Director General of Anti-Profiteering Vs. Patanjali Ayurveda Ltd. (NAA)
The Respondent has also claimed that the pricing of products depended on a number of commercial factors. In this connection it would be pertinent to mention that the provisions of Section 171 (1) of the above Act required the Respondent to pass on the benefit of tax reduction to the consumers only and have no mandate to look in to fixing of prices of the products which the Respondent was free to fix. If there was any increase in his costs the Respondent should have increased his prices before 15.11.2017, however, it cannot be accepted that his costs had increased on the intervening night of 14.11.2017/15.11.2017 when the rate reduction had happened which had forced him to increase his prices exactly equal to the reduction in the rate of such tax. Such an uncanny coincidence is unheard off and hence there is no doubt that the Respondent has increased his prices for appropriating the benefit of tax reduction with the intention of denying the above benefit to the consumers. The Respondent has referred to case of Kumar Gandhary vs. KRBL Ltd. 2018-VIL-02-NAA, wherein he has claimed that inflation has been accepted as a reason for price increase by this Authority however, the same is not correct as the rate of tax was increased in this case and not reduced. Further, he has relied on the case of Hardcastle Restaurants Pvt. Ltd. 2018-VIL-11-NAA and NP Foods 2018-VIL-08-NAA and it has been stated that the loss of input tax credit has been factored-in for determination of net profiteering. In this context, it is pertinent to mention that in the above cases the benefit of ITC was denied by the Government with reduction in the rate of tax, therefore to calculate the commensurate benefit, the benefit of ITC loss was taken into consideration. However, in the instant case, no such benefit of ITC has been denied to the Respondent as it is only a case of reduction of tax rates, and hence the Respondent is liable to reduce the prices of his products by way of commensurate reduction in prices as per the provisions of Section 171(1) of the CGST Act, 2017. Therefore, the facts of the cases referred by the Respondent are different from his case and hence, they cannot help him.
The Respondent has also argued that he had to bear loss with the introduction of GST, as rates were increased and he did not increase his prices. In this regard, it is mentioned that Section 171(1) of the CGST Act, 2017 is very clear which requires to reduce the prices with the reduction in rate of tax commensurately. The Respondent had no restriction on increasing his prices when the rates of tax were increased and it was solely his business call not to increase them. However, he cannot deny the benefit of tax reduction on this ground.
The respondent has contended that the investigation is violative of Article 19(1)(g) of the constitution of India. The contention of the Respondent made in this regard is not correct as this Aurhority or the DGAP has not acted in any way as price controller or regulator as they do not have the mandate to regulate the same. The Respondent, is absolutely free to exercise his right to practise any profession, or to carry on any occupation, trade or business, as per the provisions of Article 19 (1) (g) of the Constitution. He can also fix his prices and profit margins in respect of the supplies made by him. Under Section 171 this Authority has only been mandated to ensure that both the benefits of tax reduction and ITC which are the sacrifices of precious tax revenue made from the kitty of the Central and the State Governments are passed on to the end consumers who bear the burden of tax. The intent of this provision is the welfare of the consumers who are voiceless, unorganised and vulnerable. This Authority is charged with the responsibility of ensuring that the both the above benefits are passed on to the general public as per the provisions of Section 171 read with Rule 127 and 133 of the CGST Rules. 2017. This Authority or the DGAP has nowhere interfered with the business decisions of the Respondent and therefore, there is no violation of Article 19 (1) (g) of the Constitution.
Based on the above facts the profiteered amount is determined as Rs. 75,08,64,019/- as per the provisions of Rule 133 (1) of the above Rules as has been computed vide Revised Annexure-8 of the Report dated 06.01.2020. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules. The Respondent is also directed to deposit an amount of Rs. 75,08,64,019/- in the C\NF of the Central and the concerned State Government, as the recipients are not identifiable, as per the provisions of Rule 133 (3) (c) of the above Rules alongwith 18% interest payable from the dates from which the above amount was realised by the Respondent from his recipients till the date of it deposit. The above amount shall be deposited within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned Commissioners CGST/SCST. The State/Union Territory wise amount of benefit to be deposited in the concerned CWF
FULL TEXT OF ORDER OF NATIONAL COMPANY LAW APPELLATE TRIBUNAL,
1. This report dated 13.12.2018, had been received from the above Applicant i.e. the Directorate General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the case are that a reference was received on 08.06.2018 by the above Applicant from the Standing Committee on Anti-profiteering, to conduct a detailed investigation under Rule 129 of the above Rules, in respect of the supplies made by the Respondent, to determine whether the benefit of reduction in the rate of GST from 28% to 18% w.e.f. 15.11.2017 had been passed on by the Respondent to the recipients. The DGAP in his report dated 13.12.2018 had stated that the Respondent did not pass on the benefit of the reduction in the tax rates to his recipients by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act. 2017. In the said report, the DGAP reported that the Respondent had contravened the provisions of Section 171(1) of the CGST Act, 2017.
2. This Authority, after analysis of the submissions placed on record, decided to accord hearing to the concerned parties. During the hearings held on 28.01 2019, 13.02.2019 and 13.03.2019. the Respondent had submitted that there were inconsistencies in the DGAPs calculation of profiteering as there were certain SKUs profiteering on which had been computed twice or thrice and in respect of 6 SKUs on which rate had been reduced from 18% to 12% the reduction had been considered from 18% from 12% by the DGAP.
3. This Authority. after considering the submissions of the Respondent. had found discrepancies in the report of the DGAP dated 13.12.2018 which are as mentioned below:-
a. The Report had not covered all the SKU’s which were impacted by the rate deduction in the period between 01.07.2017 and 14.02.2019.
b. In the case of 6 SKU’s, the calculation of profiteering was worked out on the incorrect rate reduction from 28% to 18%. whereas it should have been from 18% to 12%.
c. There was Duplication/Triplication of the SKU’s in the calculation of the amount of profiteering.
d. The report of the DGAP had not categorically confirmed that all the SKU’s impacted by tax rate deduction post 01.07.2017 were properly investigated.
4. This Authority vide its order passed under Rule 133(4) dated 14.03.2019, directed the DGAP to again conduct a detailed investigation into the matter, after taking into consideration, the submissions made by him at the time of hearings before this Authority. It was also directed that there investigation should be specifically conducted by the DGAP into the aspects mentioned supra and thereafter a comprehensive report should be submitted to this Authority.
5. The DGAP, in compliance to the order dated 14.03.2019 submitted his report under Rule 133(4) on 13.09.2019 in which he stated that, a letter dated 01.04.2019 was sent to the Respondent calling for the sales data for the period from 15.11.2017 to 31.03.2019 for investigation. He also stated that the period covered during the investigation was from 15.11.2017 to 31.03.2019.In response to the said letter, the Respondent vide letters/e-mails dated 12.04.2019. 27.04.2019, 31.05.2019, 13.08.2019 and 12.09.2019 submitted the following: –
a. GSTR-1 & GSTR-3B Returns for the period November, 2017 to March, 2019 for all the registrations held all over India.
b. Details of invoice-wise outward taxable supplies during the period November, 2017 to March, 2019 reconciled with GSTR-1 and GSTR-3B Returns.
c. Sample copies of invoices issued to the Respondent’s dealers. pre and post 15.11.2017.
d. List of all the recipients along with their corresponding category.
6. The DGAP has claimed that at the time of submission of the earlier investigation report dated 13.12.2018, the Respondent had not submitted the sales data in the proper format. Accordingly, during the re-investigation the Respondent was asked to submit the data again which the Respondent submitted and the case had been reinvestigated again on the basis of fresh data submitted by the Respondent. The DGAP also stated that the main issues to be examined were whether the rate of GST on the goods supplied by the Respondent was reduced from 28% to 18% & 18% to 12°/0 w.e.f. 15.11.2017 and if so. whether the benefit of such reduction in the rates of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. It was observed by the DGAP that the Central Government, on the recommendation of the GST Council vide Notification No. 41/2017-Central Tax (Rate) dated 14.11 2017.had reduced GST rate on a number of goods supplied by the Respondent from 28% to 18% & from 18% to 12% w.e.f. 15.11.2017. which has not been contested by the Respondent.
7. The DGAP also stated that it was important to examine Section 171 of the Central Goods and Services Tax Act, 2017 which governed the anti-profiteering provisions under GST. Section 171(1) reads as “any reduction in 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.” Thus, the legal requirement was abundantly clear that in the event of the benefit of input tax credit or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services supplied. Such reduction in price could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of input tax credit. This was the only legally prescribed mechanism to pass on the benefit of input tax credit or reduction in the rate of tax under the GST regime and there was no other method that a supplier could adopt to pass on such benefits.
8. The DGAP calculated profiteering of various SKU’s, an example of the calculation, is given below:-
Table
(Amount in Rupees)
