annexure-6 of the Report), to inspect the non-confidential records/replies submitted by the Respondent but the above Applicant did not avail of this opportunity. The DGAP has informed that the present investigation was conducted for the period between 15.11.2017 to 31.05.2018.
4. As per the DGAP’s Report the Respondent had made the following claims:-
(a)That the Respondent was engaged in the business of operating quick service restaurants under the brand name “Domino’s Pizza” and had a pan-India presence with 1,128 outlets across 31 States and Union Territories in which they were registered under the GST and these outlets were maintaining consistency from taste to overall experience and the prices of all the products as shown in the menu were exclusive of all taxes/GST except in the State of Maharashtra prior to 01.07.2017.
(b)That the Respondent had denied the allegation of profiteering and stated that there was no profiteering by him as the tax reduction in respect of restaurant services had been made along with denial of Input Tax Credit (ITC) which had become a cost for him as he was required to pay GST on the inputs without benefit of the ITC.
(c)That the menu prices were exclusive of taxes/GST and hence any comparison had to be made between the cum-tax prices and not the base prices. The Respondent had also stated that the revised base prices had taken into account the cost of non-creditable input GST, however there had been no increase in the ultimate prices inclusive of GST to be paid by the customers.
(d)That he had increased the base prices of Medium Veg Pizza and Garlic Bread, however their selling prices inclusive of GST had actually decreased as could be seen from the following table:-
