2020-TIOL-NEWS-052 Part 2, Dated: Monday, March 02, 2020

2020-TIOL-07-NAA-GST

Director General of Anti-Profiteering Vs Samsung India Electronics Pvt Ltd

GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Applicant alleges that the Respondent did not reduce the selling price of Samsung 80 cm (32 inches) HD ready LED TV 32FH4003 when the GST rate was reduced from 28% to 18% w.e.f 01.01.2019 [24/2018-CTR] and the price of the product remained the same after tax reduction and thus the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price in terms of s.171 of the CGST Act, 2017 - DGAP in its report has concluded that the amount of profiteering by the respondent on account of contravention of provisions of s.171 of the Act was Rs.37,85,342/-.

Held: Respondent has contended that he is not the 'supplier' of the goods for the transaction in question and the suppliers were two separate dealers namely 'Jumbo Distributors P Ltd.' and 'EP Electronic Paradise P. Ltd' - On perusal of the complaint, it is revealed that the name of the supplier was written as M/s Samsung India Electronics P Ltd. and to authenticate this contention the applicant had included screenshots of certain e-commerce portals like Amazon etc. - As a manufacturer, the respondent and not the wholesale distributors, dealers or retailers were responsible for fixing the MRPs as only he could fix the MRPs as per the provisions of rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011 - Provisions of the section 171(1) of the Act require a registered person to pass on the benefit of tax reduction or additional ITC to the recipient by way of commensurate reduction in the prices on every supply of goods and services and they nowhere state that the above person shall fix his prices as directed under the above section - Authority, in terms of s.171(1) is also required to ensure that both the above benefits are passed on, however, it has no mandate to act as a price regulator or price controller - Methodology for determination of benefit of ITC or reduction in rate of tax has been prescribed in s.171(1) itself and no separate methodology is required to be prescribed under rule 126 - The respondent is totally free to fix his prices and earn profit and he is only required to pass on the above benefit which has been given to him by the Central and State governments by sacrificing their own revenue which he cannot appropriate against his profits, therefore, s.171 is not violative of the provisions of Article 19(1)(g) of the Constitution of India - contention of the respondent that pricing for B2C sales is highly dynamic and varies depending upon channel structure and other market factors such as size of business, operating cost, location and logistics etc. is untenable as provisions of s.171(1) of the Act require the respondent to pass on the benefit of tax reduction to the consumers only and have no mandate to look into fixing of the prices of the products which the respondent was free to fix - If there was any increase in his costs, the respondents should have increased his prices before 31.12.2018, however, it cannot be accepted that his costs had increased on the intervening night of 31.12.2018/01.01.2019 when the rate reduction had happened which forced him to increase his prices exactly equal to the reduction in the rate of such tax - such an uncanny coincidence is unheard of and hence there is no doubt that the respondent has increased his prices for appropriating the benefit of tax reduction with the intention of denying the above benefit to the consumers - profiteered amount is determined as Rs.37,85,342/- as computed by DGAP in its report dated 12.09.2019 - respondent is directed to reduce his prices commensurately in terms of rule 133(3)(a) of the CGST Rules - respondent is directed to deposit the profiteered amount in the Consumer Welfare Fund of the Central and the State Government concerned as the recipients are not identifiable as per provisions of rule 133(3)(c) of the Rules; along with interest @18% - amount to be deposited within three months - respondent is liable for imposition of penalty u/s 171(3A) of the Act and, therefore, a SCN is to be issued directing the respondent to explain why the penalty prescribed under the said sub-section should not be imposed - Commissioners to monitor this order under supervision of DGAP and submit a report within four months: NAA

- Application disposed of: NAA

2020-TIOL-14-AAAR-GST

Karnataka Co-Operative Milk Producers Federation Ltd

GST - AAR had held that Flavoured milk supplied as a ready to consume drink in Tetra-pack containers or bottles is classifiable under Tariff Heading 0402 9990 and not under 2202 9930 - An appeal has been filed against this order by the Assistant Commissioner of Commercial Taxes arguing that the applicant-respondent had suppressed vital facts in the application inasmuch as investigations had already been initiated by the DGGI against the applicant and an incident report was issued on 17.01.2019 and this fact was not disclosed to the Authority for Advance Ruling; that, therefore, the subject order passed appears to be invalid ab initio, section 98(2) refers - respondent submitted that the investigations by DGGI commenced only in April 2019 whereas the application was filed in March 2019; that the letter dated 9th January 2019 issued by DGGI cannot be considered as summons as it was a routine letter calling for documents and that no investigations had commenced as on the date of filing application before the AAR.

Held: Summons dated 9th January 2019 issued by the SIO, DGGI, Bangalore is in terms of s.70 of the CGST Act which empowers an officer to call a person to give evidence in respect of an enquiry being conducted; that the summons informs the person being summoned about legal consequences of not honouring the summons and to specifically produce documents relating to the sale of flavoured milk during the period July 2017 to November 2018; therefore, it is clear that the respondent made an application for advance ruling in March 2019 all the while being aware of the investigation being conducted against them by DGGI, Bangalore and they (respondent) chose to keep this fact away from the AAR - application for advance ruling could not have been made in this case as it is hit by the provisions of s.98(2) of the Act inasmuch as investigation was already initiated by DGGI - Order of AAR is, therefore, void ab initio - AAAR does not intend to give any ruling on the issue of classification since the matter is pending in a proceeding under the CGST Act, 2017: AAAR

- Appeal allowed: AAAR

2020-TIOL-13-AAAR-GST

International Flower Auction Bangalore Ltd

GST - AAR had held that the relationship between the respondent company and the growers is one of an agent and a principal and since the respondent company, as a commission agent, is providing services for sale or purchase of agricultural produce viz. 'cut flowers', the same is covered under clause (g) of Entry 54 of 12/2017-CTR and hence is exempted from GST - Commissioner of Central Tax has filed an appeal against this order of AAR and submits that the respondent does not act on behalf of another person for auctioning the goods but is acting only as a mediator between the buyer and seller of the products and for offering these facilities, a percentage of the sale value is received as Auction fees; that the services are rightly classifiable as 'Auctioneer service' and not under 'Commission agent'; that the benefit of exemption as extended by AAR is not admissible; that the services are classifiable under SAC 9961 [Entry 5 of 11/2017-CTR] and liable to tax.

Held : Nature of activities done by an 'Auctioneer' and a 'Commission agent' are fundamentally different even though both perform their functions on behalf of the principal - going by the nature of activities performed by the respondent, they do not merely cause the sale of goods on behalf of their clients, the flower growers/sellers, but they undertake the complete process of auction of the flowers and upon the completion of auction, the sale consideration is received not by the sellers but by the respondent who would make payment to the growers for the flowers supplied to them after deduction of the commission - such payments are made to the growers/sellers on the day following the end of the calendar week; the respondent themselves issue the delivery orders which enables the buyers to take delivery of the flowers from the auction house and they also do the billing work and collection of sale proceeds on behalf of their clients - it, therefore, appears that this wide gamut of activities by the respondent would go far beyond the scope of a commission agent since the services rendered by them are not restricted only to sale of goods on behalf of the sellers for a consideration, which is the main edifice of the definition of a 'commission agent' - activities of the respondent company are, therefore, more appropriately classifiable as 'Auctioneer service' - respondent is also not entitled for the exemption in terms of clause (g) of Entry 54 of 12/2017-CTR as the same is available only to the services provided by a 'commission agent' - AAR ruling dated 26.09.2019 is set aside and the appeal filed by the Commissioner of Central Tax, Bangalore North Commissionerate is allowed: AAAR

- Appeal allowed: AAAR