Sh. Ajay Jagga Vs M/s Bhatia Confectioners (National Anti-Profiteering Authority)
1. A Report dated 31.08.2018 was received from the Director-General of Anti-Profiteering (DGAP) consequent upon a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules 2017. Vide the Report, the DGAP reported that an application dated 14.12.2017 was filed before the Standing Committee on Anti- profiteering under the provisions of Rula 128 Of the Central Goods and Services Tax Rules, 2017 by Applicant No. 1 against Respondent No. 1, whereby Applicant No. 1 had alleged that Respondent No. 1 had not passed on the benefit of reduction in the GST rate on “Kiwi Shoe Polish” (hereinafter referred to as impugned product) from 28% to 18% w.e.f. 15.11.2017 and had instead increased the base price of the impugned product supplied by him so that there was no reduction in the final price of the item despite the reduction in the rate of tax. In support of his allegation, Applicant No. 1 enclosed with application, a copy of the invoice/bill No. CS-64964 dated 13.12,2017 the in respect of the supply of “Kiwi Shoe Polish” issued by Respondent No. 1.
2 The DGAP, vide his Report dated 31.08.2018, reported that the above application was examined by the Standing Committee on Anti- profiteering in its meeting held on 28.02.2018, wherein it was decided to refer the matter to the DGAP, for initiating a detailed investigation to determine whether the benefit of reduction in the rate of tax on the said item had been passed on by the Respondent No. 1 to the applicant No. 1 and other customers. On receipt of the reference from the Standing Committee on Anti-profiteering, the DGAP observed that the said application was not accompanied by the requisite evidence of profiteering and thus concluded that the allegation of profiteering was not substantiated. Accordingly, a closure Report vide letter F.No D-22011/API/11/2018/1023 dated 11.04.2018 was submitted by the DGAP to this Authority. In response, this Authority, vide its Order No. 2/2018 dated 24.04.2018, directed the DGAP to conduct fresh investigation in the case and submit a detailed and reasoned Report. Thereupon, the DGAP initiated fresh investigation and in that process, sent an email dated 09.05.2018 to Applicant No. 1, seeking additional details/documents available with him to substantiate his allegation. Applicant No. 1, vide email dated 12.05.2018, replied that the Respondent No. 1 had not commensurately reduced the price of the “Kiwi Shoe Polish” and enclosed a of invoice no. CS-64964 dated 13.12.2017 issued by the Respondent as the supporting evidence. Thereafter, the DGAP issued a letter dated 14.05.2018 to Respondent No. 1 asking him to submit the details regarding the pre- GST and post-GST prices charged by him for the supplies of the above item and certain other details required for the investigation.
3. In Respondent No. 1, vida his letter dated 22.05.2018, submitted copies of sample purchase invoices and sales invoices to the DGAP. Based on the information received from him the DGAP issued a Notice to Respondent No. 1 on 18.06.2018 under Rule 129 of the Central Goods and Services Tax Rules, 2017 asking him whether he admitted that he had not passed on the benefit of reduction in the rate of tax to Applicant No. 1 by way of a commensurate reduction in prices in 1he post rate-reduction period and to suo moto determine the quantum of benefit not passed on by him. Besides, Respondent No. 1 was also allowed to inspect the non- confidential evidence/ information received from Applicant No. 1 on any working day from 25.06.2018 tD 27.06.2018, but Respondent No 1 did not avail of this opportunity. Similarly, Applicant No. 1 was also allowed to inspect the non confidential evidence/reply furnished by Respondent No, 1 on any working day from 29.08.2018 to 31.08.2018. Applicant No. 1 also did not avail of the opportunity.
4. The DGAP has reported that Respondent No. 1, vide his reply dated 22.05.2018, submitted that the supply under invoice CS-64964 dated 13,12,2017 was made by him out of the stock he had purchased from Respondent No. 2 on which he had borne GST ©18% and had later sold the same charging GST 18%, and thus, the provisions of Section 171 of the Central Goods and Services Tax Act, 2017 were not attracted in his case.
5. Respondent 1 also furnished copies of his purchase invoices of the pre and post-tax rate reduction periods and based thereon, submitted that his gross profit margin relative to the percentage of MRP during the period before 15.11.2017 and the period after 15.11.2017 remained constant, but his costs had increased from Rs. 43.63 to Rs. 50. He reiterated that in the case of the item Kiwi Shoe Polish, he had not profiteered at all.
6. Further, vide his email dated 07.2018, Respondent No. 1 furnished before the DGAP, certain records that included the details of invoice- wise outward taxable supplies (offer than zermrated) from 01.11.2017 to 30.09.2018, copies of his GSTR-1 and GSTR-3B returns from November 2017 to March 2018, and certain sample copies of his purchase and sale invoices.
7. DGAP further reported that the details of the invoice—wise outward supplies submitted by the Respondent were for the month of November 2017 only and the submissions did not contain the description of the goods and the place of Accordingly, the DGAP issued an email dated 09.07.2018 to the Respondent to submit the same. Respondent No. 1, vide email dated 02.08.2018, submitted the invoice-wise outward supply for the item in question for the period November 2017 to March 2018. Further, vide his email dated 13.07.2018, the Respondent No.1 also submitted that as his aggregate turnover was more than Rs. 1.5 Cr. but less than Rs. 5 Cr. annually, he had been maintaining (and mentioning on his invoices) the HSN details of his outward supplies at 2 digit level only.
8. Based on the case record and the submissions made by Respondent, the DGAP investigated the issues of whether the GST rate applicable to the item “Shoe Polish” was reduced e.f. 15.11.2017 and if so, whether the benefit of such reduction in the rate of tax had been passed on by the Respondent No. 1 to his customers in terms of Section 171 of the Central Goods and Services Tax Act, 2017. In this context, the DGAP has reported that the Central Government, on the recommendation of the GST Council, had reduced the GST rate applicable to Shoe Polish from 28% to 18% w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 4.11.2017 and the said fact has not been contested by Respondent No. 1. The DGAP has further reported that to pass on the benefit of reduction in the rate of tax from 28% to 18%, the Respondent No. 1 was required to sell the above goods at the pre- 15.11.2017 base price and charge lower GST @18% on the said base price w.e.f. 15.11.2017. The DGAP has further stated that as a supplier registered under GST No. 04ABYPK3880F1ZB, it was the Respondent No. 1’s statutory responsibility and obligation to pass on the benefit of reduction in the GST rate to his customers by way of a commensurate reduction in price.
9. The DGAP has further reported that it was evident from the sales data submitted by Respondent No. 1 that he had increased the base price of “Kiwi Shae Polish” supplied by him in the post-tax rate reduction period, i.e. w.e.f. 15.11.2017, from Rs. 38.28 to Rs. 46.61. The DGAP has also found that the base price was increased by the Respondent No. , immediately after the tax rate reduction, by such an extent that even with the incidence of lower GST@18% (as against 28% in the pre-tax reduction period), the cum-tax price of the said goods increased from Rs. 47.53 (pre 15.11.2017) to Rs. 53.35 (post 15.11.2017). Thus, by increasing the base price of the goods and charging GST at the lower rate of 18% on en increased base price. the Respondent No. 1 had not passed on the benefit of the tax rate reduction to his recipients. The DGAP has also reported that as per sales data. submitted by Respondent No. 1, the place of supply In respect of all his supplied, was the Union Territory of Chandigarh and that the .amount of profiteering in respect of Respondent’s supplies of the Item, Kiwi Shoe Palish, computed for the period from 15.11.2017 to 31.03.2018, worked out to Rs. 181/-, details of which are in the Table-A below:-
10. The abave-referred Report was considered by the Authority in its meeting held on 09.2018 and accordingly, Respondent No. 1 and the Applicants were allowed ari opportunity of being heard on 26.06,2018. Whereas, Respondent No. 1 was represented by Sh. Rohit Garg. Chartarad Accountant & Sh. Kunal Bhatia, Authorised Representatives, and Applicant No. 2 was represented by Sh. Anwar Ali, Additional Commissioner, nons appeared for Applicant No. 1.
11. Respondent 1 filed his written submissions dated 26,09.2018 before this Authority as also during the hearing, whereby he submitted that he was a retail trader based in Chandigarh and was dealing in confectionery and kirana items and was engaged in the purchase of MRP based confectionery/ kirana items bought from whole salers manufacturers for resale thereof and that he was not a manufacturer of any item and hence he had no control on the MRP of the products supplied by him.
12. In response to para No. 13 of DGAP’s Report dated 31.08.2018, Respondent No. 1 submitted before this Authority that he increased the price charged (inclusive of GST) on his supplies of the impugned product to his recipients from Rs. 47.53/- to Rs. 53.35/- in the period after 15.11.2017 because the manufacturer (his supplier) had increased the MRP of “Kiwi Shoe Polish” from Rs. 49 to Rs,55 post 11.2017 and hence his own purchase price (cost), as a retailer, had increased from Rs. 44.54/- to Rs. 50/- post 15.11.2017, despite the GST rate reduction from 28% to 18%. In support of his claim, Respondent No. 1 submitted the following chart showing the comparative details of his cost sans taxes, the tax rate, the tax amount, the total cost, MRP of the product and the gross profit margin he earned in the period immediately before 15.11.2017 and the period after 15.11.2017:-
