Shri R. K. Gupta Vs. Ms Abbott Healthcare Pvt. Ltd. (NAA)
The brief facts of the present case are that an application dated 22.01.2018 was filed by the Applicant No. 1 before the Standing Committee constituted under Rule 128 of the above Rules alleging that the Respondent No. 1 had not passed on the benefit of reduction in the rate of tax as he had increased the MRP of “‘Melaglow Rich (Niacinamide) Depigmentation & Glow Restoration Cream (here-in-after referred to as the product) from Rs. 365/- to Rs. 415/- per unit post implementation of the GST. He had also submitted an image of the label of the product, which showed that the MRP of the product was mentioned as Rs. 365/- per unit however, another pasted sticker on the label indicated that the “MRP post GST” was Rs. 415/- per unit, which amounted to an increase of Rs. 50/- per unit post implementation of the GST. The label also disclosed that the product was marketed by the Respondent No. 1 and manufactured by the Respondent No. 2. The Applicant No. 1 had further informed vide his email dated 10.07.2018 that the above product was purchased by him from the Respondent No. 3. The Applicant No. 1 had also claimed that since the Respondents had increased the MRP of the product after the rate of tax was reduced on it, they had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against them.
Held by NAA
it is revealed that the rate of tax was 30.06% in the pre-GST era which was reduced to 28% in the post-GST era vide Notification No. 1/2017 Central Tax (Rate) dated 28.06,2017, and the rate of GST was further reduced from 28% to 18% vide Notification No. 41/2017– Central Tax (Rate) dated 14 11.2017 However, during these periods, the base price of the product was increased from Rs. 202.06 to Rs, 230.90 per unit which resulted in increasing of the selling price amounting to denial of not passing the benefit of tax reduction to the customer.
It is also established from the above facts that the above Respondent has issued incorrect invoices while selling the above product to his customers as he had not correctly shown the basic price which he should have legally charged from them. The Respondent has also compelled them to pay additional GST on the increased price through the incorrect tax invoices which would have otherwise resulted in further benefit to the customers which he has failed to pass on. It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act. Hence, he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017. In the interest of natural justice, the Respondent 1 is required to be heard as to why shouldn’t he be penalised, for the violation of the above-mentioned provisions of the CGST Act, 2017 and accordingly a notice be issued to him to explain why such a penalty should not be imposed on him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY (NAA)
1. This report, dated 22.10 2018. has been received by this Authority from the Director General of Anti-Profiteering (DGAP) under Rule 129 (6) of the Central Goods and Service Tax (CGST) Rules, 2017. The brief facts of the present case are that an application dated 22.01.2018 was filed by the Applicant No. 1 before the Standing Committee constituted under Rule 128 of the above Rules alleging that the Respondent No. 1 had not passed on the benefit of reduction in the rate of tax as he had increased the MRP of “‘Melaglow Rich (Niacinamide) Depigmentation & Glow Restoration Cream (here-in-after referred to as the product) from Rs. 365/- to Rs. 415/- per unit post implementation of the GST. He had also submitted an image of the label of the product, which showed that the MRP of the product was mentioned as Rs. 365/- per unit however, another pasted sticker on the label indicated that the “MRP post GST” was Rs. 415/- per unit, which amounted to an increase of Rs. 50/- per unit post implementation of the GST. The label also disclosed that the product was marketed by the Respondent No. 1 and manufactured by the Respondent No. 2. The Applicant No. 1 had further informed vide his email dated 10.07.2018 that the above product was purchased by him from the Respondent No. 3. The Applicant No. 1 had also claimed that since the Respondents had increased the MRP of the product after the rate of tax was reduced on it, they had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against them.
2. The above complaint was examined by the Standing Committee and vide the minutes of its meeting dated 13.04.2018 it had requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and collect evidence necessary to determine whether the benefits of reduction in the rate of tax or Input Tax Credit (ITC) had been passed on by the Respondents to their recipients or not.
3. In this connection, the DGAP had called upon the Respondent No. 1 vide his letter dated 18.05.2018, to submit the tax rate structure and MRP of the product (I) prior to GST regime and (ii) post GST regime before 15.11.2017 and after 15.11.2017. Emails dated 21.05.2018 and 31.05.2018 were also sent to the Respondent No. 1 to submit the required information but no reply was received from him. The DGAP had also asked the Respondent No, 2 vide his letter dated 06.2018 to submit similar information which he had sought from the Respondent No. 1, who vide his email dated 18 06.2018 had sought 15 days’ time to submit the reply however, no reply was received.
4. A Notice under Rule 129 of the CGST Rules. 2017, was issued on 07.2018 by the DGAP directing the Respondents to intimate as to whether they admitted that they had contravened the provisions of Section 171 of the CGST Act, 2017, by increasing the price of the product after implementation of the GST w.e.f. 01 07 2017. The Respondents were also asked to suo moto determine the quantum of profiteering, if any, on account of increase in the price of the product and indicate the same in their replies to the Notice issued by the DGAP. Further, the Respondents were also given an opportunity to inspect the non-confidential evidences/information received from the complainant on any working day between 23.07 2018 to 25.07.2018. The Respondent No. 3 visited the office of the DGAP on 25.07.2018 to inspect the same. However, the Respondents No. 1 & 2 did not inspect the record. Vide e-mail dated 15.10.2018, the complainant was requested to inspect the non-confidential evidences/replies submitted by the Respondents on 17.10.2018 or 18.10.2018 and he had inspected the non-confidential information submitted by the Respondent No. 1 on 18 10.2018.
5. The DGAP had requested for granting extension in time to complete the investigation up to 08 11.2018 which was allowed by this Authority under Rule 129 (6) of the above Rules, vide its order dated 31.07.2018. The present investigation pertains to the period between 01.07.2017 to 31.07.2018.
6. The DGAP in his Report has stated that the Respondent No. 1 in reply to his notice had supplied information regarding period-wise applicable tax structure. MRP and the selling price of the product vide his letter dated 25.07.2018. the details of which are mentioned in the table given below:-
