Director-General of Anti-Profiteering Vs Dange Enterprises (NAA)
Authority also find that after the closure of the hearing, Respondent vide his email dated 13.06.2022 has stated that he has agreed to submit the requisite data in the prescribed format as required by the DGAP for the entire period of investigation. In the given situation, as narrated above, it would be prudent that last opportunity may be provided to the Respondent to provide complete information for the investigation period within one month of issue of this order, failing which, DGAP would calculate the amount of profiteering based on the information provided by the Respondent vide email dated 05.04.2022 and extrapolating the profiteered percentage of the limited period of information provided to the over all investigation period.
15. In view of the above said observation, the matter is remanded back to the DGAP to carry out further investigation in terms of Rule 133(4) with a direction that the investigation should be completed and a report should be sent to the Authority within three months. It is reiterated that if the Respondent does not provide relevant and complete information for the investigation period all means available under the provisions of the CGST Act, 2017 and rules made thereunder shall be utilised.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. A Report dated 16.09.2021 has been received from the Director General of Anti-Profiteering (DGAP) after detailed re-investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017 pursuant to Interim Order No 25/2020 dated 20.11.2020 passed by National Anti-Profiteering Authority (NAA or Authority) in respect of the investigation report of DGAP dated 01.07.2019. The Authority had ordered reinvestigation under the rule 133 (4) as per the following grounds:-
a. The Respondent has not cooperated in the investigation and has not provided the requisite data to the DGAP which was required to examine whether the benefit of reduction in rate of tax has been passed on to the customers or not. Hence, the DGAP, in absence of the requisite data, was unable to compute the amount of profiteering as per the standard methodology adopted in similar cases of restaurant services.
b. This Authority observed that the Respondent has failed to comply with the repeatd directions of not only the DGAP to furnish the requisite data/information during the investigation but So the repeated directions of this Authority.
c. Hence, the case was remanded back to the DGAP by directing him to obtain the requisite data/information by using all the means available within the law and complete the investigation and submit his report to this Authority.
2. The brief facts of the case are that a reference was received by the DGAP from the Standing Committee on Anti-Profiteering on 01.07.2019 recommending a detailed investigation in respect of an application under Rule 128 (2) 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.). It was alleged that despite the reduction in the rate of GST from 18% to 5% w.e.f. 15.11.2017, the Respondent had not passed on the commensurate benefit of tax-rate reduction as he had increased the base prices of his products. On receipt of the said reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 (3) of the CGST Rules, 2017 was issued on 12.07.2019 by the DGAP, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in the GST rate w.e.f. 15.11.2017, had not been passed on 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 furnish all the supporting documents. The Respondent was also allowed to inspect the relied upon non-confidential evidence/information which formed the basis of the investigation between 18.07.2019 and 22.07.2019, which was however not availed of by the Respondent. Vide the above mentioned Report, the DGAP has stated:-
a. That in response to the notice dated 12.07.2019 and subsequent reminders, the Respondent submitted his replies vide his letters/e- mails dated 01.10.2019, 17.10.2019, 31.10.2019, 18.02.2020, 25.02.2020, 26.02.2020, 28.02.2020, 03.03.2020, 05.03.2020, 06.03.2020, and 13.03.2020.
b. That vide his e-mail dated 18.02.2020, the Respondent submitted certain data and information in respect of his sales, itemization report and his cash reports to the DGAP and that vide his e-mails dated 25.02.2020 and 26.02.2020, he furnished his GSTR-1 and GSTR-3B Returns; that vide his e-mail dated 03.03.2020, the Respondent submitted that as a franchisee, the pricing of his products was controlled by M/s Subway Systems India Pvt. Ltd. (the franchisor) and that he should not be penalized for adopting the prices suggested by his franchisor; that as a franchisee, he had nothing to do with the issue of passing of the benefit to the customers/ recipients, post the reduction of GST rate; that he had been made to understand by his franchisor that if he did not get any ITC in the 5% GST slab, then he would be at a loss and for that reason he revised his product pricing upwards to offset the loss on account of non-availability of ITC; further, that the sales data from 01 July 2017 to 01 March 2018 was unavailable with him but the same was available with his franchisor, SSIPL; and that the data for the period from 02 March 2018 to 31 July 2019 had been made available to him by his franchisor; that the Respondent had requested the DGAP for a time of two months to submit the requisite data, as requisitioned by the DGAP; that the Respondent also submitted that the requisite data could be obtained by the DGAP from his franchisor, M/s Subway Systems India Pvt. Ltd. ; and that the franchisor not only had the requisite records but also had the manpower and resources to cull the data.
c. That a notice of initiation of investigation was issued to the Respondent on 12.07.2019. Subsequently, reminders 01.08.2019, 24.09.2019 & 15.10.2019 and Summons dated 24.10.2019 & 01.11.2019 were also Issued, but the Respondent did not submit the requisite details/ information. Since no information was forthcoming from the Respondent, letters dated 13.12.2019, 09.01.2020, 24.01.2020 & 14.02.2020 were issued to the Additional Commissioner (Anti-Evasion) requesting necessary action to get the requisite information and details from the Respondent. Further, letters dated 24.01.2020, 07.02.2020 & 14.02.2020 were also issued by the DGAP to the Commissioner, CGST Belapur Commissionerate, Navi Mumbai requesting him to depute an officer to get the requisite documents from the Respondent.
d. That the Respondent was also issued another (fourth) reminder dated 14.02.2020 asking him to submit the required details/documents. Further, since the Respondent was a franchisee of M/s Subway Systems India Pvt. Ltd., the requisite details/ information in respect of the said franchisee was also solicited by the DGAP from the franchisor vide letter dated 14.02.2020.
e. That vide letter dated 14.02.2020, the Joint Commissioner, CGST & CEx., Belapur Commissionerate forwarded certain documents gathered from the Respondent. That on examining these documents, it was found that the Respondent had provided the copies of GSTR -1 and GSTR-36 Returns for the period from July 2017 to June 2019. It was also found that the other documents gathered and forwarded by the above said Commissionerate, such as cash reports, were not relevant to the investigation.
f. That the Respondent also furnished partial data/ information vide his successive emails dated 18.02.2020, 25.02.2020, 26.02.2020 & 28.02.2020, which comprised his GSTR-1 and GSTR-3B Returns and cash reports, as also the itemization reports and sales-details for the period from June 2017 to Oct 2017. However, the submissions made by the Respondent did not contain any data/ details pertaining to the period from November 2017 to June 2019. It was also found that the Respondent had not provided product-wise invoice-wise outward taxable sales data for even a single month, which had been requisitioned by the DGAP as the same was essential for the investigation and hence the submitted by the Respondent was incomplete.
g. That the Respondent, vide letter/e-mail dated 03.03.2020, has submitted that:-
i. the data/ information for the period 01/07/2017 to 01/03/2018 was not available with him, however, the same was available with M/s Subway Systems India Pvt. Ltd. (SSIPL) the franchisor;
ii. even the data/ information that was available at his end was in ‘text’ format and copying from text format to ‘M.S. word’ document format would take him two months and requested the DGAP for at least two months to submit the data;
iii. Hi. The data/ information could be procured by the DGAP from SSIPL as it was available with SSIPL.
h. That summons were issued to Chief Financial Officer SSIPL, the franchisor, on 06.03.2020 seeking production of data/ information pertaining to the Respondent before 16.03.2020 but since the summons were not complied with by SSIPL, another summons was issued to the Chief Financial Officer SSIPL seeking furnishing of the data/ information by 19.03.2020. Since the required data/ information was not furnished by SSIPL despite the abovementioned two summons, third summons were issued to the Chief Financial Officer SSIPL on 19.03.2020 seeking the information. However, neither the requisite data/ information nor any reply was received from SSIPL in response to the summons.
i. That despite the above-mentioned steps taken by it and despite all possible efforts made by the officers concerned, the Respondent and SSIPL, the franchisor, did not submit the data/ information that had been solicited from them for completing the investigation.
j. That since the Respondent, as also SSIPL the franchisor, was not cooperating in the investigation by not providing the requisite data/ information on one pretext or the other, DGAP was not able to compute the amount of profiteering as per the standard methodology followed in similar cases of restaurant services. The DGAP has further reported that in the absence of the requisite data required for the investigation as per the standard practice adopted in other such similar cases of franchisees of SSIPL, the DGAP was left with no option but to compute the amount of profiteering, taking the other similar cases of Subway franchisees investigated by the DGAP as the basis, which is detailed in Table-A below:-
k. That amongst the above-listed cases, the highest ‘profiteering to turnover’ ratio for exactly the same period of investigation had been computed in the case of M/s Neeva Foods Pvt Ltd, another franchisee of SSIPL. Accordingly, the ‘profiteering to turnover’ ratio computed in the case of M/S Neeva Foods Pvt. Ltd., i.e. 16.09%, was adopted as the basis of quantification of the quantum of profiteering in the instant case as well. DGAP has further stated that the aggregate of the monthly taxable turnovers of the Respondent, as reflected in his GSTR-3B returns for the period from 15.11.2017 to 30.06.2019 worked out to Rs. 1,78,65,489/- as shown in table-B below:-
