Avanti Patel Vs Starbucks Coffee (NAA)
The brief facts of the present case are that under Rule 128 (1) of the Central Goods and Services Tax (CGST) Rules, 2017, an application was filed by the Applicant No. 1 against the Respondent before the Standing Committee on Anti-profiteering alleging that the Respondent had not passed on the benefit of reduction in the GST rate on restaurant service when it was reduced from 18% to 5% w.e.f. 15.11.2017 without benefit of ITC and he had increased the base prices of the food items sold by him and applied 5% GST thereon, by either maintaining the pre-rate reduction selling prices or even increasing them in the post-rate reduction period and thus he had resorted to profiteering. In support of her allegation, the above Applicant had submitted copies of tax invoices dated 11.11.2017 and 15.11.2017 vide which she had purchased “Short Capuccino” from the Respondent.
Held by NAA
It is established from the perusal of the above facts that the Respondent has profiteered to the tune of Rs. 1,04,70,664/- during the period from 15.11.2017 to 30.06.2018 which he is required to pass on to the buyers by commensurately fixing prices of his products after taking in to account the impact of denial of ITC, which he has not done and hence he has violated the provisions of Section 171 (1) of t e CGST Act, 2017. Accordingly, as per the provisions of Section 1 1 (2) of the CGST Act, 2017. Accordingly, as per provisions of Section 171 (2) of the above Act read with Rule 133 (1) of the CGST Rules, 2017 the profiteered amount is determined as Rs. 1,04,70,664/-.
Accordingly, the Respondent is directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit of tax reduction is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount mentioned above along with the interest to be calculated @18% from the date from which the above amount was collected by him from the recipients till the above amount is deposited, in terms of the Rule 133 (3) (b) of the CGST Rules, 2017. Since, the recipients in this case are not identifiable, the Respondent is directed to deposit the above amount of profiteering along with interest in the Consumer Welfare Funds (CWFs) of the Central and the above State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 in the ratio of 50:50 along with interest @ 18%. till the same is deposited as per the details mentioned in the Table above
The above amount shall further be deposited within a period of 3 months by the Respondent, from the date of this order, failing which the same shall be recovered by the concerned Commissioners of the Central and the State GST, as per the provisions of the CGST/SGST Acts, 2017 under the supervision of the DGAP and shall be deposited as has been directed vide this order. A detailed Report shall also be filed by the concerned Commissioners of the Central and the State GST through the DGAP indicating the action taken by them within a period of 4 months from the date of this order.
It is also evident from the above narration of the facts that the Respondent has denied benefit of rate reduction to the buyers of his products in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence for violation of the provisions of Section 171 (1) during the period from 15.11.2017 to 30.06.2018 and therefore, he is apparently liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. However, perusal of the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 15.11.2017 to 30.06.2018 when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively. Accordingly, notice for imposition of penalty is not required to be issued to the Respondent.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The brief facts of the present case are that under Rule 128 (1) of the Central Goods and Services Tax (CGST) Rules, 2017, an application was filed by the Applicant No. 1 against the Respondent before the Standing Committee on Anti-profiteering alleging that the Respondent had not passed on the benefit of reduction in the GST rate on restaurant service when it was reduced from 18% to 5% w.e.f. 15.11.2017 without benefit of ITC and he had increased the base prices of the food items sold by him and applied 5% GST thereon, by either maintaining the pre-rate reduction selling prices or even increasing them in the post-rate reduction period and thus he had resorted to profiteering. In support of her allegation, the above Applicant had submitted copies of tax invoices dated 11.11.2017 and 15.11.2017 vide which she had purchased “Short Capuccino” from the Respondent.
2. The application was examined by the Standing Committee on Anti-profiteering in its meeting held on 02.07.2018 and as per the minutes of the meeting it was decided to refer the matter to the Director General of Anti-Profiteering (DGAP) to investigate and collect necessary evidence to determine whether the benefit of reduction in the rate of tax on the restaurant service had been passed on by the Respondent to his recipients as per the provisions of Rule 129 (1) of the above Rules.
3. The DGAP had sought extension to complete the investigation, which was extended upto 31.12.2018 by this Authority vide its orders dated 09.10.2018 and 15.11.2018 in terms of Rule 129 (6) of the CGST Rules, 2017. After completing the investigation the DGAP had submitted his Report under Rule 129 (6) of the CGST Rules, 2017 on 27.12.2018. The period of investigation was from 15.11.2017 to 30.06.2018.
4. The DGAP in his Report had stated that a notice under Rule 129 (3) of the CGST Rules, 2017 was issued on 27.07.2018, calling upon the Respondent to submit his reply as to whether he admitted that the benefit of reduction in the rate of tax had not been passed on to the recipients by way of commensurate reduction in prices. The Respondent was also asked to suo moto determine the quantum of benefit not passed on, if any, and indicate the same in his reply to the notice.
5. The DGAP had also stated that the Respondent in his replies had submitted that he was engaged in the business of operating and maintaining restaurants under the name Starbucks- A Tata Allianc or “Starbucks Coffee- A Tata Alliance” where he was selling C e, Tea and Iced Beverages etc. He had also submitted that he had adopted a policy to revise his prices twice in a financial year arid accordingly prices were being revised on an annualized basis @7-8% depending upon the price of the product. He had also claimed that though the revised base prices factored in the cost of non-creditable input GST, there was no increase in the ultimate prices (inclusive of GST) charged from the recipients. He had further claimed that though the base price of the complained product Short Cappuccino had increased when the GST rate on restaurant service was reduced from 18% to 5% but its selling price (inclusive of GST) had actually decreased as could be seen from the Table-1 below:-
Table – 1
Comments are closed.