GST Anti-profiteering- Delhi HC stays NAA order asking Reckitt to deposit Rs 63 lakh

Reckitt Benckiser India Private Limited Vs Union of India And Ors (Delhi High Court)

In the latest anti profiteering case of pharma major Reckitt Benckiser over alleged profiteering of 63 lakh from the sale of Dettol handwash between 2017 to 2019, Hon’ble Delhi High court has stayed the order of National anti-profiteering authority for deposit of alleged profiteering amount in the consumer welfare fund.  Read NAA order: Benefit of tax reduction to the customers should be passed only by way of Rate Reduction: NAA

Background

Earlier, the Director General of Anti-Profiteering, in its investigation, had found that Reckitt Benckiser had between November 2017 and March 2019 profiteered by Rs 63,14,901 by not passing on to consumers the benefit of GST reduction.

In its plea, Reckitt Benckiser has contended that it had passed on the benefit of GST reduction by way of “grammage increase”. While rejecting the defence regarding ‘grammage increase’, NAA stated that costs could not have been suddenly increased on the intervening night of 14/15.11.2017 . Further, once the rate reduction has occurred which could have forced increase in prices.

National Anti-profiteering Authority (“NAA”) in its order dated 19 March 2020 order, directed  the Reckitt Benckiser to deposit the amount. The NAA had further asked Reckitt Benckiser to show cause why the penalty should not be imposed upon it in accordance with the provisions of the Central Goods and Services Tax (CGST) Act.

Order by Hon’able Delhi High court vide it’s order dated 20 July 2020

In this respect the Hon’ble Delhi High Court during hearing of the case via video conferencing dated 20 July 2020 has put a stay on the NAA order directing Reckitt Benckiser to deposit in the consumer welfare fund over Rs 63 lakh it allegedly profiteered from the sale of Dettol handwash between 2017 to 2019.

However, Justice Rajiv Sahai Endlaw  remarks that such stay shall come into operation subject to the deposit of said amount within two weeks made it clear the stay would come into operation only if the pharma major deposits the amount with NAA within two weeks. Issues Notice to Revenue and lists the matter on August 24, 2020.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

1. Allowed, subject to just exceptions and as per the extant rules.

2. The application is disposed of.

W.P.(C) No.4345/2020 & CM No.15643/2020 (for stay)

3. The petition impugns the order dated 19^th March, 2020 of the respondent No.2 National Anti-Profiteering Authority, assessing the profiteered amount against the petitioner of Rs.63,14,901/-, during the period from 15^th November, 2017 to 31^st March, 2019 and directing issuance of a notice to the petitioner to show cause why penalty should not be imposed.

4. We have heard the counsel for the petitioner and the counsel for the respondents No.2&3 as well as the counsel for respondent No.1 appearing on advance notice.

5. Issue notice.

6. Notice is accepted by the counsels for the respondents.

7. The petitioner to deposit Rs.63,14,901/- in this Court, within two weeks, as sought. The amount once deposited, to be kept in maximum interest bearing account awaiting the adjudication of the petition.

8. Subject to the said deposit, the operation of the impugned order dated 19^th March, 2020 is stayed.

9. The profiteered amount being for the period prior to incorporation in the Central Goods & Services Tax Act, 2017 of the provision regarding penalty for which show cause notice has been ordered to be issued, the issuance of such notice, if not issued till date, is stayed and if the notice has been issued, further proceedings in pursuance thereto are stayed.

10. CM No.15643/2020 for interim relief is disposed of.

11. The counsel for the respondents No.2&3 informs that there are a large number of petitions entailing similar issues pending in this Court and vide  order dated 6^th July, 2020 in W.P.(C) No.3911/2020, 33 such matters identified in that order, have been ordered to be listed for hearing on 24^th August, 2020.

12. The counsel for the petitioner states that the petitioner has filed another writ petition being W.P.(C) No.7743/2019 inter alia challenging the vires of the provisions in exercise of power whereunder the impugned assessment has been done and the said writ petition was to be listed next on 10^th September, 2020 but has been tagged now with W.P.(C) No.3911/2020.

13. Counter affidavit, if any be filed on or before 7^th August, 2020.

14. Rejoinder thereto, if any be filed before the next date of hearing.

15. List along with W.P.(C) No.3911/2020 on 24^th August, 2020.