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2022-TIOL-26-NAA-GST
L'Oreal India Pvt Ltd
GST - Supplies of Hair Care, Hair Color, Skin Care, Make Up, Luxury products - It is alleged that the respondent had profiteered in the supplies made inasmuch as they had not passed on the benefit of reduction in the rate of GST on the goods supplied when the rate of GST was reduced from 28% to 18% w.e.f 15.11.2017 vide notification 41/2017-CTR - Reference was examined by the DGAP and in the investigation report dated 05.07.2019, it was concluded that the allegation of profiteering by way of either increasing the base prices of the products while maintaining the same selling price or by way of not reducing the selling prices of the products commensurately despite reduction in GST rate from 28% to 18% stands established against respondent; that the respondent has realised an additional amount to the tune of Rs.216,49,61,535/- from recipients during the period 15.11.2017 to 31.12.2018 and which includes both the profiteered amount and the GST on the said amount - Aforesaid amount was revised to Rs.186,39,57,058/- after rectifying certain inadvertent discrepancies - Personal hearing was held and the proceedings culminated in passing of an Interim order dated 03.01.2020 with a direction to DGAP to conduct further investigation - DGAP has, thereafter, presented a further report dated 28.08.2020 and inter alia mentioned that on a specific direction of the Authority to examine the Respondent's claim of having passed on the benefit of rate reduction by increasing the grammage/ volume, though S.171 of the Act, 2017 does not provide for any such means of passing on the benefit of reduction in the rate of tax or benefit of ITC other than by way of commensurate reduction in prices, in case the Authority considers the passing on benefit of rate reduction by increasing the grammage/volume, the Net profiteering will reduce to Rs.158,90,11,116/- (after reducing the grammage increase in equivalent rupees as Rs.27,49,45,942/-).
Held:
++ Respondent cannot contend that the entire investigation including the further investigation ordered u/r 133(4) should be completed within a period of 6 months when it involved fresh appreciation of evidence, submission of additional evidences by respondent including his claim of grammage benefit and recalculation of the profiteered amount involving about 55 lakhs transactions -
++ Authority finds that the statute has not provided for any consequences for failure to adhere to the time limit and has not provided that in case of failure the whole proceedings would be null and void, therefore, it can be construed that the time limit prescribed under the Act and rules made thereunder to complete investigation and further directions by Authority is directory in nature - Held, therefore, that the time limits prescribed under rule 133(1) and 129(6) are not mandatory and hence all contentions of respondent on the ground of not observing time limits are untenable and hence rejected.
++ If the respondent could change several entries in his software to increase the base prices w.e.f 15.11.2017, he could have very easily replaced one entry of rate reduction - No guidelines and methodology or elaborate mathematical calculations are required to be prescribed separately under rule 126 for passing on the benefit of tax reduction or for computation of the profiteered amount - Respondent cannot deny the benefit of tax reduction to his customers on the ground that he was required to carry out highly complex and exhaustive mathematical computations for passing on the benefit of tax reduction - Respondent has also not re-fixed the MRPs after rate reductions - If the respondent was not capable of doing the above, he could have computed the profiteered amount and deposited it in the Consumer Welfare Fund (CWF) of the Central and State Governments as per rule 133(3)(b) which has been done by some other manufacturers/traders - As per s.171(1) reduction in prices is the only legally permissible method for passing on the benefit of tax reduction.
++ Authority has been empowered under rule 126 to ‘determine' Methodology & Procedure but not to ‘prescribe' it - Respondent cannot deny the benefit of tax reduction to his customers on above grounds and enrich himself at the expense of is buyers - Conducting of investigation till 31.12.2018 causes no discrimination to the respondent as it has been established after investigation that he has not passed on the benefit of rate reduction till 31.12.2018 - There are clear cut provisions under the Act and Rules as to till what period the investigation is to be conducted and it cannot be restricted to a period of 3 months as contended by respondent - Therefore, contention of respondent regarding arbitrariness of period of investigation is not sustainable.
++ As per s.171(1) of the Act, benefit of tax reduction can be passed only by commensurate reduction in the price and it cannot be based through promotion schemes - Such promotion schemes are floated in the ordinary course of business and the main aim is to increase their sales and not to pass on the benefit of tax reduction - Moreover, these schemes benefit their distributors/retailers more than the ordinary customers - Respondent has not been able to establish any correlation between such promotion schemes and the passing on the benefit of tax reduction - Such an assertion is merely an afterthought to justify passing on of the benefit and cannot be relied upon; is wrong and misleading and hence cannot be accepted.
++ Authority does not find from the facts or the evidences collected by the DGAP or any document/evidence given by respondent whereby it can be proved that the products sold by the respondents are per gram or per kilogram - From the photographs of advertisements, one does not find as to whether the consumer was consciously made aware of specific number of excess grammage being offered to them due to reduction in the tax rate - It is also not the case where the price of the product is mentioned in immediate vicinity of the grams on the packet or vice versa - Contention of the respondent may have some persuasive value if they would have been selling their product on weight basis or volume basis.
++ It is a settled law that the statute has to be read as per the language in the general manner and the meaning provided therein and import of any other word or meaning should be avoided if the language is simple and is not open for two or many interpretations - Provisions of Anti-profiteering are a beneficial enactment, which aim to provide relief to the common person by way of reduced taxes, which the government has sacrificed and any attempt to curtail the same would defeat the very object and purpose for which the said legislation was brought in - Authority, therefore, holds that increase in grammage, if any, is not in any way equivalent or akin to commensurate reduction in prices - Authority finds that the statutory provisions u/s 171 mandate only commensurate reduction in price as the only method of passing on the benefit of reduction in rate of tax or availability of Input Tax credit and there is no scope for any exception.
++ Methodology of ‘netting off' cannot be applied in the case of tax reduction and the methodology of ‘zeroing' has to be applied as the customers have to be considered as individual beneficiaries and they cannot be dumped as goods and netted off against each other - Authority has, in its various orders, clarified that the benefit cannot be computed at the product, service or the entity level as the benefit has to be passed on each SKU, unit and service as per the provisions of s.171(1) of the Act - Therefore, respondent cannot insist on not applying the methodology of ‘zeroing' as ‘netting off' would amount to violations of the provisions of s.171(1) as well as Article 14 of the Constitution.
++ Contention of the respondent regarding impact on the price of the product on account of budgetary support scheme is not sustainable and is rejected - Contention of the respondent that in case the profiteered amount is determined, such amount should be transferred to distributors, model trade retailers, e-commerce etc. is rejected as the benefit has to be passed on to the ordinary customer and not to the recipients of the respondent.
++ Authority has not replaced any Courts, cannot be equated to a Court or a Tribunal and hence the mandate of having a Judicial Member cannot be said to apply to this authority - Allegations made by respondent regarding unconstitutionally of Authority are devoid of any legal merit moreso since the orders passed are subject to judicial review and hence no prejudice would be caused to respondent -
++ Authority has, nowhere, interfered with the business decisions of the respondent and, therefore, there is no violation of Articles 14 and 19(1)(g) of the Constitution.
++ Authority directs that fifty percent of the amount of Rs.186,39,57,058/- along with interest @18% be deposited in the Central Consumer Welfare Fund and the balance amount is to be deposited in the CWF of the State concerned along with interest @18%, within 3 months from the date of this order.
++ Since s.171(3A) was not in operation during the period 15.11.2017 to 31.12.2018 having been inserted w.e.f 01.01.2020, penalty u/s 171(3A) cannot be imposed - Central and State GST Commissioners concerned are directed to ensure that the above said amounts is got deposited failing which the same shall be recovered and action taken be reported within four months.
++ DGAP is also directed to conduct further investigation to ascertain whether the respondent has passed on the benefit of tax reduction in respect of all impacted products sold by him after 31.12.2018.
++ Pandemic - Considering the Supreme Court orders passed on 23.03.2020 and 10.01.2022, extending the period of limitation under the Acts, the order passed today falls within the limitation under rule 133(1) of the Rules, 2017 - Application disposed of: NAA
Application disposed of: NAPA
2022-TIOL-890-HC-MP-GST
S D Solar Systems India Ltd Vs State of Madhya Pradesh
GST - The petitioner had applied for migration in GST pursuant to Circular 2018/Computer (24)/70, and hence sought for a direction to respondents to decide its application in accordance with law - Respondent does not dispute that no order has yet been passed on application moved by petitioner for migration in GST - Respondents are directed to consider and decide the application moved by petitioner in quite promptitude, in the light of Circular by passing a well reasoned order, within a period of sixty days - The Court has not expressed any opinion on merits of case: HC
- Writ petition disposed of: MADHYA PRADESH HIGH COURT |
