GST - Anti-Profiteering - s.171 of the CGST Act, 2017 - Applicants had filed complaints alleging that though the rate of GST on Restaurant services had been reduced from 18% to 5% w.e.f 15.11.2017, the respondent [who is operating quick service restaurants under the brand name McDonald's in the Western and Southern regions of India and registered as supplier under GST in 10 States] had increased the prices  of the products that were being sold by him and had maintained the same prices which he was charging before the above reduction; that the respondent had indulged in profiteering in contravention of the provisions of s.171 of the Act and hence appropriate action should be taken against him - DGAP has submitted its report and respondent has offered their submissions.

Held: Respondent is trying to deliberately mislead by claiming that he was required to carry out highly complex and exhaustive mathematical computations for passing on the benefit of tax reduction which he could not do in the absence of the methodology framed by the Authority - However, no such elaborate computation was required to be carried out as the respondent was to maintain the base prices of the products which he was charging as on 14.11.2017, add 9.11% of the base prices on account of denial of ITC and charge GST @5% w.e.f. 15.11.2017 - Instead of doing that, he has raised his prices by more than 9.11% to 100.09% - Thus the respondent had not only forced his customers to pay extra base price but had also compelled them to pay additional GST on the above additional price and hence he had denied the benefit of tax reduction or in other words had profiteered by increasing his prices - It is abundantly clear from the facts and the law that no elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of tax reduction and computation of the profiteered amount - The respondent cannot deny the benefit of tax reduction to his customers on the above ground and enrich himself at the expense of his buyers as s.171 provides clear cut methodology and procedure to compute the benefit of tax reduction and profiteered amount  - It would be appropriate to mention that as per the provisions of s.171(1) of the Act, the respondent is only required to pass on the benefit of tax reduction by reducing his prices commensurately - There is no mention in the provisions that while passing on the above benefits, the costs of the respondents will also be taken into account - Had it been the intention of the legislature, it would have provided for the same in the above section - Moreover, there cannot be any sudden increase in the cost of the items sold by the respondent on the intervening night of 14/15.11.2017 exactly equal to the price which he was charging before the rate reduction - Such a coincidence is unheard of and malafide - As per the computation of the DGAP, the loss in the ITC was 9.11% and, therefore, the respondent should have increased his prices by not more than 9.11% and not from more than 11.91% to 12.38% as he has done in the case of some products - There is also no connection of profit with passing on of the benefit of tax reduction which is legally required to be passed on irrespective of the fact whether the respondent is in loss or in profit as he is not paying it from his own pocket - Respondent is fully free to fix his prices and margins of profit but under the pretext of Article 19(1)(g) of the Constitution, he cannot deny the benefit of tax reduction to the customers and enrich himself at their expense as it would be against the provisions of s.171 of the Act as well as Article 14 of the Constitution - The respondent had enough time from inception of GST w.e.f 01.07.2017 to 14.11.2017 to increase his prices due to increase in his cost, however, sudden increase in his cost on 15.11.2017 is a deliberate attempt to not pass on the benefit of tax reduction and appropriate the amount of benefit so given by the Central/State government - Constitution of the Authority under rule 122 of the Rules is legal and does not amount to excessive delegation - As this Authority has not assumed any jurisdiction which was hitherto being exercised by the High Court or any other judicial body, the principle that there must be a Judicial Member, as laid down in certain cited decisions, does not apply to the composition of this Authority - Duties of the Authority have been elaborated in rule 127 of the Rules and which clearly reveal that they do not involve settling of any question of law and these are expert functions being discharged by the domain experts who have experience in the field of indirect taxation, therefore, the sequitur of the discussion is that (a) this Authority has not replaced or substituted any function which the Courts were exercising hitherto, (b) it was performing quasi-judicial functions but it cannot be equated with a judicial Tribunal, (c) it performs its functions in a fair and reasonable manner in accordance with the Act but does not have the trappings of a Court and (d) absence of a Judicial Member does not render the constitution of this Authority unconstitutional or legally invalid - since account of ITC is kept for all the products in one common ledger/register, the same cannot be apportioned product-wise hence all the products being supplied by the respondent are required to be investigated to determine whether the benefit of tax reduction after duly considering the denial of ITC has been passed on each product to each buyer or not - Rule 133(5) is a mere clarification of the provisions of s.171(2) and hence, the DGAP has rightly conducted investigation in respect of all the products in respect of which the rate of tax was reduced with prior notice to the respondent and hence, no order was required to be passed u/r 133(5) by this Authority - Respondent cannot get away by appropriating the benefit which he is legally bound to pass on, on the ground that no complaint has been made in respect of the other products - It would also be pertinent to mention that this Authority does not function under the control of the Respondent and hence it is not liable to furnish any explanation to the respondent - Section 171 has not been framed to ensure profit of the respondent as the benefit has to be passed irrespective of the fact whether he is in profit or loss as he does not have to pass it from his own pocket since the same has been given to the ordinary consumer by the Central and State governments from their precious tax revenue by cutting down on the welfare schemes - The respondent cannot misappropriate it against his profit at the expense of the voiceless, unorganised and vulnerable public - Authority is under no obligation to suggest ways to the Respondent to increase his profit with which the respondent appears to be completely fixated even at the cost of denial of benefit of tax reduction which has been given to him from the public exchequer - Benefit is required to be computed on every product and not at the level of restaurant service as the respondent is to reduce prices on the products and not on the service - contention of the respondent that the complaint has been made against a supply made from an outlet with a particular GSTIN and, therefore, the profiteering investigation must be confined to the said supplies is untenable as section 171(2) requires that all the products on which the rate of tax has been reduced should be investigated; that the complaint of the Applicant no. 2 is in respect of all the products sold by the respondents, hence the investigation has to be conducted in respect of all the GSTINs - On the basis of the pre-rate reduction GST rate of 18% and the post-rate reduction GST rate of 5% with denial of ITC of 9.11% of the turnover and the details of the product wise supplies made during the period 15.11.2017 to 31.01.2018 as have been supplied by the respondent himself, the amount of net higher sales realisation due to increase in the base prices of the impacted products after comparing the average pre and post-rate reduction prices of the products, despite the reduction in the GST rate from 18% to 5% or the profiteered amount is determined as Rs.7,49,27,786/- as per the provisions of s.171(1) & (2) of the Act read with rule 133(1) of the Rules, 2017 - respondent is directed to reduce prices of all the impacted products commensurately in respect of which profiteering has been computed as per Annnexure-37 of the DGAP's report dated 15.06.2018 in terms of rule 133(3)(a) of the Rules r/w s.171 of the Act - Respondent is directed to deposit 50% of the profiteered amount i.e. Rs.3,74,63,893/- in the Consumer Welfare Funds of the ten (10) States where supplies have been effected since the recipients, who are millions of ordinary customers, are not identifiable - amounts to be deposited along with interest of @18% - above profiteered amount is required to be deposited along with applicable interest within a period of 3 months failing which it will be recovered by the Commissioners CGST/SGST concerned - compliance report to be submitted within a period of four months - for the contravention of the provisions of s.171 of the Act, penalty is imposable but since the provision for imposing penalty viz. s.171(3A) has been inserted in the CGST Act, 2017 w.e.f 01.01.2020 by the Finance Act, 2019, it cannot be imposed retrospectively on the respondent for the violation committed during the period 15.11.2017 to 31.01.2018 - no SCN for penalty is, therefore, required to be issued: NAA

- Applications disposed of : NATIONAL ANTI-PROFITEERING AUTHORITY

SRF Ltd Vs State Of Madhya Pradesh

Whether where once exemption from levy of Entry Tax is erroneously granted, the Revenue cannot take advantage of technicalities to revoke such benefit with retrospective effect - YES: HC

- Writ petition allowed: MADHYA PRADESH HIGH COURT

2020-TIOL-2130-HC-MUM-CUS

Cus - Initial prayer made in the writ petition was to set aside and quash the impugned seizure memorandum dated 26.09.2020 - Subsequently, additional prayer has been made by the petitioner to set aside and quash order dated 28.10.2020 as well as to declare Circular No.35/2017-Customs dated 16.08.2017 issued by the CBIC as ultra vires the provisions of section 110-A of the Customs Act, 1962 - Case of the petitioner is that it is a company incorporated under the laws of Republic of Panama, having its registered office at Panama City and it is the owner of a vessel called MT Global Rani - On being summoned by the SIO, SIIB, the Master of the vessel explained to the authority that it was the standard procedure for all ships importing cargo from Iran to declare the imports as being from Iraq - Senior Intelligence Officer issued the impugned seizure memorandum dated 26.09.2020 seizing the said vessel - It was mentioned therein that the cargo was not loaded at Basrah Port, Iraq as per import documents filed for clearance of the goods but instead loaded at Bandar Abbas Port in Iran - Therefore, there was reason to believe that the said vessel approximately valued at Rs.12,74,00,000.00 carrying the cargo 'Bitumen Grade VG30' covered under the bill of entry dated 21.09.2020 had mis-declared the country of origin as Iraq thereby rendering itself liable for confiscation under section 115 of the Customs Act - Accordingly, the said vessel was seized under section 110(1) of the Customs Act - Since it was not practicable to physically takeover custody of the said vessel, it was handed over to the master of the vessel Ranjeet Singh under supratnama dated 26.09.2020 - Petitioner, by letter dated 13.10.2020 requested respondent No.1 for provisional release of the vessel but there was no response, therefore, the present petition - It is contended that there was no justification at all for seizure of the vessel - While the cargo has not been seized, the vessel has been seized - As a matter of fact, the cargo was cleared for home consumption - It has become a standard practice that Bitumen imported from Iran is declared as originating from Iraq solely for banking purpose - This practice is being followed by all such importers and carriers and does not in any manner affect the revenue. There is no embargo in importing Bitumen from Iran - In two recent incidents, vessels, viz, MT Clayton and MT R-Ocean had brought similar product from Iran shown as originating from Iraq - While in one case no action was taken, in the other case, the vessel was released on furnishing of bond of equivalent amount as that of the vessel and cash deposit of certain amount - Vessel in question is a specialized one having high daily operating cost and because of the seizure, petitioner is incurring heavy expenditure - Respondent No.1 has stated that it has come to its notice that the vessel is already under detention by the Directorate General of Shipping vide detention order No.3/2020 dated 24.09.2020 on the ground of unseaworthiness - Adjudicating authority vide letter / order dated 28.10.2020 has rejected the request of the agent of the petitioner for provisional release of the vessel - It is also clarified that CBIC has not issued any notification under section 11 of the Customs Act - Petitioner submits that under no circumstances the vessel can be seized after clearance of the imported goods - Insofar as release of two other vessels placed in identical situation, he submits that answer given by respondent No.1 is totally evasive - Petitioner requests the Court to direct provisional release of the vessel.

Held: [para 35 to 39, 41]

+ Regarding the ground given that the vessel in any case is under detention by the Directorate General of Shipping and therefore, cannot be released without having no objection from the said authority, we are of the view that the same would not preclude exercise of power under section 110A of the Customs Act.

+ Regarding the allegation that the vessel has been engaged in repeated offence and that investigation in this regard is not yet complete, the same in our view would also not come in the way of exercise of power under section 110-A of the Customs Act.

+ A conjoint reading of sections 114AA and 115 in the backdrop of the definition of "goods" given in section 2(22) would go to show that the goods referred to in those two sections are goods which are sought to be smuggled in or the smuggled goods. It is another matter that in this case the goods imported i.e., the consignments have already been released. Even then if we look at the two provisions textually, the word 'goods' referred thereto can mean the goods carried by the conveyance (in this case vessel) and not the conveyance (in this case vessel).

+ Vessel has been seized because the proper officer had reasons to believe that it is liable to confiscation under section 115. If it is confiscated under section 115 then an option is required to be given to the owner of the vessel which is used for carriage of goods for hire to pay fine in lieu of confiscation of the vessel which should not exceed the market price of the goods i.e., the consignments sought to be smuggled or smuggled. Therefore, the justification given for imposition of the condition that there should be bank guarantee for an amount equivalent to five times of the market value of the vessel is wholly untenable.

+ Petitioner had specifically averred in the writ petition that a vessel by the name of MT R-Ocean was similarly placed like that of the vessel in question. The vessel MT R-Ocean was allowed to discharge similar cargo and no action was taken. The other vessel MT Clayton which was detained in similar fashion was granted provisional release on furnishing bond of Rs.12,00,00,000.00 which was the value of the vessel and cash deposit of Rs.10,00,000.00. In so far these averments are concerned, respondent No.1 in the reply affidavit simply shrugged off the same by saying that in the absence of relevant facts and documents, there cannot be any comparison and conclusion. This is an evasive denial by respondent No.1 and an evasive denial is no denial in the eye of law; it amounts to admission.

+ It may be mentioned that in the seizure memorandum itself the value of the vessel has been mentioned at Rs.12,74,00,000.00 approximately. Therefore, on due consideration and without going into the challenge to the impugned seizure memorandum dated 26.09.2020, we do not find any good reason to decline provisional release of the vessel.

+ Having regard to the discussions made and without expressing any final opinion on merit vis-a-vis the impugned seizure memorandum, Bench sets aside the order dated 28.10.2020 and directs respondent No.1 to grant provisional release of the vessel MT Global Rani to the petitioner under section 110A of the Customs Act on furnishing a bond of Rs.12,74,00,000.00 with further deposit of Rs.25,00,000.000 in the form of bank guarantee of a nationalised bank. Needless to say such provisional release shall be subject to completion of necessary formalities including clearance from the Directorate General of Shipping, Government of India.

+ Writ petition is accordingly allowed to the above extent.

- Petition allowed: BOMBAY HIGH COURT

2020-TIOL-2129-HC-MAD-CUS

Cus - Respondent by Order-in-Original dated 29.06.2016 had passed an order for confiscating goods under the provisions of the Customs Act, 1962 - The said order itself specifically mentions that the Petitioner is entitled to prefer appeal against that order under Section 129-A of the Act before the CESTAT - However, the Petitioner did not prefer any such appeal before that Appellate Authority, but has instead filed this Writ Petition on 26.10.2016 challenging the order passed by the Respondent.

Held: There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute - Supreme Court of India in Assistant Collector of Central Excise -vs- Dunlop India Limited = 2002-TIOL-156-SC-CX-LB has succinctly explained the legal position relating to the exercise of discretionary powers under writ jurisdiction - Inasmuch as Article 226 is not meant to short-circuit or circumvent statutory procedures and it is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution - In the result, the Writ Petition, which cannot be entertained, is dismissed: High Court [para 4]

- Petition dismissed: MADRAS HIGH COURT

2020-TIOL-2128-HC-MAD-ST

ST - Petitioner received a copy of the order dated 21.12.2016 passed by the first respondent on 31.12.2016 - Petitioner was entitled to prefer appeal against that order within a period of two months from the date of its receipt under Section 85 of the Finance Act, 1994 with a condonable period of one more month - Petitioner had presented the appeal before the Second Respondent on 19.04.2017 which was beyond the maximum limitation period of three months - Second respondent by O-in-A dt. 18.12.2017 refused to entertain that time barred appeal - incidentally, the petitioner has filed this Writ Petition against the order dated 21.12.2016.

Held: Supreme Court of India in Assistant Commissioner (CT) LTU, Kakinada -vs- Glaxo Smith Kline Consumer Health Care Limited = 2020-TIOL-93-SC-VAT has emphatically laid down that the High Court in the exercise of powers under Article 226 of the Constitution of India ought not to entertain Writ Petition assailing the order passed by a Statutory Authority which was not appealed against within the maximum period of limitation before the Appellate Authority concerned - As a corollary, it would follow that it would also not be possible to entertain this Writ Petition challenging the order of the Second Respondent, who has rightly refused to take that time barred appeal to file - In the result, the Writ Petition is dismissed: High Court [para 3, 5]

- Petition dismissed: MADRAS HIGH COURT

2020-TIOL-2126-HC-MUM-CUS

Cus - Application has been filed seeking extension of time for passing final adjudication order by the adjudicating authority - Related petition was heard and disposed of by this Court along with two other writ petitions by the common order dated 22nd September, 2020 = 2020-TIOL-1643-HC-MUM-CUS - As per the direction at sr. No.3, the adjudication process was directed to be completed within a period of four weeks - Counsel for the parties have informed the Court that the adjudication order was in fact passed on 27th November, 2020 which is slightly beyond the period of four weeks as per the direction noted above - Counsel for Revenue prays for condoning the delay in passing the adjudication order.

Held: Considering the fact that final adjudication order has in fact been passed on 23rd November, 2020, no further order is called for save and except that the additional time taken in passing the order-in-original following adjudication is accepted and condoned - Interim application is disposed of: High Court [para 6, 7]

- Application disposed of: BOMBAY HIGH COURT

2020-TIOL-2113-HC-MAD-CX

Bonfiglioli Transmissions Pvt Ltd Vs CCE

CX - Respondent has passed an Order-in-Original dated 10.11.2014 determining the liability under the provisions of the Central Excise Act, 1944 - Order specifically mentions that the Petitioner is entitled to prefer appeal against that order under Section 35B of the before the Appellate Tribunal - However, the Petitioner did not prefer any such appeal but has instead filed this Writ Petition on 01.03.2017 challenging the order passed by the Respondent.

Held: There is no acceptable explanation from the Petitioner for not having resorted to that alternative remedy provided under the statute - Supreme Court of India in Assistant Collector of Central Excise -vs- Dunlop India Limited = 2002-TIOL-156-SC-CX-LB has succinctly explained the legal position relating to the exercise of discretionary powers under writ jurisdiction - Inasmuch as Article 226 is not meant to short-circuit or circumvent statutory procedures and it is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution - In the result, the Writ Petition, which cannot be entertained, is dismissed: High Court [para 3]

- Petition dismissed: MADRAS HIGH COURT

2020-TIOL-2112-HC-MUM-CUS

CC Vs Poonam Courier Pvt Ltd

Cus - In the relevant period, an O-i-O had been passed against the assessee-company, proposing to revoke the registration granted to it under Regulation 10 of Courier Imports & Exports (Clearance) Regulations, 1998 (as amended) to operate as an Authorized Courier in terms of Regulation 14(1) of the Courier Imports & Exports (Clearance) Regulations, 1998 - The O-i-O also directed forfeiture of the security amount deposited by the assessee - Penalty was also imposed u/s 158(2)(ii) of the Customs Act - On appeal, the Tribunal set aside such O-i-O - Hence the issue at hand in the present case is whether without availing the remedy provided under Regulation 14(2) of the Courier Imports and Exports (Clearance) Regulations, 1998, the Tribunal would have the jurisdiction to entertain an appeal u/s 129A of the Customs Act.

Held - The Regulations had been made by the then Central Board of Excise and Customs in exercise of the powers conferred by section 157 read with section 84 of the Customs Act. Section 157 deals with the general power to make regulations - The CBIC has been conferred the power to make regulations consistent with the Customs Act - Likewise, the Board has been conferred the power to make regulations regarding goods imported or to be exported by post or courier under section 84 - Evidently, it is a subordinate piece of legislation - While Regulation 14(1) empowers the Principal Commissioner of Customs or Commissioner of Customs to revoke the registration of an authorized courier and also order for forfeiture of security; Regulation 14(2) provides for an opportunity to the aggrieved courier or an authorised officer of customs to represent before the Principal Chief Commissioner of Customs or Chief Commissioner of Customs if aggrieved by an order passed under Regulation 14(1) - Thus, the remedy provided under Regulation 14(2) is by way of a representation to the higher authority - Meanwhile, Section 129A(1)(a) makes it abundantly clear that any person aggrieved by a decision or order passed by the Principal Commissioner of Customs or Commissioner of Customs as an adjudicating authority may appeal to the Appellate Tribunal against such decision or order: HC

- Revenue's appeal dismissed: BOMBAY HIGH COURT

2020-TIOL-2111-HC-MAD-CUS

Royal Marketing Vs CC

Cus - Petitioner is seeking for a direction to the second respondent to permit the clearance of light melting scrap and consequently permit the petitioner to dispose the plastic cans, PET bottles to the plastic recycling Industrial Units after segregating the same from the light melting scrap imported - It is the case of the petitioner that the exporters had unintentionally mixed the PET bottles along with the light melting scrap and, therefore, there is no deliberate violation of the law by the petitioner - since nothing has been heard on the representations made by the petitioner, the writ petition has been filed seeking for a positive direction to dispose of the PET bottles in India itself, instead of re-exportation the same back to the country of origin.

Held: It is for the respondent to consider the request of the petitioner to segregate the PET bottles from light melting scrap, which was imported by the petitioner under bill of entry dated 23.07.2014 - No prejudice will be caused to the respondents, if the petitioner's representations dated 25.08.2014 & 15.09.2014 is considered by them on merits and in accordance with law - To pass final orders on merits within a period of eight weeks - Petition disposed of: High Court [para 7]

- Petition disposed of: MADRAS HIGH COURT

2020-TIOL-1675-CESTAT-MUM

Nadiadwala Grandson Finvest Pvt Ltd Vs CGST & CE

ST - The assessee had entered into an agreement with M/s Apple & Orange for engaging their services to perform all line production services in accordance with the Indian Production schedule for the movie 'JUDWAA 2' - They had filed the refund applications under Rule 5 of CCR, 2004 r/w Notfn 27/2012-C.E. (N.T.) , claiming refund of service tax paid on input services during the period from January - June' 2017 - Same was rejected - The contents of agreement clearly provide that the main producer and the beneficiary of subject movie is M/s Apple & Orange - Since, such recipient of service is located in United Kingdom, which is a place outside the geographical limits of India, the provisions of Rule 8 ibid shall not be applicable - On the other hand, by close scrutiny of the rules framed under the Place of Provision of Services Rules, 2012, the case of assessee will not be governed under Rule 4 to Rule 12 itemized therein - Rather, the place of provision of service will more appropriately be categorized under Rule 3 ibid inasmuch as the service recipient has its business establishment in United Kingdom and thus, the place of provision of service is outside India, which would be considered as export of service for grant of refund of service tax paid on the input services - The department has also accepted the impugned transactions as export of service, which is evident from the fact that no proceedings were initiated against assessee for demand of service tax on the activities undertaken by it - The impugned order has referred to the report of CAG for arriving at the conclusion that the activities undertaken by assessee will not be considered as an export of service - On perusal of the impugned order, it is found that no reference number or date of such report has been furnished therein - Thus, the contents in impugned order about the report of CAG cannot be legally recognized as having any evidentiary value for deciding the appeal against assessee - Even if the said report is considered at this juncture, then the facts emanating there from are entirely different from the facts of the present case - The report of CAG had referred to the incidents relating to production of movie 'Ae Dil Hai Mushkil', produced by Dharma Productions Pvt. Ltd., a company registered in India - The said report does not discuss the production related issues of movie under dispute - Thus, blind reliance cannot be placed on such report and accordingly, the impugned order is also not sustainable on this ground - No merits found in the impugned order, in so far as it has upheld the adjudication order on the ground that the assessee should not be entitled for refund benefit provided under Rule 5 of CCR, 2004 r/w Notfn 27/2012- C.E. (N.T.) - Accordingly, the impugned order is set aside: CESTAT

- Appeals allowed: MUMBAI CESTAT

2020-TIOL-1674-CESTAT-CHD

Overseas Warehousing Pvt Ltd Vs CC

Cus - Early hearing of appeals - Considering that the livelihood of assessee is affected, applications for early hearing of appeals are allowed - As the time sought to file the cross objection, the request for adjournment of the matter is accepted - The matter is adjourned with the direction to revenue to mention the matter after filing the cross objection - No coercive action shall be taken against assessee till further orders: CESTAT

- Application allowed: CHANDGARH CESTAT