NOVEMBER 06, 2018

By Vijay Kumar

Can anonymous complaint be made to the National Anti-profiteering Authority?

FOR the answer, please see the decision of the National Anti-Profiteering Authority (NAA) reported in - 2018-TIOL-11-NAA-GST

Applicant No. 1 through his email (rss342786@tatamotors.com) dated 22.11.17, without mentioning his name or contact address had alleged profiteering against the Respondent, Amway India Enterprises. The Applicant in his initial complaint had informed that the Respondent had not passed on the benefit of reduction in the GST rates from 28% to 18% on selected items to its customers or Amway Business Owners (ABOs).

The Director General Anti-Profiteering (DGAP), reported that vide emails dated 09.05.2018, 21.05.2018 and 09.07.2018, the Applicant No. 1 at the available Email Id, was requested to provide the name and address of the supplier against whom the complaint was made, and to provide the pre-GST and post-GST amount charged by the supplier and the invoices evidencing the same, however, no reply was received from the Applicant No. 1. He has also stated that the above Applicant was also contacted on the phone number available in his application and he had provided a new email id, on which he was again requested to send the details; however, no reply was received from him. He has further stated that the Respondent was a direct selling Company with more than 5,50,000 ABOs and was selling about 140 products covering five categories and had nationwide presence with over 130 sale offices, 4 regional mother warehouses, 3 regional hubs and 34 city warehouses. Applicant No.1 had neither provided the description of the items nor provided any of the details of the supplier or any evidence that the Respondent had indulged in profiteering and, therefore, in the absence of the description of any product, the name of any supplier and any specific evidence of profiteering by the above Respondent, no further investigation could be conducted.

The NAA issued notices to the interested parties to attend a hearing. Applicant No. 1 did not bother to attend. The DGAP was represented by an Additional Commissioner in the CBIC and the other interested party, Amway India was represented by its CFO, Sr. Manager (Taxation) and Assistant Manager (Taxation). Four Members of the National Anti-Profiteering Authority including its Chairman heard the above representatives and held that:

It is revealed from the facts that the Applicant No. 1 had not supplied details of the products or the invoices vide which he had bought them from the Respondent in spite of repeated requests made by the DGAP and therefore, the investigation against the Respondent could not establish profiteering for want of cogent and reliable evidence and hence no violation of the provisions of Section 171 of the CGST Act 2017 has been found in this case. Accordingly, the application filed by the Applicant requesting for action against the Respondent for alleged violation of the provisions of the above Section is not maintainable and hence the same is dismissed.

The moot question is, can anybody, without even revealing his identity, allege profiteering against anybody and the whole machinery of Anti-Profiteering starts working, only to decide that finally no decision can be taken?

The Prime Minister says that more people are paying taxes because they have faith that their money is being used properly and for the welfare of people.

Can the above be also called a proper use of taxpayers' money?

Paratha as per Oxford Dictionary - if I ask for bread, will I get paratha? If you know the taste of Malabar Paratha, you will soon know the taste of GST. How much of GST goes into that tasty Malabar Paratha that you relish? To find out that, first of all you should know what a paratha is. How do you know that? If you want to eat it, maybe you should ask a Punjabi or a Malabari but if you want to tax it, you should ask HSN. But HSN does not recognise the paratha, at least directly. It would be hidden somewhere in those 4 digit, 6 digit and 8 digit mystical numbers. All that you have to do is, "search and thou shalt find". But how? The Concise Oxford Dictionary is a good source and that is exactly what they did in a recent case.

It is stated that 'Parotta' is a food product made with maida (fine wheat flour). This literally means layers of cooked dough. Concise Oxford English Dictionary define paratha as a flat, thick piece of unleavened bread fried on a griddle. Since it is an unleavened flat bread prepared by frying, parota is a flatbread. Parotta is a wheat flour based, circular, layered and creamy white traditional bread. Bread is a product prepared by cooking of dough made from flour of any grain, water and salt. The explanatory note to Heading 1905 gives a very wide description of the term 'bread' and provides an illustrative list of various kinds of bread included within the scope.

The process of preparation of parotta involved mixing and kneading the dough. The dough prepared is covered with a wet cloth for resting the dough for fermentation. Then dough is divided into small balls and sheeting the small dough and baking the sheeted dough. Half cooked goods cooled to room temperature and packed.

The goods prepared from wheat flour, Edible vegetable oil, Milk solids, Sugar, Salt are in the nature of Parotta. 'Classic Malabar Parota' is unleavened, 'Whole Wheat Malabar Parota' is leavened with yeast.

The Kerala GST AAR (Authority for Advance Ruling) examined the issue meticulously (as stated in its order) in a recent case reported in - 2018-TIOL-237-AAR-GST and observed, "Bread is a staple food prepared by cooking dough of flour, water and yeast. Whereas parotta is prepared by using ghee or oil. The dough is rolled out and brushed with ghee or oil then folded again, brushed with more ghee and folded again. This is then rolled out to a circle and cooked on a buttered griddle. The heat makes the layers of dough puff up slightly, resulting in a more flaky texture."

All, obviously very essential to decide whether paratha is subject to GST.

The AAR continued,

As per entry 97 of  Notification No.2/2017 - Central Tax  / SRO. No.361/2017, only specific commodity 'Bread branded or otherwise' covered under HSN 1905 is eligible for exemption. When we apply "commercial parlance test" and in fact ask someone to bring the bread from the market, he will never bring parotta. There is an open market of the commodity where the commodity is commonly traded and the common man who knows the goods according to the meaning given to them in normal usage. As there is substantial distinction between bread and parotta, in preparation, use, taste, digestion, even though both of them are used as food. Therefore the exemption given to the specific commodity under GST tariff 'Bread branded or otherwise' is eo nomine exclusively covered under HSN 1905. It has no wider scope to incorporate different food stuff prepared using wheat flour.

As per Schedule III of GST Laws, vide Heading 2106 'Food preparations not elsewhere specified or included' is taxable @18% GST. There is specific exclusions from this heading, for 'Khakhra, Plain Chapatti or Roti, Idli/Dosa batter, and included under 5% category. Even though 'Chapati' is unleavened flatbread prepared from whole wheat flour or maida, it is specifically included under heading 2106 and reduced the tax rate from 18% to 5%. Therefore the word 'Food Preparations' connotes preparations for use, either directly or after processing such as cooking for human consumption. Therefore all food preparations which are not specifically mentioned in any other entry squarely comes under Heading 2106. The plain language used in the heading does not need an interpreter, absolute sententia expositore non indiget.

There is no doubt that parata comes under the category of 'Food preparations not elsewhere specified or included'.

And so, the AAR Ruled:

i)  'Classic Malabar Parota' and 'Whole Wheat Malabar Parota' classified under Schedule III of GST Laws, vide Heading 2106 'Food preparations not elsewhere specified or included' and is taxable @18% GST.

ii)  Eligibility of exemption from GST vide  Notification No.2/2017 - Central Tax  / SRO No.361/2017 is applicable only for specific commodity 'Bread branded or otherwise' covered under HSN 1905.

Please note that paratha is spelt differently in different sentences. Paratha has no uniformity even in an order.

Though we are not sure of what paratha is until the Concise Oxford Dictionary tells us what it is, the AAR was clear on its Greek and Latin. It taught us two nice Latin phrases:

eo nominee: The Black's Law Dictionary defines it as "Under that name; by that appellation"

absolute sententia expositore non indigent: The same dictionary defines - "An absolute sentence or proposition (one that is plain without any scruple or ab-selute without any saving) needs not an expositor."

(incidentally, the Latin term is Absoluta, not absolute.

Now They can Block Your Input Tax Credit: The Haryana Excise & Taxation Commissioner has informed all his officers (in his Memo No. 3555/GST-2, dated 30.10.2018) that GSTN has recently released API for application of the functionality for blocking and unblocking of Input Tax Credit by the statutory authorities on the GST common portal. The system Integrator of the Department has developed the necessary backend application for blocking and unblocking Input Tax Credit for the Electronic credit ledger taxpayers. The functionality of blocking and unblocking Input Tax Credit is an important tool for safeguarding the Government revenue particularly in cases of fraudulent activities by the taxpayers. He directs the jurisdictional officers to use this functionality for blocking/unblocking Input Tax Credit under the following situations:-

1.  Full amount of credit available in the Electronic Credit Ledger of the taxpayer should be blocked instantly in cases where the registered taxpayers are found to be bogus/fake as a result of any investigation or intelligence. Such taxpayers are not entitled for the credit on the grounds that no supply has been made and the proper tax has also not been deposited in respect of the claimed credit.

2.  Full amount of credit should also be blocked in cases where the firms have been found non-functional. Such taxpayers are also not entitled for the credit as no supply has been received for the reason that the firms are non-functional.

3.  Credit should also be blocked in respect of those registered taxpayers who have claimed transitional credit through TRAN-I /TRAN-II in excess of their lawful entitlement. The credit should be blocked only to the extent of excess credit claimed by the taxpayers over and above their entitlement as per GST law.

4.  The registered taxpayers are not entitled for credit availed of by them accruing from receipt of supplies which have not been used in the course of business or furtherance of the business. If in pursuance of examination of returns, such cases are detected, the credit should be blocked. The credit in these cases shall be blocked only to the extent of amount of inadmissible credit.

5.  The registered taxpayers are not entitled for credit availed of by them accruing from receipt of supplies where the credit is not admissible in accordance with Section 17(5) of the GST law. If in pursuance of examination of returns or otherwise, such cases are detected, the credit should be blocked. The credit in these cases shall be blocked only to the extent of amount of inadmissible credit.

6. The Credit should be blocked in all such cases where the taxpayers are not entitled for the credit in accordance with various provisions of the law i.e. if the tax on supplies has not been paid by the supplier, or the recipient is not in possession of the tax invoice, or the supply is outdated, or the supplier is composition taxpayer etc. The credit in these cases shall be blocked only to the extent of amount of inadmissible credit.

This is what is also called "Ease of Doing Business". They seem to have forgotten certain concepts like:

1.  Nemo in propria causa judex, esse debet - No one should be made a judge in his own case, or the rule against bias.

2.  Audi alteram partem  - Hear the other party, or the rule of fair hearing, or the rule that no one should be condemned unheard.

Ease of Doing Business - World Bank Rank: The big news last week was our leap in world ranking in Ease of Doing Business to reach the 77th place, but in ease of paying taxes, we are ranked 121 - a fall of 2 ranks from the previous year and when they did the survey, GST was only six months old. But there is a huge jump in 'Trading across Borders' from 146 to 80. The Customs Chief and Chairman of CBIC in his weekly letter dated 02.11.2018 proudly states,

What an amazing week it has been! As per World Bank's ranking on Ease of Doing Business released on 31st October, 2018, India's overall ranking has jumped from 100 to 77, making India among the top 10 improvers this year. CBIC's sustained commitment and efforts towards Trade facilitation has helped in India's huge leap from 146th Rank to 80th Rank in Trading Across Borders. Each one of you in the entire CBIC fraternity as well as all stakeholders deserve huge round of applause on this stupendous feat.

While joining in the well-deserved huge round of applause on this stupendous feat, I hope they can try doing something in GST too.