Case Law Details
Shri Pawan Sharma Vs M/S Sharma Trading Company (National Anti-Profiteering Authority)
We have also carefully considered the issue of imposition of penalty on the Respondent as the allegation of profiteering has been duly established against him. It is clear from the facts of the present case that the Respondent was fully aware of the Notification dated 14.11.2017 whereby the rate of GST was reduced on the above product from 28% to 18%. He was also fully aware of the provisions of Section 171 of the above Act whereby he was bound to pass on the benefit of reduction in the rate of tax by commensurate reduction in the price of the above product. However, the Respondent has deliberately acted in defiance of the above law and hence he is guilty of the conduct which is contumacious and dishonest. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoices in which the base price was deliberately enhanced exactly equal to the amount of reduced tax and thus he had denied the benefit of reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers.
ORDER
1. This report dated 16.03.2018, has been received from the Applicant No. 2 i.e. Director General of Safeguards (DGSG) now re-designated as Director General Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the present case are that an application dated 22.11.2017 was filed by the Applicant No. 1 before the Standing Committee, constituted under Rule 123 (1) of the above Rules, alleging that the Respondent had not passed on the benefit of reduction in the rate of tax by lowering the price of Vaseline VTM 400 ml., (here-in-after referred to as the product) which he had purchased from the respondent, when the Goods and Services Tax (GST) was reduced from 28% to 18% on this product on 15.11.2017. He had also alleged that he had bought the above product from the Respondent @ Rs. 213.63/- per unit vide tax invoice No. GSA25066 on 26.09.2017 which included GST @ 28% and the Respondent had charged the same price when he had purchased the above product vide tax invoice No. GSA37782 on 15.11.2017 when the GST had been reduced to 18%. He had thus claimed that the Respondent 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 him.
2. The above application was examined by the Standing Committee on Anti-Profiteering and was referred to the DGAP, vide minutes of it’s meeting dated 29.11.2017 for detailed investigation under Rule 129 (1) of the CGST Rules, 2017.
3. The DGAP had issued notice to the Respondent on 29.12.2017 to submit his reply on the allegation levelled by the Applicant No. 1 and also to suo moto determine the quantum of benefit which he had not passed on after the reduction in the rate of GST. The Respondent was also requested to provide copy of the balance sheet, invoices of sales and purchases and returns filed by him. The DGAP has informed that the Respondent in his replies dated 12.01.2018, 24.01.2018, 09.02.2018, 28.02.2018 and 12.03.2018 had stated that he was a distributor and stockist of M/s Hindustan Unilever Limited (hereinafter referred to as the HUL) and had supplied 20 units of the above product to the Applicant No. 1 vide invoice No. GSA37782 dated 15.11.2017 however this supply was returned by the Applicant No. 1 vide Goods Return invoice No. 534 dated 15.12.2017 against which Credit Note No. AA021330 was issued by him on 23.12.2017 and hence the above transaction did not amount to the supply of goods and therefore, it did not fall under the ambit of Section 171 of the above Act. The DGAP has also informed that the Respondent had also contended that the peak sale period for the above product was during winters and before coming into force of the GST it was being sold under various Consumer Promotion Schemes (CPS) during the lean season by offering additional quantity or along with some additional products and such CPS were usually withdrawn during the winters. He has further informed that the Respondent had also submitted that the Scheme launched during the month of September, 2017 by offering additional quantity of the product was not withdrawn in November, 2017 and the MRP was retained at Rs. 235/- for 400 ml. of Vaseline which was the MRP for 300 ml. and thus the benefit of reduced rate of tax was passed on to the recipients through the additional quantity of 100 ml. The DGAP has also stated that the Respondent had claimed that the product was sold @ Rs. 0.59 per ml. after 15.11.2017 as compared to it’s price of Rs. 0.73 per mi. during the month of November, 2017 and hence there was decrease of more than 18% in the price resulting in passing on of the benefit of reduction in the rate of the tax. The DGAP has further intimated that the Respondent had also maintained that the price of the above product was reduced from Rs. 235/- to Rs. 233/- w.e.f. 13.12.2017 which had also resulted in passing on the benefit of tax reduction along with supply of enhanced quantity of Vaseline.
4. The DGAP has reported that the contention of the Respondent that no profiteering was involved in the present case as the Applicant No. 1 had returned the product on 15.12.2017 which was sold to him on 15.11.2017 and a credit note had been issued in his favour by the Respondent and hence the above transaction was null and void was not correct as Section 171 of CGST Act, 2017 required that the benefit of tax reduction should be passed on at the time of supply of the goods and services and any future event related to that supply would not render the transaction of original supply infructuous. The DGAP has also reported that the GST rate on the product had been reduced from 28% to 18% vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, with effect from 15.11.2017 and hence the benefit of tax reduction was required to be passed on by the Respondent. He has further reported that the claim made by the Respondent that the benefit of GST rate reduction had been passed on by increasing the quantity of Vaseline from 300 ml. to 400 ml. without any increase in the MRP was not tenable as the Respondent was not competent to either increase the quantity of the product or to reduce the MRP w.e.f. 15.11.2017 as it was not in his stock and on which full Input Tax Credit (ITC) of 28% had been availed by him. The DGAP has also submitted that the base price of the product, at the time of GST rate reduction w.e.f. 15.11.2017, was increased to maintain the same selling price which was prevalent before the reduction and therefore, the Respondent had indulged in the profiteering and had thus contravened the provisions of Section 171 of the CGST Act, 2017.
5. The DGAP has also intimated that the Respondent had himself admitted that the Applicant No. 1 had purchased 10 units of the product on 26.09.2017 from him, vide invoice No. GSA25066 at the base price Rs. 166.90/- per unit on which the price charged including GST was Rs. 213.63/- per unit. The Applicant No.1 had again bought 20 units of the product on 15.11.2017, vide invoice No. GSA37782 in which the base price was shown as Rs. 181.05/- and the price charged including GST was mentioned as Rs. 213.63/- per unit. Therefore, the DGAP has concluded that although the GST on the product was reduced from 28% to 18% w.e.f. 15.11.2017, the price realised by the Respondent including GST from the Applicant No. 1 had remained unchanged at Rs. 213.63/- per unit, which showed that the unit base price was enhanced by Rs. 14.15/- (Rs. 181.05—Rs. 166.90) and therefore, profiteering to the extent of Rs 14.15/- per unit was proved against the Respondent. The DGAP has also stated that the Applicant No.1 had again purchased 11 units of the product vide invoice No. GSA42046 dated 28.11.2017 from the Respondent on which the same net price of Rs. 213.63/- inclusive of GST was charged thus, profiteering of Rs 14.15/- per unit was established against him.
6. The DGAP has concluded by stating that the Respondent had profiteered to the extent of Rs. 5,50,370/- from November, 2017 to January, 2018 which included the profiteering of Rs. 184/- made by him from the Applicant No. 1 on the sale of the 11 units of the product on 28.11.2017. He has further stated that the Respondent had profiteered an amount of Rs. 2,41,922/- @ Rs. 16.69/- including GST @ 18% per unit on the sale of 14,495 units and Rs.3,08,448/- @ Rs. 14.88/- including GST @ 18% per unit on the sale of 20,729 units between the period of 15.11.17 to 31.01.2018. Thus an amount of Rs 5,50,370/- was profiteered by the Respondent in the supply of 35,244 units of the product as per the following chart which amounted to violation of the provisions of Section 171 of the CGST Act, 2017:-
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