Principal Commissioner Vs Shiva Parvathi Theatre 70 MM (NAA)
The main issues to be examined in the present matter were whether the GST rate on Services by way of admission to exhibition of cinematography films where price of admission ticket is above one hundred rupees” was reduced from 28% to 18% w.e.f. 01.01.2019 and Services by way of admission exhibition of cinematograph films where the price of the admission ticket is one hundred rupees or less” was reduced from 18% to 12% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients. in terms of Section 171 of the CGST Act, 2017.
It has been established that the Respondent has resorted to profiteering by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate on “Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less” from 18% to 12% w e.f. 01.01.2019 to 30.06.2019. On this account, the Respondent has realized an additional amount to the tune of Rs. 5,31.625/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering is determined as Rs. 5,31,625/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his tickets as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of Rs. 5,31,625/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of Rs. 5,31,625/- in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF in two equal parts as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. The above amount shall be deposited within a period of 3 months from the date of receipt of this Order failing which the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the SGST Act, 2017.
25. It is also evident from the above narration of the facts that the Respondent has denied the benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171(1) during the period from 01.01.2019 to 30.06.2019 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. However, perusal of the provision of Section 171 (3A) of the CGST Act, 2017 under which penalty has been prescribed for the above violation shows that Section 171 (3A) of the Act has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.01.2019 to 30.06.2019 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) of the Act cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 26.02.2020 has been received by this Authority from the Applicant No. 2, i.e. the Director-General of Anti-Profiteering (DGAP) after a detailed investigation in line with Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the DGAP has received a reference from the Standing Committee on Anti- Profiteering in respect of an application filed by the Applicant No. 1, under Rule 128 of the CGST Rules, 2017 alleging profiteering by the Respondent in respect of the supply of Services by way of admission to exhibition of cinematograph films’ despite the reduction in the rate of GST from 28% to 12% w.e.f. 01.01.2019.
2. Vide his Report, the DGAP has reported that Applicant No. 1 had alleged that the Respondent had not passed on the benefit of reduction in the GST rate on “Services by way of admission to exhibition of cinematograph films” from 28% to 12% which came into effect on 01.01.2019 vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Along with the Application form APAF-1, Letter dated 26.03.2019 of the Respondent requesting for information regarding reduction of movie tickets prices and letter dated 29.03 2019 of the Applicant No. 1 to the Standing Committee on Anti-profiteering.
3. The DGAP has stated that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the Rules was issued on 08.07.2019 calling upon the Respondent to respond as to whether he admitted that he had not passed on the benefit of reduction in GST rate w.e.f. 01.01.2019 to his recipients by way of commensurate reduction in prices and, if so, to suo moto determine the quantum thereof and indicate the same in his reply to the notice as well as to furnish all documents in support of his reply The Respondent was also allowed to inspect the non-confidential evidence/information which formed the basis of the said notice, during the period from 15.07.2019 to 17.07.2019. However, the Respondent did not avail of the said opportunity.
4. The DGAP has further stated that in response to the notice dated 08.07.2019, the Respondent did not submit the requisite documents. Hence, reminder letters dated 30.07.2019, 09.08.2019 and 04.09.2019 were issued to him. However, the Respondent did not submit any document even after the above reminder letters. Therefore, Summons dated 24.09.2019, 18.10.2019 and 18.11.2019 under Section 70 of CGST Act, 2017 read with Rule 132 of the Rules, were issued to the Director of the Respondent to appear in he office of Directorate General of Anti-profiteering for submission of the requisite documents/information. However, no reply/submissions were given by the Respondent in reply to the notice dated 08.07.2019, reminder letters. and three Summons. However, the notices/letters sent to the Respondent by e-mails/Speed Post/Registered Post were received by him. Further, vide letter dated 16.12.2019, the Applicant No. 1 was also requested to obtain the documents/information required for investigation from the Respondent.
5. The DGAP has further stated that in response to the letter dated 16.12.2019, the Applicant No. 1 vide HQAE No. 266/2018-19 dated 31.12.2019 forwarded the documents required for investigation. Further, it was also informed that the GST Registration of the Respondent had been cancelled suo moto by the Range Officer, KPHB Range on 07.01.2019 as the Respondent had failed to file 6 consecutive returns. Hence, GSTR-1 and GSTR-3B Returns for the period of December 2018 to June 2019 were not available.
6. The DGAP has further reported that the time limit to complete the investigation was extended up to 27.03.2020 by this Authority vide Order dated 12.12.2019. in terms of Rule 129(6) of the CGST Rules, 2017.
7. DGAP has reported that the Applicant No. 1 has forwarded soft copy of the below-mentioned documents/information vide e-mail dated 13.02.2020:-
(a) Invoice-wise details of all outward taxable supplies of the movie admission tickets impacted by GST rate reduction w.e.f. 01.01.2019, during the period from 01.09.2018 to 30.06.2019.
(b) Price List of the aforesaid movie admission tickets, pre and post 01 01.2019.
(c) Sample copies of the invoices/tickets, pre and post 01.01.2019.
8. The DGAP has reported that vide e-mail dated 13.02 2020, the Applicant No. 1 was allowed to inspect the non-confidential documents/reply of the Respondent on 17.02.2020 to 18.02.2020, which was not availed of by the Applicant No.1. The DGAP has further reported that the period covered by the current investigation was from 01.01.2019 to 30 06.2019.
9. The DGAP also reported that he has examined the reference from the Standing Committee on Anti-profiteering and the documents/evidence on record. The main issues to be examined in the present matter were whether the GST rate on “Services by way of admission to exhibition of cinematography films where price of admission ticket is above one hundred rupees” was reduced from 28% to 18% w.e.f. 01.01.2019 and “Services by way of admission exhibition of cinematograph films where the price of the admission ticket is one hundred rupees or less” was reduced from 18% to 12% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients. in terms of Section 171 of the CGST Act, 2017.
10. It has also been mentioned by the DGAP that the Central Government, on the recommendation of the GST Council, reduced the GST rate on “Services by way of admission exhibition of cinematograph films where price of admission ticket is one hundred rupees or less” from 18% to 12% w.e.f. 27.07.2018, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 and this matter of fact had not been contested by the Respondent.
11. The DGAP has also stated that as per the provisions of Section 171 of the CGST Act, 2017 the legal requirement was very clear that in the event of a benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in prices of the goods or services. Such reduction could be only in terms of money, so that the final price payable by a consumer gets reduced commensurate with the reduction in the tax rate. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method to pass on such benefits.
12. The DGAP has also reported that the Applicant No. 1, in his letter dated 29.03.2019 and the Annexure attached to APAF-I has furnished the details of the price being charged before 01.01.2019 and price charged from 01.01.2019 and had pointed out that the Respondent was selling tickets of different categories priced at Rs. 100/- or less than Rs.100/- (excluding Tax). Hence the investigation was limited to a reduction in the rate of GST from 18% to 12% only.
13. It has also been reported by the DGAP that as per the sales data of the Respondent, it was revealed that he was dealing in three categories of admission tickets amounting to Rs 30/-, Rs. 70/- and Rs. 100/- (inclusive of tax) sold by him during the pre-rate reduction period. In the post rate reduction period effective from 01.01.2019 the price of the admission tickets (inclusive of tax) in three categories was not changed or reduced and the cum tax price of three categories of admission tickets remained same after the rate reduction and it appeared that the benefit of reduction in the tax rate in respect of the cinematography services to the extent of 6% (18% – 12%) was not passed on to the recipients by the Respondent.
14. The DGAP has further stated that on the issue of determination and quantification of the profiteering by the Respondent, it was observed from the details of the sales made available that the Respondent had increased the base prices of the admission ticket when the GST rate was reduced from 18% to 12% w.e.f. 01.01.2019. The same has been illustrated by the DGAP in the below Table-A:-
Table-A
(Amount in Rs.)
