Director General of Anti-Profiteering Vs J.P. and Sons (NAA)
NAA has observed that the Respondent, M/s J.P. and Sons was a distributor of M/s Johnson & Johnson Pvt. Ltd. The Authority finds that M/s Johnson & Johnson Pvt. Ltd. was investigated by the DGAP for allegations of profiteering is as much he has not passed on the benefit: of reduction of GST rate after the said Notification dated 14.11.2017 and the Authority has found him violating the provisions of Section 171 of the CGST Act, 2017 for the products sold by him for the period from 15.11.2017 to 31.12.2018, and, this Authority vide Order No. 77/2019 dated 23.12.2019, has also confirmed profiteering to the tune of Rs. 230,40,74,132/- against M/s Johnson & Johnson Pvt. Ltd. for the period from 15.11.2017 to 31.12.2018.
In view of the above facts, wherein the period of investigation of the Respondent i.e. 01.04.2018 to 30.11.2018 is overlapping with the Authority’s Order No. 77/2019 dated 23.12.2019, this Authority is of the opinion that the amount of profiteering calculated against the Respondent may have been already calculated and confirmed against M/s Johnson & Johnson Pvt. Ltd. as the period of investigation in the present case is already covered in the period of investigation in case of M/s Johnson & Johnson Pvt. Ltd. and the products on which profiteering has been calculated in the present case, have been included in the case of M/s Johnson & Johnson Pvt. Ltd.
Based on the above reasons and without going into the merits of the other submissions filed by the Respondent at this stage and to avoid the duplication and doubling of confirming of profiteered amount, this Authority directs the DGAP to re-investigate/re-examine the matter and make sure whether the amount of profiteering calculated in the present case has already been considered in the case of M/s Johnson & Johnson Pvt. Ltd. or not, under Rule 133(4) of the CGST Rules, 2017
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1 The present Report dated 14.07.2021 has been received by the National Anti-Profiteering Authority (NAA or the Authority) from Applicant No. 1 i.e. the Director General of Anti-Profiteering (DGAP) after further investigation in pursuance of this Authority’s Order No. 16/2018 dated 06.12.2018. The brief facts of the present case are that the DGAP vide its Report dated 31.07.2018, furnished to the Authority under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017, had conducted an investigation against the Respondent and found that the Respondent had not passed on the benefit of reduction in the rate of tax to the customers by way of commensurate reduction in the price of the product sold by him as per the provisions of Section 171 (1) of the CGST Act, 2017. The DGAP under its investigation had covered a period from 15.11.2017 to 31.03.2018. In the Report dated 31.07.2018, the DGAP had submitted that the Respondent have not passed on the benefit of GST rate reduction to the customers and had unduly profiteered itself by an amount of Rs. 5,01,646/-, which is contravention of the provisions of Section 171 (1) of the CGST Act, 2017. After hearing both the parties this Authority vide its Order No. 16/2018 dated 06.12.2018 had confirmed the profiteered amount as Rs. 5,01,646/- as per the provisions of Section 171 (2) of the CGST Act, 2017 read with Rule 133 (1) of the CGST Rules, 2017 and it was also held that the Respondent had not passed on the benefit of rate reduction to the customers between the period from 15.11.2017 to 31.03.2018 and therefore, had violated provisions of Section 171 of the CGST Act, 2017. Further, this Authority in para no. 23 of the said Order, has directed the DGAP to further investigate the quantum of profiteering which the Respondent has made thereafter and submit its Report.
2. The DGAP in his Report dated 14.07.2021, inter-alia stated that: –
i. On receipt of the aforesaid Order from this Authority on 07.12.2018, letter/e-mail dated 18.12.2018, followed by the reminders dated, 06.11.2020 15.12.2020, 25.01.2021, 07.04.2021, 13.04.2021 and 18.05.2021 and a summons dated 23.03.2021 were issued to Respondent seeking requisite documents/details for further investigation.
ii. The period covered by the current investigation was from 01.04.2018 to 30.11.2018.
iii. The Respondent submitted his reply vide letters/e-mails dated 04.12.2020, 01.02.2021, 01.02.2021, 05.04.2021, 12.04.2021 and 25.05.2021.
iv. Vide the aforementioned letters/e-mails; the Respondent submitted the following documents/information:
a. Details of invoice-wise outward taxable supplies for the period of July, 2017 to November, 2017 & April, 2018 to November, 2018 for all products impacted by GST rate reduction w.e.f. 15.11.2017.
b. Copies of GSTR-1 and GSTR-3B for the period July, 2017 to November, 2017 & April, 2018 to November, 2018.
c. Copies of sample invoices for the Pre and Post rate reduction period.
d. Price List for the Pre and Post rate reduction period.
v. The replies of the Respondent and the documents/evidences on record had been carefully examined. The issue for determination is whether the Respondent had reduced prices of the goods impacted by GST rate reduction vide Notification 41/2017 dated 14.11.2017, in compliance of this Authority’s Order for the period subsequent to 31.03.2018, upto the period covered under this investigation in terms of section 171 of the CGST Act, 2017.
vi. As regard the reduction in the rate of tax, it was observed that the Central Government, on the recommendation of the GST council, had reduced the GST rate on goods like Baby Shampoo, Baby Skincare Wipes 80s, Baby Soaps etc in question from 28% to 18% w.e.f. 15.11.2017, vide Notification No 41/2017-Central Tax (Rate) dated 14.11.2017. This is a matter of fact that had not been contested by the Respondent.
vii. Before enquiring into the allegation of profiteering, it was important to examine Section 171 of the Central Goods and Services Tax Act, 2017 which governs the anti-profiteering provisions under GST. Section 171(1) of the Central Goods and Services Tax Act, 2017 reads as “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” Thus, the legal requirement is abundantly clear that in the event of benefit of input tax credit or reduction in rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction can only be in terms of money, so that the final price payable by a recipient gets reduced commensurate with the reduction in the tax rate or benefit of input tax credit. This is the legally prescribed mechanism to pass on the benefit of input tax credit or reduction in rate of tax to the recipients under the GST regime. Moreover, it was also clear that the said Section 171 simply did not provide a supplier of any goods or services, any other means of passing on the benefit of input tax credit or reduction in rate of tax to the consumers.
viii. In order to explain the methodology adopted for determining the amount of profiteering, an illustration is given in the Table-A below, in which the calculation in respect of a specific item i.e. ” Baby Skincare Wipes 80s” sold during the month of November, 2017 (pre GST rate reduction) was taken. The average base price of the said product was obtained by dividing the total taxable value with total quantity of this item sold during the period 01.11.2017 to 14.11.2017. The average base price of this item was then compared with the actual selling price of the same item sold post-GST rate reduction i.e. on or after 01.04.2018 as illustrated in the Table-A below:
Table-A
(Amount in Rs.)
