CGST - Reduction in GST rates - Base prices of Nestle Munch Nuts Chocolate and Cadbury Dairy Milk Chocolate increased to retain the original Maximum Retail Prices - Profiteering proved: NAA
By TIOL News Service
NEW DELHI, DECEMBER 10, 2018: APPLICANT has alleged that although the GST rate applicable on the Chocolates had been reduced from 28% to 18% w.e.f. 15.11.2017 41/2017-CTR dated 14.11.2017], the Respondent had not reduced the prices of 2 products viz. Nestle Munch Nuts 32 Gm. Chocolate and Cadbury Dairy Milk Chocolate and had thus not passed on the benefit of such rate reduction to him.
It is also submitted the pre-rate reduction invoice dated 10.11.2017 and the post rate reduction invoice dated 16.11.2017 showed that both the above products were sold by the Respondent @ Rs. 20/- per piece and Rs. 40/- per piece respectively before and after the rate of tax was reduced on them. And thus the respondent had indulged in profiteering thereby contravening s.171 of the Act.
The Respondent admitted that he had sold the above products to the applicant vide invoices dated 10.11.2017 and 16.11.2017 after charging the tax at the prevalent rates of 28% and 18% on the base prices and he had not made any additional profit after the reduction in the GST rate; that since their base prices had been increased by their Distributors, he had increased the base prices keeping his profit margin same @ 11.5% and 12% respectively and sold the above products at the original Maximum Retail Prices (MRPs) as there was no change in the MRPs.
The DGAP in its report concluded that the Respondent had resorted to profiteering of Rs. 15,958/-.
The Respondent claimed that the amount of profiteering should be calculated on the basis of the difference between the base price at which he had purchased the above products and the base price on which he had sold them.
The National Anti-Profiteering Authority, however, rejected this argument as fallacious on the ground that the amount of profiteering has to include the amount of additional profit margin and the additional tax charged by the Respondent as both of them had been illegally charged by him.
The Respondent also claimed that only 944 units of Nestle Munch Nuts 32 Gm. Chocolate and 4515 units of the Cadbury Dairy Milk Chocolate were purchased by him during the period w.e.f. 15.11.2017 to 31.03.2018.
However, since, no tax invoices were produced, the APA refused to accept this claim.
Incidentally, the respondent in their written submission dated 23.08.2018 voluntarily admitted that he had profiteered to the extent of Rs. 1295/- on the stock which was lying with him on 14.11.2017 and had also deposited the same in the Consumer Welfare Fund.
The Authority, therefore, concluded that there was absolutely no doubt that the Respondent had resorted to profiteering and had not passed on the benefit of tax reduction to his customers.
Concluding that the Respondent had indulged in profiteering in violation of the provisions of Section 171 of the CGST Act, 2017 and had not passed on the benefit of reduction of tax as per the Notification dated 14.11.2017 supra in respect of the above products to his customers and, therefore, he was liable for action under Rule 133 of the CGST Rules, 2017, the Bench directed the Respondent to reduce the sale prices of the above products immediately commensurate to the reduction in the rate of tax and pass on the benefit of reduction in the rate of the tax to his customers.
As the Applicant had paid a higher price of Rs. 4.69 (1.56 + 3.13) for 02 items viz. Nestle Munch Nuts 32 Gms. and Cadbury Dairy Milk Chocolate, the Respondent was directed to refund the same to the Applicant along with interest @ 18% w.e.f. 16.11.2017 till the same is paid to the Applicant.
Further, since the amount of Rs.1295/- was already deposited, the balance amount of Rs. 14,658.31 (15,958 - {1295 + 4.69}) was directed to the deposited into the CWF along with the interest within a period of 3 months and the DGAP was directed to conduct further investigation in respect of the sales made by the Respondent after the period 31.03.2018 to assess the amount of profiteering made by the Respondent and submit report accordingly.
It was also observed that since the Respondent had knowingly and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122(1)(i), he was liable for imposition of penalty under the said Section r/w Rule 133(3)(d) of the CGST Rules, 2017 and for which a SCN was required to be issued.
(See 2018-TIOL-16-NAA-GST)
