Shri C. P. Rao Vs M/s Unicharm India Pvt. Ltd. (NAA)
It is revealed that the Central Govt. vide Notification No.19/2018-Central Tax (Rate) dated 26.07.2018 the Government had reduced the rate of GST from 12% to NIL without ITC in respect of Sanitary Napkins with effect from 27.07.2018, the benefit of which was required to be passed on to the recipients as per the provisions of Section 171 of the CGST Act, 2017. From the above discussion and the invoices available, it is revealed that the base price of the product “Sofy Bodyfit XL 6S” was increased from Rs. 33.08/- to Rs. 37.05/-, when the rate of tax was reduced from 12% to NIL% with effect from 27.07.2018. Thus, by increasing the base price of the product, post-GST rate reduction, the benefit of reduction in tax rate was not passed on to the recipients.
Further, we observe that the Respondent No. 1 claims to have passed on the benefit of reduction in the rate of tax by reducing MRP. However on perusal of the invoices on the basis of which complaint has been made it is clear that there was increase in the base price while the MRP had remained the same. Notwithstanding the fact that there had been reduction in MRP and the Respondent No. 1 had reduced his MRP, we find that it has not been commensurate with the net reduction in the rate of tax and that the benefit has not reached all the recipients which establishes contravention of the provisions of Section 171(1) of the CGST Act, 2017.
After the perusal of Annexure-31 of the DGAP report, it is established beyond any doubt that the Respondent No. 1 had increased the base price w.e.f. 27.07.2019 which clearly shows that he had deliberately in conscious disregard of the provisions of Section 171 of the above Act had resorted to profiteering as he had no ground whatsoever to increase his prices on the eve of tax reduction.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The brief facts of the case are that under Rule 128 of the Central Goods and Services Tax (CGST) Rules, 2017, the Applicant No. 1 vide his letter dated 03.08.2018, addressed to the Member (Budget), Central Board of Indirect Taxes and Customs (CBIC), informed that the prices of “Sanitary Napkins” hereinafter referred to as “the product” were not reduced by the Respondent No. 1 and Respondent No. 2, despite reduction in the rate of GST on the said product from 12% to Nil w.e.f. 27.07.2018.
2. The above issue was examined by the Standing Committee on Anti-profiteering in its meeting held on 06.09.2018, wherein it was decided, to refer the matter to the Directorate General of Anti-Profiteering (DGAP) to initiate detailed investigation in the matter and collect evidence necessary to determine whether the benefit of reduction in the rate of GST on supply of the products had been passed on by the Respondents to the recipients.
3. An Application dated 02.08.2018, under Rule 128 of the CGST Rules, 2017 was also filed by the Applicant No. 2 against the Respondent No. 1 for selling of the product at the same price even after rate reduction w.e.f 27.07.2018. The same was forwarded to the DGAP after it was examined in the meeting held by the Standing Committee on 08.10.2018.
4. The DGAP, after completing the investigation has submitted his report under Rule 129 (6) of CGST Rules, 2017 on 29.03.2019 pertaining to the period w.e.f. 27.07.2018 to 30.09.2018.
5. The DGAP has stated that a notice under Rule 129 of the CGST Rules, 2017 was issued on 29.10.2018, calling upon the Respondents to reply as to whether they admitted that the benefit of GST rate reduction had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in their reply to the notice along with all supporting documents. The Respondents were also given an opportunity to inspect the non-confidential evidences/information furnished by the above Applicants.
6. The DGAP in his Report has also stated that the Applicant No. 1 had submitted supporting evidences in the form of copies of tax invoices of the Respondent No. 2 dated 18.07.2018 and 02.08.2018, as per the details furnished in table below:-
