Rahul Sharma Vs McNROE Consumer Products Pvt. Ltd. (NAA)
1. The present Report dated 04.09.2019 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case, are that the DGAP had received a reference from the Standing Committee on Anti-Profiteering on 27.03.2019 to conduct a detailed investigation in respect of an application dated 30.07.2018 (Annexure-1) filed by the Applicant No. 1 against the Respondent in respect of supply of Deodorant Wild Stone Deo Chrome BX 120 ml’. The Applicant No. 1 had stated that the above product had been shipped by the Respondent to M/s Big Bazar, Inderlok on ‘28.09.2017 under Purchase Order No. 8114615731 with the MRP of Rs 250/-, was again supplied on 04.12.2017 under Purchase Order No. 8115262327 with the MRP of Rs. 250/- and on 16.06.2018 it was again sold under Purchase Order No. 4518224285 with the same MRP of Rs. 250/-. The above Applicant had alleged that the Respondent had not pass on the benefit of reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017 which was reduced vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 in terms of Section 171 of the CGST Act, 2017 and instead, he had increased the base price of Wild Stone Deo Chrome BX 120 ml` Deodorant to maintain the same MRP of Rs. 250/-.
2. The DGAP in his above Report has stated that the Standing Committee in its meeting held on 11.03.2019 had examined the above said reference and it had referred the application to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017 to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients or not.
3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued a notice to the Respondent on 08.04.2019 (Annexure-2) under Rule 129 (3) of the above Rules, calling upon the Respondent to reply as to whether he admitted that the benefit of tax reduction had not been passed on to the recipients by way of commensurate reduction in prices and if so, to suo-moto determine the quantum thereof and indicate the same’ n his reply to the notice as well as furnish all the supporting documents. The Respondent was also given an opportunity to inspect the non-confidential evidence/information furnished by the Applicant No. 1 during the period from 15.04.2019 to 17.04.2019. However, the Respondent did not avail of the said opportunity.
4. The DGAP in his above Report has stated that the period covered by the current investigation was from 15.11.2017 to 31.03.2019. The time limit to complete the investigation was extended upto 26.09.2019 by this Authority vide its Order dated 19.06.2019 (Annexure-3) in terms of Rule 129 (6) of the CGST Rules, 2017.
5. The DGAP has also stated that in response to the notice dated 08.04.2019, the Respondent has submitted replies vide letters/e-mails dated 18.04.2019 (Annexure-4), 24.04.2019 (Annexure-5), 10.05.2019 (Annexure-6), 17.05.2019 (Annexure-7), 14.06.2019 (Annexure-8), 01.08.2019 (Annexure-9), and 08.08.2019 (Annexure-10) and has stated that:-
a. He had reduced the prices of his products Post rate reduction in GST vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and the same had been duly communicated to all the channel partners. The said reduction was done w.e.f. 28.11.2017 due to the reason that till that date, he was analysing the impact of the above Notification on his products and was computing the revised MRPs and thereafter he had communicated the revised MRPs to his channel partners.
b. He had also distributed stickers of the revised MRPs for putting them on the stocks available with the channel partners and the fresh sales made by him had been done on the reduced MRPs
6. The DGAP in his Report has further stated that vide the aforesaid letters, the Respondent had submitted the following documents/information:-
a. GSTR-1 & GSTR-3B Returns for the period from October, 2017 to March, 2019 for all the registrations held all over India.
b. Details of invoice-wise outward taxable supplies during the period from July, 2017 to December, 2019.
c. Price Lists (pre and post November, 2017) for all the products, specifically indicating the SKUs impacted by the GST rate reduction w.e.f. 15.11.2017.
d. Sample copies of invoices issued to the dealers, pre and post 15.11.2017.
7. The DGAP in his report has also submitted that the reference from the Standing Committee on Anti-Profiteering, various replies of the Respondent and the documents/evidence placed on record had been carefully examined by him and the main issues to be examined were whether the Respondent had reduced the rate of GST from 28% to 18% on the goods supplied by him w.af. 15.11.2017 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to, the recipients, in terms of Section 171 of the CGST Act, 2017.
8. The DGAP has further mentioned that in respect of the issue of reduction in the rate of GST, it was observed that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the goods supplied by the Respondent from 28% to 18% w.e.f. 15.11.2017, vide S. No. 57k and 60A of the Schedule HI appended to the Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 (Annexure-11). This was a matter of fact which had also not been contested by the Respondent.
9. The DGAP in his report has further submitted that before enquiring into the allegation of profiteering, it was important to examine Section 171 (1) of the CGST Act, 2017 which governed the anti-profiteering provisions under the CGST Act, 2017 which reads as “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” Thus, the DGAP has claimed that the legal requirement was abundantly clear that in the event of benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services supplied. Such reduction in price could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of ITC. He has further claimed that this was the only legally prescribed mechanism to pass on the benefit of ITC or reduction in the rate 0f tax under the GST’ regime and there was no other method which a supplier could adopt to pass on such benefits.
10. The DGAP has also reported that the Respondent had claimed that he had reduced the prices of all his products post rate reduction of GST vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and the same was communicated to all the channel partners. The said reduction was done by him w.e.f. 28.11.2017 as till this date, he was analysing the impact of the Notification on his products and computing the revised MRPs. To verify the correctness of the Respondent’s claim, the DGAP has compared the price of a particular product on different dates as per the data submitted by the Respondent. The details of the same have been furnished by the DGAP in the Table-A below:-
TABLE-A
