Principal Commissioner Vs Sri Laxmi Kala Mandir 70MM Theatre (NAA)
It is clear from the investigation carried out by the DGAP and also letter dated 03.06.2019 to Deputy Commissioner (Anti Evasion), Medchal, Hyderabad that the Respondent has maintained the same prices of all three categories of movie admission tickets which he was charging before the tax reduction and has not reduced them when the GST rate was reduced from 18% to 12% w.e.f. 01.01.2019. The Respondent should have maintained the classwise details of the tickets sold by him as well as the price charged on each class, however, he has not done so, therefore, there is no other alternative available to compute the profiteering except to take into consideration the total taxable of each class and the reduction in the rate of tax as profiteering is apparent from the details of the prices charged by the Respondent post rate reduction.
As the Respondent had not maintained class/category-wise details of his outward taxable supplies of movie admission tickets, therefore, this Authority finds that the methodology i.e. the clump sum’ of all the three categories of admission tickets adopted by the DGAP to arrive at/compute profiteering in the subject case is correct. It is evident to us that the Respondent had not reduced the base prices of the admission tickets in respect of all the three categories and had instead maintained the pre-rate reduction cum tax prices unchanged by appropriately increasing the base prices of all categories of admission tickets immediately after the tax rate had been reduced.
Further, this Authority takes note of the fact that the Respondent has not submitted any argument against the charges framed in the DGAP’s report. Therefore we don’t find any basis to differ from the findings of the DGAP that the Respondent had indeed contravened the provisions of Section 171 of the CGST Act 2017.
Based on the facts discussed above, it has been established that the Respondent has profiteered by way of increasing the base prices of his supplies of the three categories of movie tickets by maintaining the same selling prices of the movie admission tickets despite the reduction in GST rate on “Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less” from 18% to 12% w.e.f. 01.01.2019 to 30.06.2019. It is also clear to us that the Respondent has not passed on the benefit amounting to Rs. 1,31,754 (inclusive of GST) to his customers/ recipients. Thus the profiteering is determined as Rs. 1,31,754/- as per the provisions of Section 171 read with Rule 133 (1) of the CGST Rules 2017 and accordingly the Respondent is directed to commensurately reduce the prices of the three categories of movie tickets in line with the provisions of Section 171(1) read with Rule 133 (3) (a) of the CGST Rules 2017.
Further, since the customers/ recipients, in this case, are not identifiable, we direct the Respondent to deposit the profiteered amount of Rs. 1,31,754/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited, in two equal parts, in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF as per provisions of Section 171(1) read with Rule 133 (3) (c) of the CGST Rules 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 28.09.2020 has been received from Applicant No. 2, i.e. Director-General of Anti-Profiteering (DGAP), after a detailed investigation under Rule 129 of the Central Goods & Service Tax (CGST) Rules 2017, which arose from an application filed by Applicant No. 1 under Rule 128 of the CGST Rules, 2017, alleging profiteering by the Respondent in respect of the supply of “Services by way of admission to exhibition of cinematography films”. Applicant No. 1 had alleged that the Respondent did not pass on the benefit of reduction in the GST rate on the “Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less”, from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018, and had instead, increased the base prices of the movie tickets to maintain the same cum-tax selling prices as were in the pre-rate reduction period despite the reduction in the rate of tax.
2. The DGAP has reported that Applicant No. 1 had forwarded the Application to the Standing Committee on Anti-profiteering for necessary action along with the relevant supporting documents and that the aforesaid application was examined by the Standing Committee on Anti-profiteering in its meeting and consequentially it was decided to refer the said matter to the DGAP to initiate a detailed investigation, including collection of necessary evidence for Case No. 17/2022 Page 2 of 18 Pr. Commissioner Vs. M/s Sri Laxmi Kala Mandir 70MM Theatre determining whether the benefit of reduction in the rate of GST on the supply of “Services by way of admission to exhibition of cinematography films” had been passed on by the Respondent to his recipients/ customers. The DGAP has reported that the period covered in the investigation is from 01.01.2019 to 30.09.2019.
3. The DGAP has also reported that on receipt of the aforementioned reference from the Standing Committee on Anti-profiteering, a Notice dated 23.10.2019 was issued by him to the Respondent in terms of Rule 129 of the CGST Rules 2017, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in GST rate, notified w.e.f. 01.01.2019, had not been passed on by him to his recipients by way of commensurate reduction in the prices of the movie tickets supplied by him, and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all documents in support of his reply. Further, vide the said Notice, the Respondent was also allowed to inspect the non-confidential evidence /information furnished by Applicant No. 1 which formed the basis of the said Notice, either on 30.10.2019 or on 31.10.2019. However, the Respondent did not avail of the said opportunity.
4. The DGAP has further reported that despite receiving the above mentioned notice and several reminders that followed the notice, the Respondent did not submit the requisite records/ documents. Hence, summons dated 03.03.2020 were issued to the Respondent seeking submission of the requisite records/ documents by 12.03.2020. In response to the summons, neither did anyone appear on behalf of the Respondent before the DGAP nor were the requisitioned records/ Case No. 17/2022 Page 3 of 18 Pr. Commissioner Vs. M/s Sri Laxmi Kala Mandir 70MM Theatre documents submitted by him. Hence another summons dated 21.05.2020 were issued to the Respondent, again seeking the submission of the requisite documents by 01.06.2020. Despite the second summons, again, neither did anyone appear on behalf of the Respondent before the DGAP nor were the requisitioned records/ documents submitted by him.
The DGAP has also reported that apart from the above communications and summons, he also issued letters dated 26.02.2020, 06.05.2020, and 18.05.2020 to the jurisdictional GST office to obtain the desired documents from the Respondent and forward the same to the DGAP. In response thereto, the jurisdictional GST office forwarded the following details/documents pertaining to the Respondent, vide letter dated 01.06.2020:-
i. Month-wise details of the outward taxable supplies of the movie admission tickets impacted by the GST rate reduction w.e.f. 01.01.2019 for the period 01.04.2018 to 30.09.2019.
ii. Category-wise pricelists of the tickets for the pre and post-tax rate reduction periods.
iii. Sample copies of tickets pertaining to the pre and post-tax rate reduction periods.
iv. GSTR-1 and GSTR-3B Returns for the period from 01.12.2018 to 30.09.2019.
6. The DGAP has further reported that the time limit to complete the investigation was 08.04.2020. However, due to the prevalent pandemic of COVID-19 in the country, vide Notification No. 35/2020-Central Tax dated 03.04.2020 issued by the Central Govt. under Section 168 (A) of the CGST 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 CGST Act, 2017 which fell 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 be extended up to 30.06.2020. Further, vide Notification No. 55/2020-Central Tax dated 27.06.2020 and Notification No. 65/2020 dated 01.09.2020, the time limit was extended up to 30.11.2020. Further, the DGAP has reported that this Authority vide order dated 24.03.2020, had granted three months extension in terms of Rule 129 of the CGST Rules, 2017. Accordingly, the time limit to complete the investigation would be 28.02.2021.
7. The DGAP has also reported that in response to the Notice dated 23.10.2019 and subsequent reminders and summonses the Respondent submitted his reply vide emails/letters dated 03.12.2019, 09.12.2019, 16.12.2019 and 23.01.2020. Vide the aforementioned letters/e-mails, the Respondent only submitted the GSTR-3B returns for the period from December, 2018 to August, 2019.
8. The DGAP has also reported that vide e-mail dated 04.09.2020, Applicant No. 1 was also allowed to inspect the non-confidential documents/reply furnished by the Respondent, either on 09.09.2020 or 10.09.2020. The opportunity was availed by the Assistant Commissioner, CGST, Medchal Commissionerate on 10.09.2020 and the documents were inspected by him on behalf of Applicant No. 1.
9. The DGAP has reported that it was observed that the Central Government, on the recommendation of the GST Council, reduced the GST rate on the “Services by way of admission to exhibition of cinematography films where price of admission ticket was one hundred rupees or less” from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018.
10. The DGAP has further reported that the reference received from the Standing Committee on Anti-profiteering, the various replies of the Respondent and the documents/evidence received from the jurisdictional office placed on record had been examined in detail and it emerged that the main issue to be looked into was whether the rate of GST on the “Services by way of admission to exhibition of cinematography films, where price of admission ticket was one hundred rupees or less” was reduced from 18% to 12% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act, 2017.
11. The DGAP has also reported that Applicant No. 1 had given the details of admission tickets of MRP Rs. 70/-, Rs. 50/- and Rs. 10/- in the aforesaid application and also furnished the copy of the reply dated 03.06.2019 of the Respondent wherein the Respondent also confirmed those three rates of the admission tickets. Further, the Respondent had also informed vide letter dated 29.05.2020 to the jurisdictional office that he had only three rates of admission tickets i.e. Rs. 70/-, Rs. 50/- and Rs. 10/-. However, the Respondent in his reply dated 29.05.2020 submitted to the Jurisdictional office stated that he was not maintaining the class type transactions separately and that during the filing of returns he was mentioning the total receipts for the month and paying tax accordingly. The investigation was limited to the “Services by way of admission to exhibition of cinematography films where price of admission ticket was one hundred rupees or less” where reduction in the rate of GST was from 18% to 12% only.
12. The DGAP has further reported that before inquiring into the allegation of profiteering, it was important to examine Section 171 of CGST Act, 2017 which governed the anti-profiteering provisions under GST. Section 171(1) of CGST Act, 2017 states that “Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.” Thus, the legal requirement was that in the event of a benefit of ITC or reduction in rate of tax, there must be a commensurate reduction in prices of the goods or services, Such reduction could obviously be only in terms of money, such that the final price payable by a consumer got reduced commensurate with the reduction in the tax rate. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method that a supplier could adopt to pass on such benefits.
13. The DGAP has reported that on examination of the details/documents submitted by the Applicant No. 1, Respondent and Jurisdictional office, it was observed that basically there were three categories of tickets (Balcony- Rs. 70, 1st Class- Rs. 50 & Third Class- Rs. 10) sold by the Respondent during the pre as well as post rate reduction period effective from 01.01.2019 and the cum-tax price of these three categories of tickets remained same after the rate reduction which resulted in profiteering in terms of Section 171 of the Central Goods and Service Tax Act, 2017.
14. The DGAP has also stated that the Respondent was not maintaining the class/category-wise details of outward taxable supplies of movie admission tickets. Therefore, the methodology adopted by the DGAP to arrive at/compute profiteering in the subject case was in ‘lump sum’ of all the three categories of admission tickets. This meant that when the GST rate reduced from 18% to 12% w.e.f. 01.01.2019, vide Notification No, 27/2018-Central Tax (Rate) dated 31.12.2018, where the price of admission ticket was one hundred rupees or less the Respondent was required to pass on the benefit of 6% to the recipients by reducing the prices of movie admission tickets. However, the Respondent maintained the same prices of all categories of tickets even after the rate reduction which resulted in profiteering in terms of Section 171 of the Central Goods and Service Tax Act, 2017.
15. The DGAP has reported that the issue that remained was the determination and quantification of profiteering by the Respondent, if any, for failing to pass on the benefit of the reduction in the rate of tax on the “Services by way of admission to exhibition of cinematography films where price of admission ticket was one hundred rupees or less” to the recipients, in terms of Section 171 of the CGST Act, 2017. Since, the profiteering in the subject case was to be worked out in lump sum, the benefit of 6% (18%-12%) on the taxable turnover of each month w.e.f. 01.01.2019 was to be passed on to the recipients by way of commensurate reduction in prices of the tickets. From the sales data made available, it appeared that the Respondent increased the base price of the admission ticket when the GST rate was reduced from 18% to 12% w.e.f. 01.01.2019. As per the summary submitted by the Respondent, even after 01.01.2019, he continued to charge 18% GST. The price list of all the three categories of the tickets for pre and post-tax rate reduction periods submitted by the Respondent clearly indicated that the same cum tax price was maintained for the tickets during the pre and post-tax rate reduction periods.
16. The DGAP has stated that having established the fact of profiteering, the next step was to quantify the same. On the basis of aforesaid pre/post reduction in GST rates and the details of month-wise outward supplies submitted by the Respondent, it was observed that profiteering during the period from January 2019 to September 2019 worked out Rs. 1,31,754/- due to the increase in the base prices of the movie tickets, despite the reduction in GST rate from 18% to 12%. The month-wise details of the computation are given in Table “A” below:
