pri Evidence Must For Proving Profiteering In GST Evidence Must For Proving Profiteering In GST

Dr. Sanjiv Agarwal, FCA, FCS

Section 171 of GST law is the most powerful provision to check excessive profiteering resorted to by businesses owing to tax efficiency accruing because of goods and services tax (GST). The National Anti-profiteering Authority (NAA) entrusted with disposing of such cases including implementation of provision and monitoring has already decided over a dozen of anti-profiteering complaints and ruled, both for and against complaints.

The law of positive evidence has been applied by NAA in all such cases and where there was no evidence of anti-profiteering stance or it could not be proved in view of lack of evidence, such complaints were decided in favour of business entity or against the complainant. In other words, complainant has to provide substantial evidence to prove that the accused business entity has indulged in anti-profiteering or the business entity against whom complaint has been made has to prove by way of positive and documentary evidences that there is no such case of anti-profiteering to be taken cognizance of. The NAA is expected to adjudicate the complaints solely on facts and circumstances of the case and documentary and other evidences tendered by complainant or defending entity.

The evidences being relied upon by parties on either side ought to be :

(i) Positive

(ii) Credible

(iii) Constructive so as to aid establishment of anti-profiteering or otherwise

(iv) Meeting satisfactions of the NAA and / or DGAP, and

(v) Relating to the complaint, product, business entity or industry etc, as the case may be

Yum Restaurant’s Case

In Raman Khaira v. Yum Restaurants India Pvt. Ltd. decided by the NAA on 29 October, 2018 and reported vide (2018) 98 Taxmann.com 442 (NAA), there was a complaint against KFC outlet.

In this case, there being around 700 stores of KFC brand in India, investigation conducted by Director General Anti-profiteering against could not establish profiteering for want of credible evidence of profiteering against a specific supplier of KFC and accordingly no violation of provisions of section 171 could be established.

It was alleged that company had not passed on the benefit of reduction of tax from 18% to 5% to its customers. He had also alleged that it was supplying him Burger @ Rs. 32/- per unit and after adding 18% GST, he was paying about Rs. 40/- per unit before the tax was reduced w.e.f. 15.11.2017, whereas he was purchasing the above product @ Rs. 42/- per unit after the reduction in the rate of tax and therefore, the company was illegally profiteering by appropriating the amount of reduction of tax by fleecing the poor customers as he was denying them the benefit of reduction and therefore action should be taken against him.

However, on being asked by DGAP to provide the pre and post GST invoices of the products sold and other details like name and address of outlet from where supplies were made so that matter could be investigated, there was no response. The complainant also did not appear for hearing before NAA.

The DGAP submitted that in the absence of any specific evidence of profiteering against a specific supplier of M/s. KFC, he was not in a position to initiate any investigation in the matter. He had further submitted that it was also not practical to initiate investigation against all the franchisees of M/s. KFC, especially when there was no evidence of profiteering. He had therefore, recommended that no meaningful investigation in respect of M/s. KFC could be conducted by him and hence the application filed by the complainant merited rejection as the allegation of profiteering was not substantiated.

In view of the fact that the investigation conducted by DGAP against the company could not establish profiteering for want of credible evidence, it was ordered by NAA that there is no violation of provisions of section 171 of the CGST Act, 2017 and the complaint being non maintainable, was dismissed.

Amway India Case

In another complaint in the matter of Amway India, i.e. DGAP v. Amway India Enterprises Pvt. Ltd., National Anti-profiteering Authority vide its Order dated 29th October, 2018 and reported in (2018) 98 taxmann.com 443 (NAA) has come to the conclusion that application filed by applicant requesting for action against Amway for alleged violation of provisions of section 171 on ground that it had not passed on benefit of reduction in GST rates from 28 per cent to 18 per cent on selected items to its customers/Amway Business Owners, would not be maintainable as there was no specific evidence of profiteering against respondent. In absence of description of any product, name of supplier and any specific evidence of profiteering by respondent no further investigation could be conducted. Hence, no violation of provisions of section 171 had been found.

The complaint was received by email without mentioning name or contact address stating that M/s Amway had alleged profiteering against the reduction in the GST rates from 28% to 18% on selected items to its customers or Amway Business Owners (ABOs). The complainant had neither provided the description of the items nor provided any of the details of the supplier or any evidence that the company had indulged in profiteering and therefore, in the absence of the description of any product, the name of any supplier and any specific evidence of profiteering by the Amway, no further investigation could be conducted.

The DGAP had also recommended that no meaningful investigation could be conducted against the complaint. The company submitted that in view of the report submitted by the DGAP, the allegation of profiteering had not been proved against it and therefore, the instant proceeding should be dropped.

The NAA concluded that the investigation conducted in the allegations levelled by the complainant against the company could not establish profiteering for want of cogent and reliable evidence and hence no violation of the provisions of Section 171 of the CGST Act, 2017 was found in this case. Accordingly, the application filed by the complainant requesting for action against the company for alleged violation of the provisions of section 171 is not maintainable and hence the same was dismissed.

It may thus be inferred that a mere complaint may not be entertained but it has to be backed by substantial and credible evidences.

Way Forward

There is a need for a holistic industry / sector – wise research to study the impact of GST on such sectors so that public awareness can be made and impact be known to people in public interest. This will also have a pressure on businesses not to indulge in anti-profiteering. It will also positively impact in reducing the number of complaints and better compliances by the business entities. It is also true that it is always open to consumers to move to cheaper substitutes and competition may itself reduce the prices.

Read Other Articles from Dr. Sanjiv Agarwal

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