Director General of Anti-Profiteering Vs M/s VTWO Ventures (National Anti-Profiteering Authority)
We have carefully considered the Report of the DGAP contention of the Applicant No. 1 and the submissions made by the Respondent as also the documents placed on record to consider whether there was any reduction in the rate of tax in the relevant period and whether the benefit of reduction in the rate of tax was passed on to the recipients as required under Section 171 of the CGST Act, 2017.
From the facts of the case and the records placed before us, we find it evident that the Respondent had increased the base prices of his products w.e.f. 15.11.2017 despite reduction in the rate of GST from 28% to 18%. The DGAP in his Report has also revealed that the amount profiteered by the Respondent in respect of supplies of the products during the period 15.11.2017 to 31.08.2018 is Rs. 18,887/-, the details of which have already been tabulated in para 7 above. Therefore we find that the Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 in as much as he did not pass on the benefit of reduction in the rate of tax to his recipients by way of commensurate reduction in the prices.
It is also established from the above facts that the Respondent had issued incorrect invoices while selling the above products to his recipients as he had incorrectly shown the base prices and had also compelled them to pay additional GST on the increased prices through the incorrect tax invoices which would have otherwise resulted in further benefit to the recipients. It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act and hence he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017. In the interest of natural justice before imposition of penalty a notice be issued to him asking him to explain why penalty should not be imposed on him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present Report dated 05.12.2018 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The facts of the case are that the Kerala State Screening Committee on Anti-Profiteering, vide minutes of its meeting held on 08.05.2018, had referred the instant matter to the Standing Committee on Anti-profiteering, alleging profiteering by the Respondent on the supply of “luggage trolley bag/suitcases”, namely “Tropic 45 Weekender Black” and “Neolite Strolly 53 360(VIP) FIR” (hereinafter referred to as “the products”), as the benefit of reduction in the rate of tax of GST w.e.f. 15.11.2017 had not been passed on by the Respondent to the recipients. In this regard, the Applicant No. 1 had relied on two invoices issued by the Respondent, one dated 25.10.2017 (Pre-GST rate reduction) and the other dated 27.12.2017 (Post-GST rate reduction).
2. The Standing Committee considered the matter and opined that this was a case of profiteering. Thereafter, vide minutes of its meeting dated 02.07.2018, the Standing Committee forwarded the complaint to the Director General of Anti-Profiteering (DGAP) to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and to determine whether the benefit of reduction in the rate of tax on the above taxguru.in products had been passed on by the Respondent taxguru.in to his recipients or not.
3. The DGAP, after concluding his investigation submitted his Report on 05.12.2018 under the provisions of Rule 129 (6) of the CGST Rules, 2017, wherein the DGAP reported that he had issued notice to the Respondent dated 13.09.2018 under Rule 129 of the CGST Rules, 2017 calling upon the Respondent to reply as to whether he admits to the charge that the benefit of reduction in the rate of tax had not been passed on by him (the Respondent) to the 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 recipients, if any, and specify the same in his reply. The period of investigation covered by the DGAP under this Report is from 15.11.2017 to 31.08.2018.
4. In the aforementioned Report, the DGAP has reported that the Respondent had submitted replies to the DGAP vide his letters dated 28.09.2018 and 05.10.2018 and 22.10.2018 where he had stated that as distributor of the company’s (VIP) products, he followed the company’s pricing structure and that his distributor’s margin had remained unchanged in the pre and post GST periods, even when the rate of GST was reduced from 28% to 18% ad-valorem and he never enjoyed any additional benefits in respect of his supplies. The Respondent also submitted that along with other suppliers of luggage items he had represented before the Government of India seeking reduction in the GST rate as the tax burden on the industry had increased in the post-GST era as compared to the pre GST era. The Respondent further stated that he had not increased the prices of his products post implementation of GST, since he was hopeful of a reduction in the tax rate and that the reduction in taxguru.in GST rate from 28% to 18%, which came into effect from 15.11.2017, had only corrected the excessive tax burden which was being borne by him. The Respondent also submitted relevant documents, viz. invoice-wise details of outward taxable supplies of the products under investigation, covering the period from October, 2017 to August, 2018 and price lists of the products under investigation (pre and post 15.11.2017) as also his GSTR-1 and GSTR-3B returns for the period July, 2017 to August, 2018.
5. In this Report, the DGAP has reported that investigation was conducted to ascertain as to whether the benefit of such reduction in the rate of tax had been passed on by the Respondent to his recipients as mandated by the provisions of Section 171 of the CGST Act, 2017. The DGAP has further reported that despite the reduction in GST rate from 28% to 18%, the sale price of the products was not reduced by the Respondent on the pretext that the distributors had been following the pricing structure of the manufacturing company and that his distributor’s margin had not increased and hence, he had not derived any additional benefit on account of the reduction in tax rate from 28% to 18%.
6. The DGAP has reported that the investigation revealed that the Respondent had actually increased the base price of the products “Tropic 45 Weekender Black” and “Neolite Strolly 53 360(VIP) FIR” when GST rate on the said products was reduced from 28% to 18%, which implied that the taxguru.in commensurate benefit of rate reduction was not passed on to the recipients by the Respondent.
7. The DGAP has further reported that investigation further revealed that the amount so profiteered by the Respondent in respect of supplies of the products during the period 15.11.2017 to 31.08.2018, worked out to Rs. 18,887/-, the details of which are as below:-
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