Case Law Details
Deputy Commissioner of State Tax Vs Dough Makers India Pvt Ltd. (NAA)
Fact of the Case:
The brief facts of the present case are that a reference was received from the Standing Committee on Anti Profiteering on 27.03.2019 by the DGAP, to conduct a detailed investigation in respect of an application (originally examined by the Maharashtra State Screening Committee on Anti-profiteering) (Annex-1) filed under Rule 128 of the CGST Rules 2017, alleging profiteering in respect of restaurant service supplied by the Respondent (Franchisee of M/s Subway Systems India Pvt. Ltd.) despite reduction in the rate of GST from 18% to 5% w.e.f. 15.11.2017. It was alleged that the Respondent has increased the base prices of his products and has not passed on the benefit of reduction in the GST rate from 18% to 5% w.e.f. 15.11.2017, affected vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017. The DGAP in his report has stated that the summary sheet of the extent of profiteering was prepared by the Deputy Commissioner of State Tax, Pune, which was also enclosed with the reference received from the Standing Committee on Anti-profiteering. This above issue was examined by the Maharashtra State Screening Committee and upon being prima facie satisfied that the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017, it forwarded the said complaint with its recommendation to the Standing Committee on Anti-profiteering for further action vide its letter dated 21.02.2019.
Held by NAA:
The profiteering ought to have been computed on the basis of the comparision of pre-rate reduction item-wise average base price with the actual transaction-wise/invoice-wise price charged by the Respondent in respect of his supplies in line with provisions of Section 171 (1) and Section 171 (2) of the CGST Act as has been done by the DGAP in similar cases. This is because profiteering needs to be computed in respect of each supply effected by the registered person/supplier, i.e. the Respondent. We find that the reason for this anomalous computation has been detailed by the DGAP by stating that the Respondent had never furnished the actual invoice-wise / transaction-wise data for the relevant post-rate reduction period at any time during the investigation and hence profiteering could not be computed in respect of every supply/transaction for the post-reduction period. It has also been reported by the DGAP that the Respondent had refused to furnish the requisite transaction-wise / invoice-wise data stating that he was unable to do so because the invoice-wise data (which pertained to multiple outlets) was voluminous and there were technical issues in funishing the same and that he could only provide data containing the day-wise outward taxable supplies. NAA also observe that as investigating agency, the DGAP has been conferred with wide ranging powers under Rules 129 and 132 of the CGST Rules to summon any relevant record which may be required for conducting an investigation. It is a fact that the Respondent is a franchise of M/s Subway Systems India Pvt. Ltd and conducts his business in terms of the franchisee-franchisor agreement and pays royalty to the franchisor in respect of all his sales. Therefore it is imperative that the item-wise invoice-wise / transaction-wise data is maintained at the end of the franchisor also. Since the respondent has expressed his inability to provide the requisite data on account of certain inexplicable technical reasons, we find it a fit case for exercise of the powers granted under the above Rules to the DGAP to summon the record and to recompute the amount of profiteering accordingly. Therefore, without going into any merits/other submissions filed by the Applicants and the Respondent at this stage, NAA find this case to be a fit case for recomputation of the amount of profiteering.
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