The Director General of Anti-Profiteering (hereinafter referred to as DGAP) has submitted a report dated 28.8.2020 under Rule 133(4) of the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “the Rules) in the matter relating to M/s L’Oreal India Pvt. Ltd., A-Wing, 8th Floor, Marathon Futurex, N.M. Joshi Marg, Lower Parel, Mumbai -400013 (hereinafter referred to as “Respondent” also). The aforesaid report dated 28.8.2020 was submitted by DGAP pursuant to the National Anti-profiteering Authority’s (hereinafter referred to as “NAA” or “the Authority” also) direction contained in Interim Order (I.O). No. 05/2020 dated 03.01.2020 in the matter of Respondent, whereby the matter was referred back to the DGAP under Rule 133(4) of the Central Goods and Services Tax Rules, 2017 to conduct further investigation with the following observations/directions:-

(i) DGAP has submitted that an amount of Rs. 19,75,12,265/- can be reduced on account of rectification of the non-averaging of base prices where description was used for comparison {01.10.2017 to 14.11.2017 (Goods Desc.) and 01.09.2017 to 30.09.2017 (Goods Desc.)}. However, the DGAP has also stated that the above rectification could be made if it was decided to do so by this Authority. The DGAP has not mentioned the reasons on the basis of which such an approach can be approved by this Authority. He has also not explained why the above approach was not applied by him at the time of preparing of his Report dated 05.07.2019.

(ii) DGAP has also submitted that an amount of Rs. 4,80,88,937/- can be excluded from the original profiteered amount due to rectification of inconsistency in the sequence followed by him in respect of certain line items in case it is so decided by this Authority. However, no explanation has been given why the above inconsistency cannot be rectified by him in case such an error has taken place.

(iii) DGAP has also stated that an amount of Rs. 5,18,75,235/- could be subtracted from the profiteered amount on the ground of rectification of the adopted average price on description wherever comparable product code was used subject to the approval of this Authority. However, no reasons have been given why the above approach was more appropriate as compared to the approach which was adopted by the DGAP while computing the profiteered amount vide his Report dated 05.07.2019.

(iv) This Authority had also directed the Respondent to furnish the details pertaining to his claim of having passed on the benefit of rate reduction by increasing the grammage/volume of his products to the DGAP. The said information was to be examined by the DGAP and his findings included in the fresh Report to be filed by him in consequence of I.O. dated 03.01.2020.

2. Briefly stated, the facts of the case are as under:-

2.1 A reference was received on 07.01.2019 from the Standing Committee on Anti-profiteering under Rule 129 of the Central Goods and Services Tax Rules, 2017, to conduct a detailed investigation on the basis of a letter F.No.22011/NAA/36/2018 dated 17.10.2018, of the Secretary, NM, along with supporting documents, alleging profiteering by the Respondent. It was alleged that the Respondent had not passed on the benefit of reduction in the rate of GST on the goods supplied by the Respondent, when the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017 vide Notification No 41/2017-Central Tax (Rate) dated 14.11.2017 (hereinafter referred as Notification also), in terms of Section 171 of the Central Goods and Services Tax Act, 2017.

2.2. The said reference was examined by the Director General of Anti-Profiteering and the Investigation Report dated 05.07.2019 under Rule 129(6) of the Rules, was furnished to the Authority. Vide the said Report, 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 a reduction in GST rate from 28% to 18% w.e.f. 15.11.2017 stands established against the Respondent. On this account, the Respondent has realized an additional amount to the tune of Rs. 2,16,49,61,535/- from the recipients during the period from 15.11.2017 to 31.12.2018, which includes both the profiteered amount and GST on the said profiteered amount. The conclusion was based on the documents and information submitted by the Respondent during the course of original investigation. The aforesaid amount was revised to Rs. 1,86,39,57,058/- vide DGAP letter dated 23.12.2019 after rectifying certain inadvertent discrepancies as submitted by the Respondent during the course of hearings held before the Authority.

3. The above said Investigation Report dated 5.7.2019 and subsequent revision of the quantification of the profiteered amount conveyed vide letter dated 23.12.2019 was shared with the Respondent. Personal hearing was given by the Authority to the Respondent on 01.01.2020 and the proceedings culminated in passing of its I.O. No. 05/2019 dated 03.01.2020 with a direction to the DGAP to conduct further investigation on the observations as mentioned in paragraph 1 above. The Authority also directed DGAP to supply detailed list of the Stock Keeping Units (SKUs) impacted by the rate reduction w.e.f. 15.11.2017 along with the pre-rate reduction base prices and the commensurate reduced base prices post rate reduction with percentage increase/reduction made by the Respondent in respect of such SKU.

4. The DGAP in it’s report dated 28.8.2020 has, inter-alia, submitted as under: –

4.1 After receiving reference from the Authority, letter was issued to the Respondent on 14.01.2020 calling upon him to submit the information/ documents required to further investigate the matter.

4.2 In response to DGAP’s letter dated 14.01.2020 the Respondent replied vide letter dated 03.02.2020 and submitted the following details with regard to his claim of having passed on the benefit of rate reduction by increasing the grammage/volume of his products:

(i) Name of SKU: The change in grammage is recognized in the SAP accounting system by changing the 11-digit product code. Accordingly, when the Respondent increased the grammage of products to pass on the benefit of reduction in rate of tax, the same was also reflected by way of change in product code at 11-digit level as per outward supply details submitted by the Respondent.

(ii) Base price of the SKU pre-rate reduction with documentary evidence: The base price adopted by DGAP in Report dated 05.07.2019 as adjusted for base price discrepancies and weighted average price of products with latest MRP highlighted by the Respondent in his submissions dated 01.11.2019 has been adopted by him as the base price for SKUs pre-rate reduction. The Respondent has used this base price as the pre-rate reduction price for computing the commensurate price pursuant to increase in grammage.

(iii) Weight/Volume of the SKU pre-rate reduction with documentary evidence: This old grammage is reflected in the Minutes of Meeting of the Respondent dated 21.12.2017, wherein the Respondent decided that he will pass on the benefit of reduction in GST rate by increasing the grammage of the product. Further, the details of old grammage can also be seen from the supporting documents viz., the shipper labels as per production records.

(iv) Commensurate base price of the SKU post rate reduction with details of computations: The Respondent has computed the revised base price by considering base price adopted by DGAP in Report dated 05.07.2019 and adjusting it for discrepancies and weighted average price of products with latest MRP, as highlighted by the Respondent in his submissions dated 01.11.2019. Since this base price is for product with Old Grammage, the Respondent computed commensurate base price of the SKU sold post rate reduction by adjusting the base price for the increased grammage. The Respondent has used this commensurate base price to calculate the amount of increase in grammage.

(v) Commensurate increase in the Weight/Volume required post rate reduction with computations: The Respondent submits that the commensurate increase required in the Weight/Volume to pass on the benefit of reduction in rate of tax comes to 8.48%. Respondent submitted that it has increased the grammage by 10%, 18.18% and 41.30% at 11-digit code level, which is much higher than the 8.48% commensurate increase in grammage required.

(vi) Actual Increase in the weight in grams/mis: The Respondent has increased grammage by 10%, 18.18% and 41.30% respectively in respect of products supplied by him, and the details of increased grammage at 11-digit code level. This grammage increase is more than the 8.48% grammage increase required to pass on the benefit of reduction in rate of tax. The Respondent has also provided supporting documents viz. the shipper labels for sample SKUs as per production records showing the increased grammage along with the corresponding SKUs with old grammage.

(vii) Whether the increase is commensurate with the rate reduction: The Respondent has increased grammage by 10%, 18.18% and 41.30% respectively in respect of products supplied by him. Thus, the Respondent has increased the grammage to pass on the benefit of rate reduction commensurately. In fact, the Respondent has passed on more than the required benefit, as the increase in grammage is higher than 8.48% required to be passed on.

(viii) Date of passing on the benefit of tax reduction with documentary evidence: The Respondent, in its Minutes of Meeting dated 21.12.2017, discussed that since grammage increase is viewed as one of the methods to pass on the benefit of reduction in rate of GST, it shall pass on the benefit by increasing the grammage and the increase in grammage to be made was recorded in the Minutes of Meeting. Accordingly, the Respondent instructed its production team to commence new production with higher grammage. The sale of these products with higher grammage were effected starting January 2018. As an evidence for the same, the Respondent has provided the details of first invoice date for sale of products with higher grammage.

Further, in some cases, the product code with higher grammage may have changed subsequently due to changes in art work or other changes. In such cases, it will be relevant to refer to the first invoice date of product at 8-digit level. For instance, product code CNCFC316-F0 shows first invoice date of product with higher grammage as 03.09.2018. However, the said code was created only due to some art work or other changes and the Respondent was in fact selling the product with higher grammage prior to that as well, through product code CNCFC316-B1, the first sale invoice date for which was 02.01.2018.

(ix) Amount of benefit of tax reduction passed on the SKU: The Respondent has mapped the benefit passed on by way of higher grammage and also the Respondent has also restricted the benefit so passed on to revised alleged profiteering.

(x) Amount of benefit of tax reduction passed on State/Union territory wise: The Respondent has provided the benefit of tax reduction passed on in the State/Union Territory wise 35 files provided by DGAP. These files contain State/Union territory wise details based on calculation of alleged profiteering provided by DGAP.

(xi) Amount of profiteering computed by DGAP on the SKU as Der DGAP letter dated 23.12.2019: The amount of profiteering computed by DGAP as adjusted for base price discrepancies and weighted average price of products with latest MRP.

(xii) Amount of profiteering computed by DGAP on these SKUs State/Union Territory wise: The amount of profiteering computed by DGAP as adjusted for base price discrepancies and weighted average price of products with latest MRP as per Respondent’s submission dated 01.11.2019.

4.3 The Respondent submits that an amount of INR 26,96,31,164 (restricted to profiteering amount at line item level) passed on by the Respondent by way of increase in grammage (calculated based on weighted average price of products with latest MRP) should be reduced from the total profiteering alleged to have been made by the Respondent. Further, the Respondent has on totality basis passed on INR 82,97,36,596 by way of higher grammage.

4.4 However, the Respondent vide E-mail dated 22.08.2020 has submitted that there was an inadvertent formula error in 2 files out of total 35 files, which they have revised and corrected. Accordingly, the Respondent submitted that amount is revised to INR 26,65,22,215 (earlier was Rs. 30,29,26,538/-) (restricted to profiteering amount at line item level) passed on by the Respondent by way of increase in grammage (calculated based on weighted average price of the products with all the MRPs) should be reduced from the total profiteering alleged to have been made by the Respondent.

4.5 The Respondent also clarified that, since, they have claimed reduction from profiteering to the extent goods are returned, they do not intend to claim grammage benefit for the very said sale. The same can be better explained from the illustration is given table below:

Particulars	Profiteering	Grammage benefit
Sale	+1	+1
Credit note	0	-1
Total profiteering	1	0

In respect of the above sale line item, profiteering of INR 1 was computed when the sale took place, but subsequent reduction was not made when the goods were returned and credit note was issued. Accordingly, the Respondent has claimed reduction of INR 1 in profiteering on account of subsequent sales return for which credit note was issued. Now that the said benefit of INR 1 in respect of credit note is being allowed, he has adjusted the same in our computation for grammage benefit. That is, in a case where goods with higher grammage were sold and subsequently returned, he has not claimed any benefit of higher grammage (by adding and subtracting, effect is nullified).

4.6. Vide the aforementioned letters/e-mails, the Respondent submitted the following documents/information to the DGAP:

a. Master of Product codes supply with Increased Grammage

b. 35 sheets containing transaction wise benefit of Increase in grammage claimed by the Respondent.

c. Copy of Minutes of Meeting for GST rate reduction implementation method dated 21.12.2017.’

d. Shipper Labels as per production records

e. Computation of commensurate increase in grammage

4.7 The I.O. received from the National Anti-Profiteering Authority, the various replies of the Respondent and the documents/evidences on record have been carefully examined by the DGAP and it’s point wise submissions to issues raised by the Authority are as under:-

(i). Non-averaging of base price where description is used for comparison [01.10.2017 to 14.11.2017 (Goods Desc.) and 01.09.2017 to 30.09.2017 (Goods Desc.)]: DGAP has adopted the Average base price (arrived by dividing the total taxable value by total quantity sold) in pre-rate reduction period and compared it with the actual transaction value in post-rate reduction period. However, in case one product having same description is sold in multiple product code, then DGAP has adopted the average base price available at first place in the same product. The same has happened due to the proprietary of VLOOKUP function (used to lookup a value in a table by matching on the first column) in MS-Excel, which in case of duplicate values, find the first match when the match mode is exact.

Respondent has submitted that instead of taking average price at first place, the pre-rate reduction base price should be taken as one out of the following three approaches:

(a) Weighted Average Base Price of the product having same description with all the MRPs.

(b) Average Base Price of the product with latest MRP of the latest product code introduced immediately prior to rate-reduction.

(c) Weighted Average Base Price of the products with latest MRP prevailing in pre-rate reduction period.

Accordingly, Respondent has re-computed the profiteering amount and submitted that the profiteering should be reduced by Rs. 19,75,12,265/- in case approach (a) above is adopted or by Rs. 30,39,43,079/- in case approach (b) above is adopted or by Rs. 30,51,84,398/- in case approach (c) is adopted.

In this regard, the DGAP has submitted that Respondent has sold some products with same description in multiple product codes with different MRPs. However, these MRPs are prevailing in pre-rate reduction period and are not obsolete. For this an example of the product with description “MAHREL (NEW) SHADE NO. 4”, for General Trade Channel has been taken, the details are furnished in table below:

No.	Product Code	Product Description	HSN	MRP	Quantity	Taxable Amount	Average Price
2439	MRCIP400-70	MAJIREL (NEW) SHADE NO. 4	33059040	310	73,906	163,20,873	220.83
2440	MRCIP400-80	MAJIREL {NEW} SHADE NO. 4	33059040	335	30,465	72,70,227	238.64
Total					1,04,371	2,35,91,101	226.03

In the post rate reduction period, DGAP has adopted the pre-rate reduction base price as Rs. 220.83/- (available at first place) and determined the profiteering for product sold in post-rate reduction period. It is pertinent to mention here that this product was sold post-rate reduction period with MRP of Rs. 310/- only and accordingly determined profiteering of Rs. 27,72,970/- (for the state Delhi- General Trade). However, Respondent submitted that as per approach (c) Weighted average price of latest MRP of Rs. 238.64/- should be adopted and profiteering reduced by Rs. 26,38,779/- resulting into profiteering of Rs. 1,34,191/- [Rs. 27,72,970/- (-) Rs. 26,38,779/-].

The above submission of the Respondent is not appropriate as Respondent has sold 73,906 units of Rs. 310/- MRP and 30,465 units of Rs. 335/- MRP during pre-rate reduction period which shows both MRPs were in market and neither was obsolete. Similarly, approach (b) does not hold good as adopting average price of product with latest MRP is not appropriate when old/other MRPs were also prevailing in pre-rate reduction period.

Therefore, approach (a) where Weighted Average Base Price of the product having same description with all the MRPs is the correct approach to be adopted for pre-rate reduction base price to address the issue of adopting old MRP/first line item. Following the approach as per (a) above, and adopting weighted average base price of Rs. 226.03/-, the profiteering amount will reduce by Rs. 7,70,237/- resulting into revised profiteering of Rs. 20,02,733/- [Rs. 27,72,970/- (-) Rs. 7,70,237] for the State- Delhi General Trade.

Another example of the product with description “MAIIREL (NEW) SHADE NO.3”, for General Trade Channel, of which the details are furnished in table below:

No.	Product Code	Product Description	HSN	MRP	Quantity	Taxable Amount	Average Price
2435	MRCIP300-70	MAJIREL (NEW) SHADE NO.3	33059040	310	1,01,854	224,92,710	220.83
2436	MRCIP300-80	MAJIREL (NEW) SHADE NO.3	33059040	335	23,106	55,14,061	238.64
Total					1,24,960	2,80,06,771	224.12

In the post rate reduction period, DGAP has adopted the pre-rate reduction base price as Rs. 220.83/-(available at first place) and determined the profiteering for product sold in post-rate reduction period amounting to Rs. 28,81,815/-(for the state Delhi- General Trade). However, Respondent submitted that as per approach (c) Weighted average price of latest MRP of Rs. 238.64/- should be adopted and profiteering reduced by Rs. 26,17,512/- resulting into profiteering of Rs. 2,64,303/- [Rs. 28,81,815/- (-) Rs. 26,17,512/-].

The above submission of the Respondent is not appropriate as he has sold 1,01,854 units of Rs. 310/- MRP and only 23,106 units of Rs. 335/- MRP during pre-rate reduction period which shows both MRPs were in market and neither was obsolete. Similarly, approach (b) does not hold good as adopting average price of product with latest MRP is not appropriate when old/other MRPs were also prevailing in pre-rate reduction period.

Therefore, approach (a) where Weighted Average Base Price of the product having same description with all the MRPs is the correct approach to be adopted for pre-rate reduction base price to address the issue of adopting old MRP/first line item. Following the approach as per (a) above, and adopting weighted average base price of Rs. 224.12/-, the profiteering amount will reduce by Rs. 4,83,997/- resulting into revised profiteering of Rs. 23,97,818/-[Rs. 28,18,815/-(-) Rs. 4,83,997/-] for the State – Delhi General Trade.

Therefore, considering the approach (a), the total profiteering amount will get reduced by Rs. 19,75,12,265/- as against the amount of Rs. 30,51,84,398/- claimed by the Respondent, for approach (c).

(ii). Rectification of inconsistency in sequence followed for some line items: The methodology adopted by DGAP has been explained in para-22 of the Investigation Report dated 05.07.2019 read with “Summary Sheet” of Annexure-15 of the said report and diligently followed without any inconsistency wherein, it is mentioned that at first step, DGAP has compared pre-rate reduction average base price (during the period 01.10.2017 to 14.11.2017) with post-rate reduction actual base price using product codes and wherever, product codes were not found, he has used product description to compare the pre-rate reduction average base price (during the period 01.10.2017 to 14.11.2017) with post-rate reduction actual base price at step two. In similar manner, wherever, price was still not found, DGAP has used pre-rate reduction average base price (during the period 01.09.2017 to 30.09.2017) with post-rate reduction actual base price using product code at step three and used product description to compare the pre-rate reduction average base price (during the period 01.09.2017 to 30.09.2017) with post-rate reduction actual base price at step four and so on. However, due to adoption of the average base price available at first place in the same product (having multiple product codes), if the price was not obtained at Step-2 (due to non-availability of price in particular channel) then, DGAP has proceeded to Step-3 and so on to find the pre-rate reduction base price for computation of profiteering. Therefore, the claim made by the Respondent before the Authority that Weighted Average Base Price of the product having same description is available at step two itself has merit and accordingly the profiteering is to be revised.

However, to address the issue of following incorrect sequence for few line items identified by the Respondent due to adopting first line item, as discussed above, approach (a) where Weighted Average Base Price of the product having same description with all the MRPs is the correct approach which was adopted for pre-rate reduction base price and accordingly, the total profiteering will further reduce by an amount of Rs. 4,80,88,937/- as against Rs. 5,28,32,173/- claimed by the Respondent, for approach (c).

(iii). Adoption of average price of description wherever comparable product code is used: In addition to the steps mentioned in point (ii) above, where after applying step four, pre-rate reductions prices were still not found, DGAP proceeded to step five & six, where comparable product were used (having minor difference in description and having different product code) to compare the average pre-rate reduction base prices (arrived by dividing the total taxable value by total quantity sold) during the period 01.10.2017 to 14.11.2017 and during the period 01.09.2017 to 30.09.2017 respectively. Respondent has mentioned one such instance of having sold product GN MEN Acnofight FW 50 ml with product code SYMAF050-70 at a per unit price of INR 61.93 (excluding GST). Since, the said product code or sale of that description was not available in pre-rate reduction period, DGAP has mapped product code SYMAF050-00 (having product description AcnoFight Face wash 50 ml) as comparable whose pre-rate reduction price was INR 53.92 (excluding GST) and accordingly computed a profiteering of INR 8.01 p.u. (excluding GST) or Rs. 9.45 p.u. including GST.

The Respondent has submitted the details of pre-rate reduction prices of the product code SYMAF050-00 having product description AcnoFight Facewash 50m1 as also details of other product codes having same product description which are furnished in table below:

S.No.	Product Code	Product Description	HSN	MRP	Quantity	Taxable Amount	Average Price
3626	SYMAF050-00	AcnoFight Face wash 50ml	33049990	85	3,096	166,926	53.92
3627	SYMAF050-30	AcnoFight Face wash 50ml	33049990	95	210	12,655	60.26
3628	SYMAF050-40	AcnoFight Face wash 50ml	33049990	99	1,96,034	1,21,84,724	62.80
		Total			1,99,340	1,23,64,305	62.03

Further, in case one product having same description is sold in multiple product code, then DGAP has adopted the average base price available at first place in the same product. The same has happened due to the proprietary of VLOOKUP function (used to lookup a value in a table by matching on the first column) in MS-Excel, which in case of duplicate values, finds the first match when the match mode is exact.

However, the Respondent contented that if the aforesaid product code SYMAF050-00 having product description AcnoFight Face wash 50 ml is a correct comparable, then all the other products viz. SYMAF050-30 and SYMAF050-40 having the same description AcnoFight Face wash 50 ml should also be considered as correct comparable and accordingly, the average price of all the codes having the same comparable description must be considered instead of considering the price of 1 product code alone.

The above contention of the Respondent has merit and as already discussed in detail in point- (i) above, considering the approach (a) where Weighted Average Base Price of the product having same description with all the MRPs is adopted for pre-rate reduction base price, the total profiteering will further reduce by an amount of Rs. 5,18,75,235/- as against Rs. 5,72,41,346/- claimed by the Respondent, for approach (c).

(iv) Benefit of rate reduction passed on by increasing the grammage/volume of the products: The concern raised by the Respondent has already been addressed in para-14 & 17 of Investigation Report dated 05.07.2019 which is re-produced below:

“14. Before enquiring into the allegation of profiteering, it is important to examine Section 171 of the Central Goods and Services Tax Act, 2017 which governs the anti-profiteering provisions under GST. The said Section 171(1) reads as any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” Thus, the legal requirement is abundantly clear that in the event of benefit of input tax credit or reduction in rate of tax, there must be a commensurate reduction in the prices of the goods or services supplied. Such reduction in price can only be in terms of money, so that the final price payable by a recipient gets reduced commensurate with the reduction in the tax rate or benefit of input tax credit. This is the only legally prescribed mechanism to pass on the benefit of input tax credit or reduction in the rate of tax under the GST regime and there is no other method which a supplier can adopt to pass on such benefits.

17. As the provisions contained in Section 171 of the Central Goods and Services Tax Act, 2017 do not provide for any means of passing on the benefit of reduction in the rate of tax or benefit of input tax credit other than by way of commensurate reduction in price, the claim of the Respondent that they had passed on the benefit of GST rate reduction on certain SKUs by increasing the quantity or grammage of the product while maintaining the earlier pre-rate reduction MRP of such SKUs, is also not acceptable,”

4.8 As per directions of the Authority contained in para-103 of aforesaid I.O. No. 05/2020 dated 03.01.2020, the documents submitted by the Respondent regarding his claim of passing on the benefit of reduction in rate of tax by increasing the grammage/volume were examined and it was observed that there were formula errors in three columns viz. Column-BA “Commensurate Base Price with Grammage including GST”, column-BB “Grammage Benefit-Gross” and column-BC “Grammage Benefit-Net restricted to Alleged Profiteering incl. GST”. However, on specific pointing out, the Respondent revised and corrected only two columns i.e. column BB & BC. Therefore, the formula error in Column-BA “Commensurate Base Price with Grammage including GST” remains in the 2 files submitted by the Respondent vide his e-mail dated 22.08.2020. The same was examined and corrected by DGAP in his working sheets.

Accordingly, considering the approach (a) where Weighted Average Base Price of the product having same description with all the MRPs to be adopted for pre-rate reduction base price (as discussed above, the Respondent has passed on the benefit of reduction in rate of tax by increasing the grammage/volume amounting to Rs. 27,49,45,942/-(restricted to profiteering amount computed at transaction level). The same was quantified on specific direction of the Authority without admitting the claim of the Respondent.

4.9 The profiteering has been computed at each transaction level (approximately 52 lakh transactions) consisting of 35 files, therefore, the detailed list of the SKUs impacted by the rate reduction w.e.f. 15.11.2017 along with the pre-rate reduction base price (Column 45) and the commensurate reduced base price post rate reduction (Column AE) with percentage increase/reduction made by the Respondent in respect of such SKU are provided in column BF in each 35 files of Annex-6 of the Report.

4.10 After examining the various contentions raised by the Respondent vide letter dated 05.11.2019 before the Authority, DGAP has revised his profiteering amount to Rs. 1,86,39,57,058/- vide table-‘C’ in para-4 of DGAP’s letter of even no. 1172 dated 23.12.2019, which is reproduced in table below:

S.No.	Particulars	Amount (in Rs.)	Remark
1.	Reported Profiteering as per DGAP’s Report dated 05.07.2017 (A)	2,16,49,61,535/-	Para-22 of Report
2.	Less: Rectification of non-averaging of base price where description is used for comparison (01.10.2017 to 14.11.2017 (Goods Desc.) and 01.09.2017 to 30.09.2017 (Goods Desc.)) (B)	19,75,12,265/-	Para- B(I) of letter dated 23.12.2019
3.	Less: Rectification of inconsistency in sequence followed for some line items (C)	4,80,88 ,937/-	Para- B(II) of letter dated 23.12.2019
4.	Less: Rectification of Adoption of average price of description wherever comparable product code is used (D)	5,18,75,235/-	Para- B(III) of letter dated 23.12.2019
5.	Less: Exclusion of profiteering in respect of line items for which credit notes issued (E)	65,20,961/-	Para- B(IV) of letter dated 23.12.2019
6.	Less: Exclusion of profiteering for sales not impacted by rate reduction (F)	14,45,267/-	Para- B(V) of letter dated 23.12.2019
7.	Less: Rectification of profiteering computed in respect of Invoice No. MH1814006635 dated 22.06.2018 (G)	1,63,882/-	Para- B(VI) of letter dated 23.12.2019
8.	Add: Rectification of inadvertent error in adopting pre-rate reduction base price from Respondent’s Price List (H)	46,02,070/-	Para- 3 of letter dated 23.12.2019
Net Revised Profiteering (I)= [A-(B+C+D+E+F+G)+H]	1,86,39,57,058/-

However, vide aforesaid I.O. No. 05/2020 dated 03.01.2020, the Authority sought detailed clarifications on the deductions allowed in S. No. 2, 3 & 4 above which were duly addressed in para 4.7 above.

Apart from above, the Authority directed DGAP to examine the Respondent’s claim of passing on the benefit of rate reduction by increasing the grammage/volume of their products and include the findings in the fresh Report to be furnished by DGAP.

In view of the above, the place (State or Union Territory) of supply-wise break-up of the revised profiteered amount of Rs. 1,86,39,57,058/-(as per DGAP letter of even no.1172 dated 23.12.2019) and increase in grammage amounting Rs. 27,49,45,942/- is furnished in table below:

S.No.	Name of State	State Code	Revised Profiteering Amount as per Report dated 23.12.2019 (in Rs.)	Benefit passed on by increase in grammage	Net profiteering
A	B	C	D	E	F=D-E
1.	Andaman & Nicobar Islands	35	7,31,376	2,27,065	5,04,312
2.	Andhra Pradesh	37	1,93,23,189	42,00,193	1,51,22,996
3.	Arunachal Pradesh	12	24,84,310	4,41,306	20,43,003
4.	Assam	18	3,26,34,331	77,55,612	2,48,78,719
5.	Bihar	10	3,30,11,667	89,07,480	2,41,04,187
6.	Chandigarh	4	1,37,87,443	8,28,849	1,29,58,595
7.	Chhattisgarh	22	1,74,40,804	35,78,123	1,38,62,681
8.	Dadra and Nagar Haveli	26	3,16,680	84,008	2,32,672
9.	Daman and Diu	25	4,96,288	1,59,447	3,36,841
10	Delhi	7	23,05,94,750	2,08,17,829	20,97,76,921
11.	Goa	30	1,21,32,941	19,26,455	1,02,06,486
12.	Gujarat	24	11,95,97,065	2,16,20,776	9,79,76,289
13.	Haryana	6	9,58,25,575	1,12,00,203	8,46,25,372
14.	Himachal Pradesh	2	77,75,294	15,95,812	61,79,482
15.	Jammu & Kashmir	1	1,62,28,548	38,20,248	1,24,08,299
16.	Jharkhand	20	2,33,41,894	51,08,609	1,82,33,285
17.	Karnataka	29	15,40,52,967	2,06,76,923	13,33,76,044
18.	Kerala	32	2,70,97,666	44,85,782	2,26,11,883
19.	Madhya Pradesh	23	4,38,21,931	84,93,520	3,53,28,411
20.	Maharashtra	27	37,57,54,539	3,95,11,422	33,62,43,117
21.	Manipur	14	48,17,508	4,56,526	43,60,982
22.	Meghalaya	17	52,45,762	9,85,463	42,60,299
23.	Mizoram	15	39,27,568	3,40,460	35,87,108
24.	Nagaland	13	74,20,071	17,67,448	56,52,623
25.	Orissa	21	2,57,22,155	43,42,020	2,13,80,135
26.	Puducherry	34	16,43,307	2,74,164	13,69,142
27.	Punjab	3	8,30,45,161	1,03,17,250	7,27,27,911
28.	Rajasthan	8	6,08,22,347	1,42,86,912	4,65,35,435
29.	Sikkim	11	30,79,109	4,10,887	26,68,222
30.	Tamil Nadu	33	6,21,10,519	99,72,842	5,21,37,677
31.	Telangana	36	5,76,76,182	96,42,487	4,80,33,695
32.	Tripura	16	30,93,745	8,65,260	22,28,485
33.	Uttar Pradesh	9	14,22,37,365	2,84,37,729	11,37,99,636
34.	Uttarakhand	5	1,42,01,632	26,02,258	1,15,99,374
35.	West Bengal	19	16,24,65,370	2,48,04,575	13,76,60,795
	Grand Total		1,86,39,57,058	27,49,45,942	1,58,90,11,116

4.11 Thus, the total profiteering amount is Rs. 1,86,39,57,508/-. Further, on 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 Section 171 of the Central Goods and Services Tax Act, 2017 does not provide for any means of passing on the benefit of reduction in the rate of tax or benefit of input tax credit other than by way of commensurate reduction in prices, DGAP has computed the actual increase in grammage amounting to Rs. 27,49,45,942/. In case the Authority considers the passing on benefit of rate reduction by increasing the grammage/volume, the Net profiteering will reduce to Rs. 1,58,90,11,116/- as mentioned in table above.

4.12 In view of the aforementioned findings, it appears that Section 171 (1) of the Central Goods and Services Tax Act, 2017 requiring that “any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices”, has been contravened in the present case.

 

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