Sh. K.G.M. Shushan Vs Praxis Home Retail Ltd. (NAA)
NAA finds that the DGAP claimed that he has collected all relevant data and information including documents from the Respondent and have carried out in-depth investigation. However, after going through the DGAP’s investigation report, its annexures & calculations, the Respondent’s submissions and the other facts on record, the Authority finds that: –
(i) The DGAP’s report mentions that, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, the rate of tax (GST) was reduced from 28% to 18% on subject goods and profiteering had been calculated on such subject goods. To cross verify the same, we had gone through the Annexure 19, i.e. the calculation sheet, to the DGAP’s Report dated 27.11.2020, and checked random entries. It has come to light that at Serial nos. 69694 and 71039, goods were taxed at 12% and 5% respectively and profiteering of Rs. 394.43/- and Rs. 25.23/- respectively have been calculated on such goods as well. Many such entries have been observed by the Authority.
(ii) At Serial No. 91 for the product “Screw On front connector 2Pcs”, it has been observed that the base price in pre-GST was Rs. 7.27/- and in post-GST it was Rs. 0.85/-. Further, at Sr. No. 994 for the product “SS16 LUMOS METALLIC BASE LAMP ASRTD” the base price in pre-GST era is Rs. 934.38/- and in post-GST, it is taken Rs. 3.47/-. It is observed that there is a substantial difference in the base prices of the same product and, at Serial No. 111 for the product “Screw On front connector 2Pcs”, the base price of the goods is in negative, that appears to be erroneous.
(iii) In Table – D, the state wise break up of amount of profiteering has been given and in the last row the sum of the profiteering is given as Rs. 3,67,88,027/-. However, at the time of verification, it has come to notice that the actual sum of the entries is Rs. 3,50,38,029/- in the table and there is a difference of Rs. 17,49,998/-.
(iv) The Respondent in his submissions has contended that he applied for GST registrations for the first time in the month of November, 17 and all the Sales undertaken by him were post rate change date i.e., 15.11.2017. Since the past sales were not undertaken by the same legal entity, a comparison to alleged profiteering was not even possible. He is a completely new entity that came into existence only in post rate reduction period and hence, comparison of prices of two different entities holding different GSTINs cannot be compared.
In view of the above facts and observations, the Authority holds that the present Report including data considered and calculations made therein do not appear to be correct. The Authority without going in to the merits of the case, directs the DGAP to re-investigate and recalculate the amount of profiteering under Rule 133(4) of the CGST Rules, 2017 strictly in accordance with the provisions of Section 171 of the CGST Act, 2017 and Rules made thereunder and on the basis of authentic, verifiable data collected after due security from authentic and reliable legal sources and after due application of mind in respect of the findings made in para (i) to 11 (iv) above.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The Present Report dated 27.11.2020 was received in National Anti-Profiteering Authority (NAA or the Authority) from the Director General of Anti-Profiteering (hereinafter referred to as `MAP’) after a detailed investigation under Rule 129(6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the case are that the Maharashtra State Screening Committee on Anti-Profiteering received an application, filed under Rule 128 of the CGST Rules, 2017, by Applicant No. 1 alleging profiteering by the Respondent in respect of supply of “Modular Kitchen Components” (hereinafter referred to as the `subject goods’). The Applicant No. 1 alleged that the Respondent had not reduced the price in respect of the supply of “Modular Kitchen Components” when the GST rate was reduced from 28 % to 18 % w.e.f 15.11.2017, vide Notification No. 41/2017 — Central Tax (Rate) dated 14.11.2017 and thus the benefit of GST rate reduction was not passed on to the Applicant No. 1 by way of commensurate reduction in the prices.
2. The DGAP in its Investigation Report dated 27.11.2020, has inter-alia, submitted as under:-
2.1 The aforesaid reference was initially examined by the Maharashtra State Screening Committee and forwarded to the Standing Committee on Anti-profiteering for necessary action. The Standing Committee on Anti-Profiteering had examined the Application in its meeting held on 13.09.2019. Thereafter, it was decided to forward the same to the DGAP 09.10.2019 to conduct a detailed investigation in the matter. Accordingly, investigation was initiated by the DGAP to collect evidence necessary to determine whether the benefit of GST rate reduction had been passed on by the Respondent to the Applicant No. 1 and other recipients in respect of supply of impacted goods.
2.2 After receipt of the reference from the Standing Committee on Anti-profiteering, a Notice was issued to the Respondent by the DGAP on 24.10.2019, under Rule 129 of the CGST Rules, 2017, seeking his reply as to whether he admitted that the benefit of GST rate reduction had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo-moto determine and indicate the same in his reply to the Notice as well as to furnish all supporting documents. Further, in the said Notice dated 24.10.2019, the Respondent was given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1 on 31.10.2019 or 01.11.2019., which the Respondent didn’t avail.
2.3 In response to the Notice, the Respondent did not submit the complete requisite documents on due date. Hence, reminder letters were issued to the Respondent on 25.11.2019, 07.01.2020, 20.01.2020, 12.02.2020 and 23.04.2020. The Respondent did not submit complete requisite documents even after several reminder letters, therefore, summons under Section 70 of the Central Goods and Service Tax Act, 2017 read with the Rule 132 of the Rules was issued on 27.05.2020 to Sh. Anil Chandak (CFO) of M/s Praxis Home Retail Limited to submit the relevant details on or before 06.06.2020.
2.4 In compliance of the said summons, the Respondent replied vide e-mail dated 06.06.2020, but did not submit any relevant details/documents. Hence 2″ summons, under Section 70 of the Central Goods and Service Tax Act, 2017 read with the Rule 132 of the Rules, were issued on 06.07.2020 to Sh. Anil Chandak (CEO) of M/s Praxis Home Retail Limited. to submit the relevant details on or before 24.07.2020.
2.5 In compliance of the 2nd Summons, the Respondent submitted certain details, which were neither complete nor in the prescribed format. Therefore, again letters were sent to the Respondent to submit the details/documents in the prescribed format. In response to said letters, the Respondent submitted relevant details/documents vide letter dated 25.08.2020 and 28.09.2020.
2.6 The time limit to complete the investigation was 08.04.2020. However, due to prevalent pandemic of COVID-19 in the country, vide Notification 35/2020-Central Tax dated 03.04.2020 issued by the Central Board of Indirect Taxes and Customs under Section 168 (A) of the CGS’I’ Act, 2017, it was notified that where any time limit for completion/furnishing of any report, had been specified in, or prescribed or notified under the Central Goods and Service Act, 2017 which falls during the period from the 20th day of March, 2020 to the 29th day of June, 2020, and where completion or compliance of such action had not been made within such time, then, the time limit for completion or compliance of such action, shall he extended upto the 30.06.2020. Vide Notification 55/2020-Central Tax dated 27.06.2020 and Notification No. 65/2020 dated 01.09.2020, it was further extended upto 30.11.2020. Further, the National Anti-Profiteering Authority, vide letter dated 24.03.2020, granted three months’ extension in terms of Rule 129(6) of the Rules. Thus, the time limit to complete the investigation was on or before 28.02.2021.
2.7 Vide e-mail dated 01.10.2020, the Applicant No. 1 was given an opportunity to inspect the non-confidential documents/reply furnished by the Respondent. However, the Applicant No. 1 did not avail the opportunity.
2.8 The period covered by the current investigation was from 15.11.2017 to 30.09.2019.
2.9 In response to the Notice dated 24.10.2019 and subsequent reminders, the Respondent submitted his reply vide e-mails/letters dated 06.11.2019, 05.12.2019, 25.01.2020, 29.01.2020, 24.02.2020, 12.05.2020, 06.06.2020, 24.07.2020, 25.08.2020, 28.09.2020, 05.11.2020 and 09.11.2020. The replies of Respondent were summed up as follows: –
(a) That he was engaged in the business of customized offerings to his customers (like modular kitchens etc), which was made to order and customized to the last mile. The consideration for each transaction was also, therefore negotiated separately, since such offerings were not priced like off the shelf products. Therefore, there was no case of comparability between any two given transactions as neither the deliverable was comparable (as size, fit outs, material quality, etc might differ) nor the prices were comparable (since negotiated each time afresh). Further, the total agreed price might then be broken up into per item price merely for the sake of billing and as such had not been agreed with the customer in that manner. These per item prices (even though visible on the invoice) were therefore only for the sake of presentation and hence, cannot be construed as dependable data point for any analysis. Thus, it was unclear as to how the profiteering, if at all, could be examined or computed in the present case. Further, the Respondent stated that the pricing in customized projects was agreed on lump sum basis and then merely split or segregated at item level for billing purposes. This was evident from the documents submitted in respect of complainant’s case as well. Given this, considering the item wise pricing in such cases would be erroneous to say the least.
(b) That the prices, in retail business, were purely based on business and market dynamics and were not comparable across location, formats and different periods. Further, his sales follow multiple formats such as regular store sales (stores being located in a standalone building or mall), e-commerce sales, etc and these aspects had a direct bearing on prices of sales/ supplies. Accordingly, comparison was not practicable. Also, the retail offerings were linked to customer taste and seasonality and the products despite static description was evolving on regular basis. No two products were comparable since these weren’t machine made items and differ in quality, design and durability notwithstanding a standard description being attached to same. It was a well-established fact that commercial aspects, business dynamics and dynamic pricing was a natural business outcome in the modular kitchen/ retail industry, implying that prices of two or more supplies was incomparable. Hence, the difference in pricing was purely attributable to genuine business reasons and not due to any mala fide intention to take benefit of reduction in GST rates.
(c) That his business was divided by various channels i.e. (a) mode — normal in store sales vs sales through ecommerce platforms; and (b) customized and non-customized offerings. The pricing in these combinations was neither inter-linked nor dependent on same factors and thus, such channels should also be duly considered in arriving at any conclusion in these present investigations.
(d) That the complaint had already been withdrawn and, it was not warranted that the present proceedings continue despite the withdrawal of complaint, as there was no legal tenability in continuation of these proceedings sans the complaint. It was a settled position that without complaint and/ or prima facie evidence against the taxpayer, a profiteering complaint cannot be pursued. It is, therefore, requested to discontinue the present investigation or otherwise provide the relevant evidence and basis to continue the same (i.e. other than the original complaint, which stands withdrawn).
(e) That profiteering provisions were transitional by nature and hence, review for over a period of 22 months, from the rate change, for investigation was neither legitimate nor just. As over a period as long as 22 months, the following factors would change considerably:
