Director-General of Anti-Profiteering Vs Lifestyle International Pvt. Ltd. (NAA)
Facts of the case:
The brief facts of the case are that an application dated 23.11.2017 was filed before the Standing Committee on Anti-profiteering under Rule 128 of the CGST Rules, 2017, by Ms. Neeru Varshney before the Standing Committee vide which she alleged that the Respondent had not passed on the benefit of reduction in the rate of GST to her when she had purchased “Maybelline FIT Me foundation” (hereinafter referred to as “the Product”) from the Respondent. It was also stated that the GST on the product was reduced from 28% to 18% w.e.f. 15.11.2017. The complaint was investigated by the DGAP who vide his Investigation Report dated 28.03.2018 concluded that the basic price of the impugned good was increased by the Respondent as a result of which the Respondent had not passed on the benefit of tax reduction and had thus contravened the provisions of Section 171 of the CGST Act, 2017. An amount of Rs. 15,861/- on the product was also established as the profiteered amount.
Held by NAA:
After considering all the Reports filed by the DGAP, submissions of the Respondent including the submissions made during the hearings and other material placed on record. We observe that the Respondent’s submissions dated 18.02.2020 and 24.02.2020 and the accompanying data/information are voluminous and require thorough scrutiny and may entail a revised mathematical computation of the amount of profiteering, notwithstanding the previous clarifications of the DGAP contained in his supplementary reports dated 02.12.2019, 08.01.2020 and 07.02.2020. Therefore, NAA find that the matter needs further investigation based on the complete data that has been submitted by the Respondent only on 18.02.2020 and 24.02.2020. NAA also find that all the contentions and submissions made by the Respondent during the hearings need to be verified and if found substantiated and correct by the DGAP. Needless to say that the discrepancies in Respondent’s submissions, as pointed out by the DGAP during the process of hearings, will also need to be ironed out by the Respondent, which would necessitate the Respondent to fully cooperate with the DGAP during the process of further investigation. In such circumstances, we conclude that the matter needs to be reinvestigated accordingly in the interest of justice. Therefore, without going into the merits of the case and without considering the contentions and submissions of the Respondent at this stage, NAA find it imperative that there is a need for revisiting the investigation and recomputation of the profiteered amount. All the other submissions made by the Respondent will be duly considered after the final computation of the profiteered amount is done after a thorough investigation by the DGAP following provisions of Section 171 of the CGST Act, 2017. Given the above facts, this Authority directs the DGAP to reinvestigate the present case as mentioned in the preceding paragraphs of this Order. under Rule 133(4) of the CGST Rules 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present Report dated 30.09.2019 has been received from the Applicant i.e. the Director-General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the case are that an application dated 23.11.2017 was filed before the Standing Committee on Anti-profiteering under Rule 128 of the CGST Rules, 2017, by Ms. Neeru Varshney before the Standing Committee vide which she alleged that the Respondent had not passed on the benefit of reduction in the rate of GST to her when she had purchased “Maybelline FIT Me foundation” (hereinafter referred to as “the Product”) from the Respondent. It was also stated that the GST on the product was reduced from 28% to 18% w.e.f. 15.11.2017. The complaint was investigated by the DGAP who vide his Investigation Report dated 28.03.2018 concluded that the basic price of the impugned good was increased by the Respondent as a result of which the Respondent had not passed on the benefit of tax reduction and had thus contravened the provisions of Section 171 of the CGST Act, 2017. An amount of Rs. 15,861/- on the product was also established as the profiteered amount.
2. This Authority, vide its Order No. 08/2018 dated 25.09.2018 directed the Respondent to refund an amount of Rs. 41/- along with the applicable interest to Ms. Neeru Varshney and to get the balance amount of profiteering amounting to Rs. 15,820/- deposited in the Consumer Welfare Fund as per the provisions of Rule 133(3)(c) of the above Rules, along with the interest. Since the Respondent vide para-27 of his submission dated 18 05 2018 had admitted that the benefit on account of reduced tax rate amounting to Rs. 1 98,46,438/- might not have been passed on by him on to certain customers who had purchased the impacted goods in the post-rate reduction period, although he had passed on excess benefit to his other customers by way of greater (more than commensurate) reduction in prices following the reduction in the rate of tax, this Authority, after considering the same, had directed the DGAP to investigate the above admission of the Respondent. The DGAP initiated an investigation to collect the necessary evidence to investigate the above-mentioned issue and to determine whether the benefit of reduction in the rate of tax had been passed on by the Respondent to the recipients in respect of the products supplied by him. The DGAP issued a letter dated 30.10.2018 to the Respondent and asked him to furnish the requisite documents/ information about Respondent’s other supplies to his other customers.
3. The Respondent submitted his replies to the DGAP vide letters/e-mails dated 12.11.2018, 25.11.2018, 29.11.2018, 10.12.2018, 01.08.2019,16.08.2019,26.08.2019,27.08.2019,09.09.2019, 14.09.2019 and 19 09.2019.
4. Vide his above-mentioned replies, the Respondent had submitted that he had not profiteered in any manner. He also stated that the amount of Rs. 1,98,46,436/- covered his pan-India sales and the said amount pertained to the DGAP’s period of investigation and it was further taken based on the methodology adopted by the DGAP. The Respondent also intimated that he had also filed a writ petition in the Hon’ble High Court of Delhi challenging the order passed by this Authority and he was awaiting directions of the Hon’ble Court for not initiating recovery proceedings against him.
5. The Respondent further submitted that he had inadvertently computed the total amount of Rs. 1,60.80,372/- (1,19,82,835/- + 40,97,537/-) as Rs. 1,98,46,436/- while computing the amount initially. The Respondent also submitted the details of additional price reductions passed on by him and the total margin loss to him on account of the sale of Pre-GST stock and requested for the same to be taken into account in evaluating the extent of alleged benefit not passed on. The Respondent had also provided a summary of the net loss impact to him after taking into consideration the alleged GST benefit not passed on, additional price reduction passed on by him, and the margin loss impact on him on account of sale of Pre-GST stock.
6. The Respondent further submitted to the DGAP that he had multiple levels of descriptions available for internal referencing purposes and in certain cases, he had considered the primary description and in certain cases, it had been considered as secondary description and thereby there was a difference in the description column. The Respondent also submitted that there was no difference in the details submitted during the original investigation (February 2018 & March 2018) and vide emails dated 26.08.2019 & 27.08.2019.
7. Vide the aforementioned letters/e-mails, the Respondent also submitted the following documents/information:
a. Invoice-wise and SKU-wise details of the outward taxable supplies (other than zero-rated, nil rated, and exempted) for the period November 2017 to January 2018 for all the GST registrations.
b. Details of alleged reduction not passed on along with Reduction in LS margin & details of additional benefit passed on.
8. The DGAP after receiving the order from this Authority, the various replies of the Respondent and the documents/ evidence on record has found certain discrepancies which are given below-
(i) Initially, the Respondent had accepted before this Authority that an amount of Rs. 1,98,46,438/- might not have been passed on to the customers who had purchased the goods, however, the Respondent had submitted details of an amount of Rs. 1,60,80,372/- only.
(ii) The amount of Rs. 1,60,80,372/- pertained to those goods which were purchased at 28% GST and sold at 18% GST closing stock held as on 15.11.2017 only and do not pertain to complete sales made post 15.11.2017.
9. The DGAP also stated that concerning the Respondent’s reliance on the order of the Hon’ble High Court of Delhi passed in the WP(C) 12647/2018 filed by him wherein the Hon’ble High Court had ordered that “the proceedings pursuant to Authority’s order dated 25.09.2018 might continue and even final order might be passed. However, coercive steps for recovery of demand, if any, would not be taken without permission of the Court till the next date of hearing.”, showed that there was no stay on the present proceedings.
10. The DGAP has also stated that the Respondent intimated that there was no difference in the details of outward taxable supplies submitted during the original investigation period and vide his emails dated 26 08 2019 & 27.08.2019 and both were same. Therefore, the profiteering, if any has been arrived at by the DGAP by comparing average selling prices of the goods sold during the period 01.11.2017 to 14.11.2017 with the prices post 15.11.2017 for the items similar in each aspect after taking into consideration the details of the outward taxable supplies submitted during the original investigation. Further, the DGAP’s Report dated 28.03.2018 covered the product “Maybelline FIT Foundation” only while the present report covered all the impacted products of the Respondent.
11. The DGAP also stated that as regards the profiteering, the quantity sold during the period 01.11.2017 to 14.11.2017 (pre-GST rate reduction) was taken and an average base price (after discount) was obtained on dividing the total taxable value by total quantity of this item sold during this period. The average base price of this item was compared with the actual selling price of the item sold during post-GST rate reduction i.e. on or after 15.11.2017 as has been illustrated in the table below:-
Table
(Amount in Rupees)
