Case Law Details
State of officer Vs Bonne Sante (NAA)
The Respondent has further contended that the DGAP, while calculating the profiteered amount, was wrongly added a 5% notional amount without explaining any reasons and hence, the profiteered amount be reduced appropriately. This contention of the Respondent is not correct because the provisions of Section 171 (1) and (2) of the CGST Act, 2017 mandate that the benefit of reduction in the tax rate is to be passed on to the recipients/ customers by way of commensurate reduction in price, which includes both, the base price and the tax paid. In this connection, it would be appropriate to mention that the Respondent has not only collected excess base prices from the customers which they were not required to pay due to the reduction in the rate of tax but he has also compelled them to pay additional GST on these excess base prices which they should not have paid. By doing so, the Respondent has defeated the very objective of both the Central as well as the State Governments which aimed to provide the benefit of rate reduction to the general public. The Respondent was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of tax reduction to his customers by charging excess GST. Had he not charged the excess GST the customers would have paid less price while purchasing goods from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent. The above amount can also not be paid to the eligible buyers from the Consumer Welfare Funds as the Respondent has not deposited it in the above Fund. Therefore, the above contention of the Respondent is untenable and hence it cannot be accepted.
The Respondent has relied upon the judgment passed by this Authority in the case of M/s Flipkart vide Order No. 05/2018 dated 18th July 2018 wherein it had been recorded that withdrawal of discounts was the prerogative of the supplier and did amount to On perusal of the above-cited case, it is observed that the issue in that case related to denial of discount of Rs. 500/-, which had been initially offered by the supplier to the buyer at the time of placing the order, but the same was withdrawn by the supplier at the time of supply. In these circumstances, it was held by this Authority that the withdrawal of such discount does not amount to profiteering, since the said discount offered had no connection with the base price of the products supplied. The facts of that case are totally at variance with the facts of the present case wherein the Respondent has claimed that giving discounts was a norm in the competitive world and a call of business. Therefore, the case cited above has no relevance in the context of the present case.
It is clear from the plain reading of Section 171(1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP’s Report that there has been a reduction in the rate of tax from 18% to 5% w.e.f. 15.11.2017, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 in the post GST period. It has been revealed from the DGAP’s Report that the ITC which was available to the Respondent during the period July 2017 to October 2017 is 7.39% of the net taxable turnover of restaurant services supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the ITC was not available to the Respondent. The DGAP in his Report has stated that the Respondent had increased the base prices of different items by more than 7.39% i.e. by more than what was required to offset the impact of denial of ITC, supplied as a part of restaurant services to make up for the denial of ITC post-GST rate reduction and on comparison of pre and post GST rate reduction prices of the items sold in respect of items sold. Accordingly, the quantum of profiteering has been computed to Rs. 7,33,043/- as per Annexure-10 of the DGAP’s Report dated 13.09.2019, which is correct and can be relied upon.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
Please become a Premium member. If you are already a Premium member, login here to access the full content.
