Case Law Details
Director-General of Anti-Profiteering Vs Lite Bite Travel Foods Pvt. Ltd (National Anti-Profiteering Authority)
The application had been filed under Rule 128 of the CGST Rules 2017, alleging profiteering in respect of restaurant service supplied by the Respondent (Franchisee of M/s. Subway Systems India Pvt Ltd.). In the application. it was alleged that despite the reduction in the rate of CST from 18% to 5% w.e.f, 15.11.2017, the Respondent had not passed on commensurate benefit since he had increased the base prices of his products.
The Respondent has claimed that he was operating both of his Subway outlets under investigation under the franchisee model, wherein Mis Subway Systems India Pvt. Ltd. was the ultimate authority which controlled the prices, POS and any revision in the prices and the Respondent has no real control over the prices of the products being sold. Therefore, profiteering, if any, should be demanded from the franchisor i.e. M/s Subway India. Upon perusal of the agreement between the Respondent and M/s Subway Systems India Pvt. Ltd_ i e, the franchisor, it is revealed that there isn’t any clause related to the control of the prices or MRP of the products supplied by the Respondent. The Respondent was free to fix the prices of his products. Further, the provisions of Section 171 of the CGST Act, 2017 required a registered person under GST to pass on the benefit of additional ITC or reduction in the rate of tax by way of commensurate reduction in the prices of the goods or services supplied by him Hence, it is the responsibility of the Respondent to comply with the provisions of Section 171 of the CGST Act: 2017. Therefore, the contention made by the Respondent is not correct.
The Respondent has further contended that the right to reasonable profit was a part of the right of trade and any methodology prescribed under Section 171 of the Act, ibid, could not be de-hors a reasonable profit. In this regard, it is pertinent to mention that this Authority doesn’t have the mandate to regulate the same. The Respondent is free to exercise his right to practice 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 the tax. This Authority is charged with the responsibility of ensuring that 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 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. 61.67,097/- as has been computed in Annexure-15 of the DCAP’s Report dated 25.10.201g. Accordingly, the Respondent is directed to reduce his prices commensurately in terms of Rule 133 (3) (a) of the above Rules, Further, since the recipients of the benefit, as determined, are not identifiable, the Respondent is directed to deposit an amount of Rs. 51,67.0971- in two equal parts of Rs. 30,83,548.501- each in the Central Consumer Welfare Fund and the Maharashtra State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable 18% to be calculated starting from the dates on which the above amount was realized by the Respondent from his recipients till the date of its deposit. The aggregate amount of Rs 61,67,097/- shall be deposited, as specified above, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned SGST Commissioner.
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