ORDER

1. The present Report dated 19.09.2019 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that the Applicant No. 1 had filed application dated 30.07.2018 (Annexure-1 of the Report) before the Standing Committee on Anti-profiteering stating that the Respondent No. 1 had resorted to profiteering in respect of supply of “Dettol HW Liquid Original 900 ml” and had also alleged that the Respondent No. 1 had not passed on the benefit of reduction in the GST rate from 28% to 18% w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and instead, increased the base price of the above product. The above Applicant also stated that the Respondent No. 1 had supplied “Dettol HW Liquid Original 900 ml” to M/s Big Bazar, Inderlok on 07.11.2017 under Purchase Order (PO) No. 8115009618 with the MRP of ₹ 189/- per unit, on 21.12.2017 under PO No. 4514107805 with the MRP of ₹ 209/- and on 20.06.2018 under PO No. 4518283635 with the MRP of ₹ 192/- and thus he had not reduced the price of the above product commensurately.

2. The DGAP has stated in his above Report that the said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, it had referred the application to the DGAP for investigation under Rule 129 (1) of the CGST Rules, 2017 to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients. The minutes of the meeting had been received by the DGAP on 27.03.2019 (Annexure-2)

3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued notice to the Respondent on 08.04.2019 (Annexure-3 of the Report) under Rule 129 (3) of the above Rules, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo-moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all the supporting documents. The Respondent was also given an opportunity to inspect the non-confidential evidence/information furnished by the Applicant No. 1 during the period from 15.04.2019 to 17.04.2019. The authorised representative of the Respondent No. 1 inspected the non-confidential evidence/information furnished by the Applicant No. 1 on 23.04.2019 (Annexure-4).

4. The DGAP in his report has also stated that the Respondent No. 1 vide his letter dated 30.04.2019 (Annexure-5) had submitted that he did not supply the above product directly to M/s Big Bazar, Inderlok and the Purchase Orders referred to in the notice were not placed on him. Accordingly, vide letter F. No.22011/API/56/2019/1135 dated 21.05.2019 (Annexure-6), the DGAP had asked M/s Big Bazaar, Inderlok to provide copies of the said Purchase Orders, which were submitted by him vide his letter dated 24.05.2019 (Annexure-7). The said Purchase Orders showed that the impugned product “Dettol HW Liquid Original 900 ml” was supplied to M/s Big Bazaar by the Respondent No. 2 under PO No. 8115009618 with the base price of ₹ 134.23/- and on 19.12.2017, under PO No. 4514107805 with the base price of ₹ 161.02/-. Therefore, the Respondent No. 2 was also made a “Co-noticee” on 12.06.2019 (Annexure-8) in the proceedings already initiated by the DGAP vide notice dated 08.04.2019, to collect evidence necessary to determine whether the benefit of reduction in the rate of GST from 28% to 18%, had been passed on by the Respondent No. 1 and 2 to their recipients in respect of supply of all the products impacted by the GST rate reduction w.e.f. 15.11.2017, by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017.

5. The DGAP has further reported that the Respondent No. 1 did not submit the relevant documents as required for the investigation. Therefore, Summons were issued to Sh. Gaurav Jain, Managing Director of the Respondent No. 1 on 19.06.2019 under Section 70 of the CGST Act, 2017 read with Rule 132 of the CGST Rules, 2017 (Annexure-9), to appear before the Assistant Commissioner, Directorate General of Anti profiteering on 27.06.2019 and to produce the relevant documents. In response to the Summons, Sh. Aditya Gupta, authorised representative on behalf of Sh. Gaurav Jain, vide letter dated 27.06.2019 submitted the required documents in respect of the complained product only.

6. The DGAP has also submitted that a letter dated 27.06.2019 was issued to the Respondent No. 1 to submit the details in respect of all the products which were being supplied by him and which had been affected by the GST rate reduction w.e.f. 15.11.2017. The Respondent No. 1 filed a Writ Petition No. 7743/2019, before the Hon’ble High Court of Delhi and the Hon’ble Court vide its orders dated 19.07.2018 (Annexure-10) and 22.08.2019 (Annexure-11) had granted stay on the submission of the information in respect of the products other than the complained product, during the pendency of the Writ Petition. The Respondent No. 2 had also filed a Writ Petition No. 816212019, before the Hon’ble High Court of Delhi and the Hon’ble court vide its orders dated 29.07.2018 (Annexure-12) and 22.08.2019 (Annexure-13) had granted stay on submission of information in respect of the products other than the complained product, during the pendency of the Writ Petition. Therefore, the DGAP in compliance of the above orders of the Hon’ble High Court of Delhi, has limited the present investigation to the complained product “Dettol HW Liquid Original 900 ml” only in respect of the supplies made by both the Respondent No. 1 and 2.

7. The DGAP has also mentioned that vide e-mail dated 13.08.2019 (Annexure-14) the Applicant No. 1 was also given an opportunity to inspect the non-confidential evidence/reply furnished by the Respondent No. 1 and 2 on 19.08.2019 or 20.08.2019. However, he did not avail of the said opportunity.

8. The DGAP in his above Report has stated that for the sake of clarity, the profiteering by the Respondent No. 1 and No. 2 has been dealt with separately. The period covered by the current investigation was from 15.11.2017 to 31.03.2019. Also, the time limit to complete the investigation was extended upto 26.09.2019 by this Authority vide its order dated 19.06.2019 (Annexure-15) in terms of Rule 129 (6) of the CGST Rules, 2017.

9. The DGAP has also stated that in response to the notice dated 08.04.2019 and subsequent reminders, the Respondent No. 1 has submitted replies vide his letters dated 17.06.2019 (Annexure-16), 27.06.2019 (Annexure-17), 10.07.2019 (Annexure-18) and 16.09.2019 (Annexure-19) stating:-

a. That he had taken necessary steps to reduce the price of the above product at the earliest possible time. Till 31.08.2017, he was selling the product with MRP of ₹ 189/- per unit. For commercial reasons, the MRP of the said product was increased to ₹ 209/- per unit w.e.f. 01.09.2017. When the GST rate on the product was reduced from 28% to 18%, he had reduced the MRP by 8.1% from ₹ 209/- to ₹ 192/- w.e.f. 24.11.2017.

b. That his product had a shelf life of 18 to 24 months and it was most likely that the Applicant No. 1 had bought the product having an old manufacturing date, which must have been lying on the shelf of the retailer, on which he did not have any control.

c. That the pricing to different type of customers was different. The different types of customers were Canteen Stores Department (CSD), Distributors, Direct Modern Trade, E-Commerce Trade, Indirect Modern Trade and Super Stockists.

d. That there were cases of return of goods by the customers back to him, for which he had issued credit notes with GST. He requested that the supplies against which credit notes had been issued, should be excluded from the investigation.

e. That in respect of the CSD supplies, the prices were negotiated without tax and thereafter taxes prevailing were charged at the time of supply.

f. That he had increased the price of the product from ₹ 192/- per unit to ₹ 209/- per unit w.e.f. 01.06.2018 due to commercial reasons such as increase in the rate of Customs Duty, forex rate fluctuations and market forces etc.

g. That he had submitted the price trend of the product from September, 2014 and the price of the product was ₹ 170/- per unit in September, 2014, the price was further increased to ₹ 189/- per unit in September, 2016. Thereafter, in September, 2017, the price of the product was increased to ₹ 209/- per unit.

h. That the benefit of ITC claimed in TRAN-1 statement had not been accepted by the GST authorities due to some technical glitch for which he had been running from pillar to post and had filed a Writ Petition before the Hon’ble Punjab & Haryana High Court.

10. The DGAP in his Report has also mentioned that vide the aforesaid letters, the Respondent No. 1 had submitted the following documents/information:-

a. Copies of GSTR-1 & GSTR-3B Returns for the period from October-2017 to March-2019 in respect of all registrations.

b. Copies of sample invoices.

c. Outward sales data of the product “Dettol HW Liquid Original 900 ml” for the period from November, 2017 to March, 2019.

11. The DGAP has further mentioned that the Respondent No. 1 vide his letter dated 27.06.2019 has informed that all the details and documents submitted by him in the subject case were to be treated as confidential, in terms of Rule 130 of the CGST Rules, 2017.

12. The DGAP has also reported that the Respondent No. 2 has replied vide his letters 17.06.2019 (Annexure-20), 24.06.2019 (Annexure-21) and 16.07.2019 (Annexure-22) and vide the aforesaid letters, he had submitted the following documents/information:-

a. Copies of GSTR-1 & GSTR-3B Returns for the period from October-2017 to March-2019.

b. Copies of sample invoices.

c. Outward sales data of the product “Dettol HW Liquid Original 900 ml” for the period from November, 2017 to March, 2019.

13. The DGAP in his report has also stated that various replies of the Respondent No. 1 & 2 and the documents/evidence on record have been carefully examined by him and the main issues to be examined were whether the rate of GST on the product “Dettol HW Liquid Original 900 ml” supplied by the Respondent No. 1 & 2 was reduced w.e.f. 15.11.2017 and if so, whether the above Respondents have passed on the benefit of such reduction in the GST rate to the recipients, in terms of Section 171 of the CGST Act, 2017.

14. The DGAP has further stated that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on the “Dettol HW Liquid Original 900 ml” from 28% to 18% w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 (Annex-23). This was a matter of fact which had also not been contested by the Respondent No. 1.

15. The DGAP in his report has also submitted that it was important to examine the provisions of Section 171 of the Act and it was clear that in the event of benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could only be in terms of money, so that the final price payable by a recipient got reduced commensurate with the reduction in the tax rate or benefit of ITC. This was the only legally prescribed mechanism to pass on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method which a supplier could adopt to pass on such benefits.

16. The DGAP has further submitted that the Respondent No. 1 had sought to exclude the outward sale of the Goods sold to the CSD from the scope of the present investigation. On examination of the nature of the above sales and the copy of the agreement entered into by the Respondent No. 1, the DGAP has observed that the reduction in the rate of GST w.e.f. 15.11.2017 did not have any impact on the sales mentioned in respect of goods sold to the CSD.

17. The DGAP in his report has also claimed that the Respondent No. 1 had contended that he had increased the MRP of the product from ₹ 192/- per unit to ₹ 209/- per unit w.e.f. 01.06.2018 due to commercial reasons such as increase in the rate of Customs Duty, forex rate fluctuations and the market forces etc. and the price of the product was ₹ 170/- per unit in September, 2014 which was further increased to ₹ 1891- per unit in September, 2016. Thereafter, in September, 2017, the price of the product was increased to ₹ 209/- per unit. In this regard, the DGAP has stated that while calculating profiteering in this case, the average base price was calculated for the period immediately before 15.11.2017 and then compared with the transaction value of each invoice during the period after 15.11.2017. Thus, where the Respondent No. 1 had reduced the price after 24.11.2017, the average base price was compared with the actual transaction value of the reduced price only and benefit extended to the Respondent No. 1. The invoices against which credit notes have been issued by the Respondent No. 1, were excluded from the investigation.

18. The DGAP in his report has also mentioned that upon perusal of the outward sales data made available by the Respondent No. 1. It was revealed that he had increased the base price of the product “Dettol HW Liquid Original 900 ml” when the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017. The calculation has been furnished by the DGAP in Table-A below for the above product viz. “Dettol HW Liquid Original 900 ml” for which average base price has been calculated during the pre-GST rate reduction period from 01.11.2017 to 14.11.2017 and then profiteering has been calculated for the post-GST rate reduction period in respect of Invoice No. S170322005 dated 17.11.2017 as is given below:-

Table-A

(Amount in Rs.)

19. The DGAP in his report has further mentioned that as per the aforesaid pre and post-reduction GST rates and the details of the outward taxable supplies (other than zero rated, CSD, nil rated and exempted supplies) of the product “Dettol HW Liquid Original 900 ml” during the period from 15.11.2017 to 31.03.2019, as furnished by the Respondent No. 1, the amount of net higher sales realization due to increase in the base price of the product, despite the reduction in the GST rate from 28% to 18% or in other words, the profiteered amount came to ₹ 63,14,901/-. The details of the computation have been furnished by the DGAP in Annexure-24. The said profiteered amount has been arrived at by comparing the average of the base prices of the product “Dettol HW Liquid Original 900 ml” sold during the period from 01.11.2017 to 14.11.2017 differently for different types of customers i.e. CSD, Distributors, Direct Modern Trade, E-commerce Trade, Indirect Modern Trade and Super Stockists, with the actual invoice-wise base prices of such products sold during the period from 15.11.2017 to 31.03.2019. The excess GST so collected from the recipients, has also been included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased base price. Further, perusal of the outward sales data made available by the Respondent No. 1 indicated that he had profiteered by an amount of ₹ 45,444/- from the Respondent No. 2 during the period from 15.11.2017 to 31.03.2019. The details of the computation have also been furnished by the DGAP in Annexure-25 of his Report dated 19.09.2019.

20. The DGAP has furnished the place (State or Union Territory) of supply-wise break-up of the total profiteered amount of ₹ 63,14,901/- in Table-B below:-

Table-B

21. The DGAP has further mentioned that as per the data made available by the Respondent No. 2 it was observed that he had increased the base price of the product “Dettol HW Liquid Original 900 ml” when the rate of GST was reduced from 28% to 18% w.e.f. 15.11.2017. On the basis of the aforesaid pre and post-reduction GST rate and the details of the outward taxable supplies (other than zero rated, nil rated and exempted supplies) of the product “Dettol HW Liquid Original 900 ml” during the period from 15.11.2017 to 31.03.2019, as furnished by the Respondent No. 2, the amount of net higher sales realization due to increase in the base prices of the product, despite the reduction in the GST rate from 28% to 18% or in other words, the profiteered amount came to ₹ 2,33,456/-. The details of the computation have been furnished by the DGAP vide Annexure-26 of his Report dated 19.09.2019. The said profiteered amount has been arrived at by comparing the average of the base prices of the product “Dettol HW Liquid Original 900 ml” sold during the period from 01.11.2017 to 14.11.2017, with the actual invoice-wise base prices of the above product sold during the period from 15.11.2017 to 31.03.2019. The excess GST so collected from the recipients was also included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased base price. The DGAP has also intimated that on the basis of the details of the outward supplies submitted by the Respondent No. 2, it appeared that the product had been supplied by the Respondent No. 2 in the State of Delhi only.

22. The DGAP has claimed that the allegation of profiteering by way of increasing the base price of the above product when the GST rate was reduced from 28% to 18% w.e.f. 15.11.2017 was sustainable against the Respondent No. 1 & 2.

23. The above investigation Report was received by this Authority from the DGAP on 20.09.2019 and was considered in its sitting held on 25.09.2019 and it was decided to accord an opportunity of hearing to the Applicants and the Respondents on 18.10.2019. Notice was also issued to the Respondent No. 1 & 2 directing them to explain why the Report dated 19.09.2019 furnished by the DGAP should not be accepted and their liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed.

24. The Respondent No. 1 vide his submissions dated 08.11.2019, has submitted :-

a. That he had filed a writ petition before the Hon’ble High Court of Delhi (W.P. (C) No. 7743/2019) challenging the notice dated 08/09.04.2017 issued by the DGAP and subsequent proceedings, inter alia, on the ground that the scope of investigation proposed to be conducted by the DGAP was outside the scope of Section 171 of the CGST Act. The Hon’ble High Court by vide its order dated 19.07.2019 had directed that:-

“It is directed that, till the next date, it (the Noticee) will not be required to furnish information to the DGAP pursuant to the impugned notice other than information pertaining to the Complained Product. It is, however, clarified that the NAPA’s inquiry as far as the Complained Product is concerned will proceed in accordance with law.”

b. That he had passed on the benefit of reduction in the tax rate of GST to his recipients. However, the DGAP vide his Report dated 19.09.2019 has erroneously held that the Respondent No. 1 & 2 had profiteered an amount of ₹ 63,14,901/- and ₹ 2,33,456/- respectively on the complained product.

c. The proceedings were without jurisdiction as they are barred by limitation prescribed under Rule 128 (1) of the CGST Rules, 2017:-

i. That in the present case, an online complaint was filed with the Standing Committee by the Applicant No. 1 on 30.07.2018. Hence, for the purpose of Rule 128 (1) of the CGST Rules, the date of receipt of the written complaint by the Standing Committee was 30.07.2018. The Standing Committee examined and referred the written complaint for investigation by the DGAP against him in its meeting held on 11.03.2019. Therefore, it was clear that the Standing Committee did not consider the written complaint within the period of limitation prescribed under Rule 128 (1) of the CGST Rules. Rule 129 (1) of the CGST Rules also didn’t empower the Standing Committee to examine a written complaint beyond the period of limitation. In the present case, the limitation for the Standing Committee to examine the online written complaint expired on 29.09.2018 and the Standing Committee could not have examined the online written complaint in its meeting held on 11.03.2019. Hence the examination of the written application and reference to the DGAP by the Standing Committee was beyond the statutory period of limitation prescribed under Rule 128 (1) of the CGST Rules.

ii. That reliance has been placed on the judgment of the Hon’ble Supreme Court passed in the case of Chhatisgarh State Electricity Board v. Central Electricity Regulatory Commission and Others (2010) 5 SCC 23, followed in the case of Suryachakra Power Corporation Limited v. Electricity Department (2016) 16 SCC 152.

iii. That since the consideration of the online written complaint by the Standing Committee was barred by limitation, the DGAP could not have investigated the online written complaint in terms of Rule 129 of the CGST Rules, as the DGAP could not consider a complaint without a valid and legal examination and reference by the Standing Committee. In view thereof, the present proceedings were liable to be dropped.

d. In the absence of prescription under Section 171 of the CGST Act and/or Rule 129 of the CGST Rules prescribing the period of investigation, the period of 15.11.2017 to 31.03.2019 adopted by DGAP was arbitrary and was liable to remand the matter for re-investigation & recalculation:-

i. That the reduction in the GST rate for the complained product was brought into force w.e.f. 15.11.2017 and the DGAP had arbitrarily decided to consider whether he had profiteered by not passing on the reduction in the rate of GST on the complained product up to 31.03.2019. However, Section 171 of the CGST Act and Rule 129 of the CGST Rules, 2017 did not prescribe any time-frame for considering whether the Respondent had passed on “commensurate reduction in the price of the goods…” to the recipient.

ii. That the provisions of Section 171 of the Act did not prescribe that the Respondent ought not to increase the price of the product, forever. The base sate price of the complained product was not controlled under any legislation or the Essential Commodities Act and the CGST Act and Rules also did not prescribe that the base sale price ought to be frozen forever or for a specified period, to ensure that the Respondent had not clawed back on the reduction in the GST rate. Therefore, it was clear that a supplier was expected to hold on to the base sale price only for a reasonable period. In this view, the DGAP ought to have taken only a reasonable period say upto 31.03.2018 (which would have been 4.5 months from the date of reduction in the GST rate i.e. 15.11.2017) for investigation and could not have taken a period of 16 months and 16 days. The decision of the DGAP of taking such a long period was arbitrary, without the authority of law and constituted colourable exercise of power. Assuming if the period of investigation was restricted to the end of the financial year i.e. 31.03.2018 (4.5 months from the date of GST rate reduction), the alleged profiteering would come down from ₹ 63,14,901 to ₹ 13,65,592/-.

e. Increase in price of product w.e.f. 01.06.2018 was a routine increase and due to commercial reasons:-

i. That he had taken a price increase on the complained product nine months after the previous price increase and 6.5 months after the GST rate was reduced on 15.11.2017. However, the DGAP had ignored the same. He had been revising the price of the complained product, on regular intervals based on market factors, increase in the cost of raw materials, packing materials and inflation etc. and the price at which the product was supplied by him to his customers was directly dependent on the final MRP fixed by him.

ii. That when the rate of GST was reduced from 28% to 18%, he immediately worked out the benefit that should be passed on to the recipients and accordingly reduced the MRP of the product by 8.1% from ₹ 209/- to ₹ 192/- w.e.f. 24.11.2017 (within 8 days of notification). To support this fact, he has enclosed a copy of the MRP stickers of the first batch of production of the complained product from his factory and a copy of the sticker was also enclosed as Exhibit-7.

iii. That explanation of the historical pattern of MRP revision in respect of the complained product was furnished by him as per Table given below:-

iv. That the MRP of the complained product was ₹ 189/- as on 31.08.2017. In the routine course, he had increased the MRP of the complained product to ₹ 209/- w.e.f. 01.09.2017 (i.e. 75 days before the date of rate reduction notification dated 15.11.2017). After the GST rate was reduced, the MRP of the complained product was reduced from ₹ 209/- to ₹ 192/-. Thereafter, in the routine course and for commercial/business reasons, the MRP of the complained product was increased to ₹ 209/- w.e.f. 01.06.2018 (i.e. nine months after the previous price increase). Since the DGAP has taken the period of consideration for investigation as 15.11.2017 to 31.03.2019, the DGAP didn’t give benefit for the increase in MRP from ₹ 192/- to 209/- and consequently arrived at an amount of ₹ 63,14,901/-.

v. That there was a 10.42% increase in the cost of production (as per BOM) of the product from the second half of 2017 till the end of first half of 2018 (June 2018). Cost Accountant’s certificate to this effect was also enclosed as Exhibit-8. Accordingly, keeping in mind the increase in the cost of production and market expectations, he purely for commercial reasons had increased the MRP (with a corresponding increase in channel partner prices) which had been ignored in the DGAP’s Report.

vi. That the costs of raw material and packing material etc., were increased during the period of investigation and hence, he was within his right to increase the price of the product to pass on the cost increases to the customers. Such cost was very relevant for the determination of the price of the product supplied by him. Such cost increases compelled a business to revise its prices and hence, were inextricably linked to pricing decisions.

vii. That the DGAP had ignored the said cost increases as being irrelevant for the purpose of determination of profiteering. Reliance was placed on the order passed by this Authority in the case of Kumar Gandhary v. KRBL Ltd. and also on the case of M/s NP Foods.

viii. That the investigation by the DGAP and the Report, covering the period from 15.11.2017 to 31.03.2019 and holding that the price increase undertaken by the Respondent No. 1 was in effect to claw back, the reduction in the applicable rate of tax and not due to commercial factors, was irrational, whimsical and contrary to the orders passed by this Authority. Consequently, the same had the effect of placing unlawful restraint on trade, a fundamental right of the Respondent No. 1 and was therefore violative of Article 19 (1) (g) of the Constitution of India. Without prejudice, even assuming without admitting that the DGAP could have taken the period upto 31.03.2019 for the purpose of the investigation, the DGAP ought to have taken into consideration the increased BSP consequent to the increase in the input costs.

ix. That the DGAP has used mechanical manner of taking the average supply value of the product (for period 01.11.2017-14.11.2017) and compared the same with the invoice value (15.11.2017 to 31.03.2019). That the DGAP had followed an incorrect and illegal approach to calculate the alleged profiteering. Thus. the demand in respect of alleged profiteering insofar as the same pertained to the price increase w.e.f. June 2018 was not sustainable. Assuming even if the period of investigation was not taken into consideration, but the price hike on the complained product (w.e.f. 01.06.2018), was given benefit, the alleged profiteering would get reduced to ₹ 15,76,325/-.

f. The DGAP had taken an average of price of complained product for calculating pre-GST Base Selling Price, but not for post-GST rate reduction, Base Selling Price:-

i. That Section 171 of the CGST Act or Chapter XV of the CGST Rules did not prescribe the methodology or guidelines for passing on the commensurate reduction in prices. That the anti-profiteering provisions of the CGST Act and Rules did not stipulate that the commensurate reduction in prices ought to be passed on in cash or monetary terms only. Therefore, in the absence of computational methodology or mechanism prescribed under the CGST Act and the CGST Rules to pass on the commensurate reduction in prices, the Respondent No. 1, based on legal advice and bonafide belief, decided to pass on the commensurate reduction in price of the complained product through extension of promotional schemes etc.

ii. That for the period upto the date on which the GST rate was reduced, the DGAP had taken an average of all the invoices and arrived at the average price. However, post 15.11.2017, the DGAP didn’t take an average of all the invoices and selectively picked up, certain invoices where there was a difference and arrived at a conclusion that the Respondent No. 1 had profiteered. Assuming, the scope of the investigation was limited to 15.11.2017 to 31.03.2018 the alleged profiteering amount would be ₹ 7,98,279/-. If the comparable average price during the period from 01.11.2017 to 14.11.2017 was taken as the basis for the comparison with the period from 15.11.2017 to 31.03.2018 and averaged, the alleged profiteering would further come down by ₹ 5,67,313/- to ₹ 7,98,279/- and further assuming that the grammage increase was factored in, there would be no profiteering at all. An excel sheet containing the calculation for this purpose, with the average approach for both pre-tax reduction and post-tax reduction, has been furnished by the Respondent No. 1 vide Exhibit-10.

g. Benefit of Credit Notes on account of Sales returns was not considered by the DGAP while computing the alleged profiteering:-

i. That he had issued credit notes with respect to the cases where sales return was done by his customers. Details of the said sales return were provided to the DGAP during the investigation. However, the same had not been considered by the DGAP though the same had been accepted to be excluded from the scope of investigation in his report. The DGAP in Para 25, observed that the invoices against which credit notes had been issued by the Respondent No. 1 were excluded from the investigation. However, the benefit granted by such credit notes had not been factored in while computing profiteering.

ii. That the DGAP while comparing the average base prices had considered all the invoices for the relevant period. Such invoices also contained cases where the product was not finally supplied and was returned to the Respondent No. 1. As the same did not form part of supplies undertaken by the Respondent No. 1, they should be excluded from the calculation of the alleged profiteering amount.

iii. That if the above contention was taken into consideration, the alleged profiteering amount would further stand reduced by ₹ 37,411/- to ₹ 7,60,868/-. An Excel sheet showing the calculation in this respect has been enclosed as Exhibit-11.

h. Supplies made to ‘Institutional Distributor’ Channel Partner were based on contractual and negotiated prices (excluding the taxes). The same could not be considered for the purpose of present calculation by DGAP:-

i. That the supplies made by Respondent No. 1 to Institutional Distributor Channel Partners were liable to be excluded from the scope of investigation as the price for the said supplies was contractual and the same was negotiated excluding taxes and thereafter taxes (as applicable at the time of sale) were applied thereon. Therefore, in such cases, the change in GST had no bearing on the price of the product supplied as the prevailing tax was added to the price negotiated between the parties. In this regard, a copy of the contract entered into by the Respondent No. 1 with a Channel Partner was enclosed as Exhibit-12.

ii. That it was not the case of the DGAP that the Respondent No. 1 had applied incorrect tax rate on the supplies made to these customers. As taxes did not form part of the negotiated price and the price for supplies made in this channel was pre-agreed with the customer, there could be no instance of profiteering on such supplies. Once the Respondent No. 1 has charged reduced rate of tax from his customers, the DGAP or this Authority has no jurisdiction to examine the price at which goods were sold to the customer in this category. Provisions of Section 171 of the CGST Act were applicable only in situations where the tax was reduced, or additional benefit of ITC was given to the supplier. The case of the Respondent No. 1 fell under the ‘reduction in rate’ and admittedly, the reduced tax had been charged. Therefore, the investigation in respect of supplies made to Institutional Distributor Channel Partner was totally incorrect.

iii. That assuming, if the above benefits were factored and thereafter the benefit of Institutional Distributor was given, the alleged profiteering amount would further stand reduced by ₹ 2,30,3351- to ₹ 5,30,533/-. An Excel sheet showing the calculation in this respect has been furnished by the Respondent No. 1 as Exhibit-13.

iv. That the DGAP has extended similar benefit in the computation of profiteering on the supplies made to the CSD. The DGAP in Para 24 of his Report observed that on examination of the nature of the sales made to the CSD and the copy of agreement thereof, it was observed that the reduction in the rate of GST w.e.f. 15.11.2017 did not have any impact on the sales mentioned in respect of goods sold to the CSD. That the supplies made to Institutional Distributor Channel Partner were pari materia to the supplies made to the CSD. Thus, if the DGAP has extended benefit to the supplies made to the CSD, the same should also be extended in respect of supplies made to the Institutional Distributor Channel Partners.

i. That the products including the complained product were manufactured/marketed across India for which the Respondent No. 1 had obtained separate GST registrations. The investigation conducted by the DGAP was in respect of all the GST registrations of the Respondent No. 1 located all over India, details of which were also furnished by the Respondent.

j. That he had undertaken various measures to pass on the benefit to his recipients including MRP reductions, extension of the period of existing promotional schemes, addition of higher grammage on free of cost basis and higher post supply price reduction (discounts) etc.

k. That he had undertaken the activity of changing the MRP of the affected product. The process of MRP change had started in the month of November, 2017 itself immediately once the notification regarding rate reduction was notified. However, as the old MRP printed on inventory phased out and the fresh stock with reduced MRP became ready, he started to hit shelves from the latter part of November, 2017.

I. In the absence of methodology prescribed in the CGST Act or Chapter XV of the CGST Rules for calculation of profiteering, the procedure adopted by the DGAP in his Report was arbitrary and subjective:-

i. That in the absence of machinery provisions vesting powers and prescribing the mechanism and methodology to be adopted by the DGAP, to conduct anti-profiteering investigations, the DGAP has conducted the investigation, outside the scope of Chapter XV of the CGST Rules and based on the subjective methodology has subjectively decided the period of investigation from 15.11.2017 to 31.03.2019 without any rationale or justification. Hence, on this sole ground the DGAP’s Report was liable to be rejected. This submission was being made without prejudice to the challenge made by the Respondent No. 1, before the Hon’ble High Court in his writ petition.

ii. That as per Rule 126 of the CGST Rules, this Authority has the power to determine the methodology and procedure for determination as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of ITC has been passed on by the registered person (the Respondent No. 1 in the present case) to the recipients by way of commensurate reduction in prices. It was pertinent to note that as on date, CGST Rules had not prescribed any procedure/ methodology/ formula/ modalities for determining/ calculating ‘profiteering’.

iii. That the Methodology and Procedures, 2018 issued by this Authority on 19.07.2018 only provided the procedure pertaining to investigation and hearing. However, no method/formula has been notified/prescribed pertaining to the calculation of the profiteering amount.

iv. That Rule 127 of the Rules outlines the duties of this Authority. However, under the CGST Act or the Rules there was no prescription, let alone the manner and methodology to be adopted by the DGAP for arriving at a decision that there was profiteering by the Respondent No. 1 as he had not passed on the commensurate reduction in the rate of tax. There was also no prescription as to whether such computation had to be done invoice-wise, product-wise, business vertical-wise or entity-wise etc. and this Authority also had not exercised its powers under Rule 126 of the CGST Rules to prescribe the same. In the absence of such a prescription under the CGST Act or the Rules or by this Authority the DGAP had exercised arbitrary and unbridled powers, not vested in it and the same was in violation of Article 14 of the Constitution of India. It would be impossible for the Respondent No. 1 to defend his case and explain how the observations and findings of DGAP were incorrect, thus violating the principles of natural justice.

v. That in order to the control rise in inflation on account of implementation of GST, the Malaysian Government had introduced the ‘Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations 2014, which provided for the mechanism to calculate whether any company had profiteered on account of GST or not. The anti-profiteering measures in Australia revolved around the ‘Net Dollar Margin Rule’ serving as the fundamental principle as guideline i.e. if the new GST regime caused taxes and costs to fall by $1, then prices should fall by at least $ V-. At the same time if the cost of the business rose by $1 under the new tax regime, then prices might rise by not more than $1. These regulations had been set as barometers for calculating profiteering. However, no such procedure for calculation of profiteering had been provided under the CGST Act and CGST Rules and even this Authority had not prescribed any such mechanism in the exercise of its powers under Rule 126 of the CGST Rules. Absence of the same violated the principle of natural justice and thus, the investigation was liable to be set aside.

vi. That in the case of Commissioner of Income Tax Bangalore v. B. C. Srinivasa Setty (1981) 2 SCC 460, the Hon’ble Supreme Court has held that the charging section was not attracted where corresponding computation provision was inapplicable. Further, in the case of Samsung (India) Electronics Pvt. Ltd. v. Commissioner of Commercial Taxes U. P. Lucknow 2018 [11] G.S.T.L. 367 The Hon’ble Allahabad High Court has observed that in the absence of any procedure or provision in the UP VAT Act, 2008 conferring such authority, in the case of a sale of composite packages bearing a singular MRP, the authorities under the Act could not possibly assess the components of such a composite package separately. Such an exercise, if undertaken, would also fall foul of the principles enunciated by the Supreme Court. Further, in the case of Eternit Everest Ltd. v. Union of India 1997 (89) E.L.T. 28 (Mad.), the Hon’ble Madras High Court had held that in the absence of the machinery provisions pertaining to determination and adjudication upon a claim or objection, the statutory provision would not be applicable.

m. The findings of the DGAP in its Report were in violation of the import and meaning of Section 171 of the CGST Act:-

i. That there were no guidelines or procedures in relation to the method and methodology to determine whether the Respondent No. 1 had profiteered by not passing on “commensurate reduction in prices”, consequent upon reduction in the applicable rate of tax.

ii. That assuming that the intent of the legislature was that commensurate reduction in prices ought to be only in monetary terms and it could not be passed on by way of increase in grammage, schemes and credit notes etc., the legislature would have explicitly stated so in Section 171 of the CGST Act. However, the legislature in its wisdom didn’t specify that commensurate reduction in prices ought to be only through the mechanism of cash in BSP or MRP, in Section 171 of the CGST Act; hence the DGAP (an authority to exercise powers as vested under Chapter XV of the CGST Rules) could not import or impute meaning in the statute. He has relied upon the judgement passed by the Hon’ble Supreme Court in the case of Southern Petrochemical Industries Company Ltd. v. Electricity Inspector and ETIO and Others (2007) (5 SCC) 447 in which it was held that:-

“Omission of words in a particular statute may play an important role. The intention of the legislature must be, as is well known, gathered from the words used in the statute at the first instance and only when such a rule would give rise to anomalous situation, the court may to recourse to purposive construction. It is also a well settled principle of law that casus omissus cannot be supplied.”

iii. That as per the various principles laid down by the Hon’ble Supreme Court in a large number of judgments, it was clear that (a) principles of strict/literal interpretation applied to charging provisions of the taxation statutes (b) cause/ reasoning for a particular provision of law, could not be supplied, unless there was a clear lacuna and only when reasons for such assumption of cause were found within the four corners of the statute, (c) cause/intention could be supplied only if, literal/strict interpretation led to an absurd or anomalous situation. However, in the present case, there was no basis for the DGAP to assume that “commensurate reduction” used in Section 171 of the CGST Act would only mean, only in cash. The finding of the DGAP in this regard was erroneous. Methods like increase in quantity or grammage of goods supplied, introduction of promotional offer of giving an item free along with the main product etc. were also methods to extend the commensurate ‘reduction’.

iv. That the DGAP had not considered that the increase in the price of the complained product was in routine for commercial and compelling reasons which were beyond the control of the Respondent No. 1.

n. Passing of commensurate reduction benefit could be in monetary or non-monetary terms:-

i. That the interpretation assigned by the DGAP that in terms of Section 171 of CGST Act, the legal requirement was that in the event of benefit of ITC or reduction in rate of tax, there must be a commensurate reduction in the prices of the goods or services and such reduction could only be in the form of cash, was incorrect.

ii. That Section 171 of the CGST Act, 2017 did not use the words ‘pass on the benefit by reduction in price only’. The effect of commensurate reduction in price was extending benefit to the recipient due to tax rate reduction. Thus, what was pertinent to be seen was whether the objective of Section 171 was being achieved or not. If a recipient was extended the benefit in monetary or non-monetary form proportionate to tax rate reduction, Section 171 was duly complied with in strict sense. Price in this regard was the consideration paid or payable for overall supply of a product.

iii. That as per Indian Contract Act, 1872, consideration included any act or abstinence. While consideration for supply was generally measured in monetary terms, the same could also include non-monetary elements. Thus, price was not only what was reflected in the invoice. The monetary component might already be factored in the invoice price. However, the parties could also choose to settle the consideration partly in non-monetary terms. He had reduced the price by way of extension of promotion schemes and by providing additional quantity in the same amount and by these methods, he had ensured full and total compliance with Section 171 of the CGST Act and thus the finding of the DGAP with respect to profiteering was incorrect.

iv. That in the absence of any prescribed methodology for passing on the benefit of GST rate reduction based on bonafide belief and legal advice received, he had passed on the benefit by way of Schemes whereby the additional quantity (in ml) was given along with the complained product. The production of the complained product with reduced MRP was commenced on 24.11.2017 and thereafter it was supplied with reduced MRP (base price) to the distributors and other channel partners. On the date of GST rate reduction i.e. 15.11.2017, the Respondent No. 1 had closing stock lying at various locations with the old MRP and the complained product was MRP driven. Accordingly, the Respondent No. 1 had to work on the computation of the revised MRP for the complained product as well as other goods (mostly MRP driven) and thereafter re-fix the prices for all his customers, in order to pass on the commensurate reduction in the applicable rate of tax. Further, the number of goods dealt by the Respondent No. 1 was high and the entire process had consumed around 7 days after the GST rate reduction. In the meantime, since there could be a shortage in the market, the Respondent No. 1 for the interim continued to supply the complained product with the same MRP. The Respondent No. 1 was informed that if he passed the commensurate reduction in applicable taxes, the requirement of Section 171 of the CGST Act would be met.

v. That the benefit of rate reduction was passed on to the consumers by way of an additional 200 ml free quantity with 900 ml unit thus reducing the price/m1 of the complained product. This already running promo had been further intensified after the rate change on 15.11.2017 in order to ensure that the benefit of the rate reduction on the old stock (stock lying prior to change in MRP on 24.11.2017) was passed on to the customers and to the end customers in the subsequent sales. Thus, the customers had received 1100 ml of Dettol hand liquid along with Dettol pump at the price of 900 ml. If the MRP of the Dettol 200 ml. was taken into consideration, there would be no profiteering at all.

vi. That the passing of benefit through grammage/ml increase has been consistently accepted as one of the effective ways for passing on the benefit of GST rate reduction, for the reason that grammage/ml. increase was nothing but a reduction in the price per gram/ml in the hands of the recipient. In other words, grammage/ml. increase was commensurate reduction in the price of goods as contemplated under Section 171 of the CGST Act and was thus sufficient compliance of the provision of the law. In this regard, reliance has been placed on the case of Ankit Kumar Bajoria v. M/s. Hindustan Unilever Limited, 2019 (21) GSTL J74 (N.A.P.A.), wherein this Authority has accepted the argument of grammage being a correct way in terms of Section 171 of CGST Act for passing on the benefit of commensurate reduction in the rate of tax.

o. Alleged profiteered amount has been inflated in the DGAP Report, by adding GST; such inclusion was not sustainable in law:-

i. That while arriving at the total alleged profiteering amount, the DGAP had incorrectly added 18% GST to the alleged profiteered amount without giving reasons which was contrary to the provision of law. The amount charged as GST by the Respondent No. 1, had been duly deposited with the Government. The amount termed as excess GST in the DGAP Report was not GST per se and such excess tax had been deposited with they Government. In view thereof, the said amount could not be treated as amount profiteered by him, for the purpose of Section 171 of the CGST Act.

ii. That assuming, without admitting, that the Respondent No. 1 has profiteered and the GST has been collected thereon and the said GST was to be paid in the Consumer Welfare Fund (CWF) then instead of the Respondent No. 1, the Government could transfer the amount equivalent to GST on the profiteered amount to the CWF.

iii. That addition of 18% GST would have been correct if the amount had been collected and retained by him and not deposited with the Government. In this regard, reliance was placed on the case of R. S. Joshi Sales Tax Officer Gujarat v. Ajit Mills Limited (1977) 4 SCC 98, wherein the Hon’ble Supreme Court analysed what the term ‘collected’ meant in the context of the sales tax legislation of Gujarat. It observed as under:-

“34. Section 37 (1) uses the expressions, in relation to forfeiture any sum collected by the person – shall be forfeited’. What does collected’ mean here? Words cannot be construed effectively without reference to their context. The setting colours the sense of the word. The spirit of the provision lends force to the construction that ‘collected” means “collected and kept as his” by the trader. If the dealer merely gathered the sum by way of tax and kept it in suspense account because of dispute about taxability or was ready to return if eventually it was not taxable, it is not collected. ‘Collected., in an Australian Customs Tariff Act, was held by Griffth C.J., not .to include money deposited under an agreement that if it was not legally payable it will be returned’ (Words & Phrases p. 274). We therefore, semanticise. Collected’ not to cover amounts gathered tentatively to be given back if found non-exigible from the dealer.”

iv. That in view of above judgement, re-computation of the alleged profiteering amount by extending the benefit of cum-tax to Respondent No. 1, the alleged profiteering amount would be further reduced by ₹ 9,67,699/-. The excel sheet containing the calculations has been furnished by the Respondent No. 1 vide Exhibit-14.

v. That if the above mentioned benefits were factored in and thereafter the benefit of cum-tax was given, the alleged profiteering amount would further stand reduced by ₹ 80,685/- to ₹ 449,848/-. The Excel sheet mentioning the calculation in this respect has been submitted by the Respondent No. 1 vide Exhibit-15.

25. The Respondent No. 1 vide his submissions dated 13.11.2019 has also stated that he had passed on the profiteered amount by way of increased grammage and has submitted the detailed computation vide Exhibit-16.

26. The Respondent No. 2 his submissions dated 13.11.2019 has stated as under:-

• That the present investigation was beyond the period of limitation and was without jurisdiction. The methodology and period of investigation has not been provided in the CGST Act or the CGST Rules.

a. That there was no profiteering and as the benefit has been passed on by the Respondent No. 1 by increasing the grammage to the recipients, and hence, in the same manner, it had been passed on by him to the recipients.

b. That in view of the above, the matter might be sent back to the DGAP for reconsideration.

27. Supplementary Report was also called for from the DGAP on the above submissions dated 08.11.2019 and 13.11.2019 filed by the Respondent No. 1 and submissions dated 13.11.2019 filed by the Respondent No. 2 under Rule 133 (2A) of the CGST Rules, 2017. The DGAP vide has Report dated 27.11.2019 has stated:-

i. That the Standing Committee vide minutes of its meeting dated 11.03.2019, had referred the above complaint mentioned in Annexure-1, to the DGAP for investigation. Further, 37 cases mentioned in Annexure-1C pertaining to the month of February, 2019 were duly disposed of by the above Committee on 11.03.2019 i.e. within a period of 02 months.

ii. That the methodology/process adopted to compute the profiteering amount has already been discussed in detail, in the DGAP’s Report dated 19.09.2019. However, this Authority may take a view regarding the period of investigation in the present case.

iii. That he had excluded the transactions against which credit notes had been issued. The terms and conditions in respect of the supplies made to the CSD and Institutional Distributors were completely different and therefore, the supplies made to the Institutional Distributors were not excluded from the scope of investigation.

iv. That the provisions of Section 171 of the Act did not provide for any 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 the prices. The claim made by the Respondent No. 1 that he had passed on the benefit of GST rate reduction on certain products by increasing the quantity of grammage of the products while maintaining the earlier pre-rate reduction MRP of such products was not acceptable.

v. That the DGAP has computed the profiteered amount by comparing the average of the base price of the product sold during the period from 01.11.2017 to 14.11.2017 with the actual invoice-wise base prices of such product sold during the period from 15.11.2017 to 31.03.2019. The excess GST so collected from the recipients was also included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased base price.

28. Further, the Respondent No. 1 vide his submissions dated 24.12.2019 in response to the above Report of the DGAP has stated:-

i. That he had raised objection that the Standing Committee on Anti-Profiteering had not considered the written complaint within the period of limitation as prescribed under Rule 128 of the CGST Rules. The DGAP in response to the above objection had merely given the date of recommendation and had not given any response at all and had not denied the fact that the complaint was not considered and disposed of within a period of 02 months of its receipt on 30.07.2018.

ii. That the DGAP has admitted that Section 171 of the Act or Rule 129 of the Rules did not prescribe the period of investigation. Hence, in the absence of prescription in law, the DGAP could have only taken a reasonable period i.e. from 15.11.2017 to 31.03.2018 instead of 15.11.2017 to 31.03.2019 i.e. the period of 16 months and 16 days. Hence, if the period of investigation was considered from 15.11.2017 to 31.03.2018, the alleged profiteering would have come down to ₹ 13,64,592/-.

iii. That the claim of the DGAP that the terms of supply to the CSD and Institutional Distributors were completely different was completely incorrect. The DGAP has not taken note of the fact that supplies to the Institutional Distributor were based on contractual and negotiated prices as they were in the case of supply to the CSD. In the case of CSD as well as sale to the Institutional distributors, the base price was decided and the actual applicable taxes were collected. The DGAP had given benefit in respect of the supplies made to the CSD as CGST/SGST was charged separately on them. However, even though the supplies made to the Institutional Distributor were on identical lines i.e. the applicable taxes were collected separately but the DGAP had rejected the same without giving any reason.

iv. That the statement of the DGAP that “transactions against which credit notes have been issued were already excluded” was not correct. The DGAP had included the same while computing the profiteering amount. The DGAP had considered all the invoices while computing the profiteering amount. Some of the invoices also pertained to the cases where the product was not finally supplied and was returned. Since, the returned product did not form part of the supplies made by the Respondent No. 1, the same should be excluded from the alleged profiteered amount.

v. That the CGST Act or Chapter XV of the CGST Rules did not prescribe the methodology or approval for computation of profiteering.

vi. That the DGAP had not applied the principle laid down by this Authority that the grammage increase was an acceptable form of passing on the commensurate reduction in prices as has been accepted by this Authority in the case of Ankit Kumar Bajoria V. Hindustan Unilever (20/2018).

vii. That the amount charged as GST from the customers had been deposited with the Government and hence, the same was needed to be reduced from the profiteered amount.

29. The Respondent No. 1 vide his submissions dated 15.01.2020 has further stated:-

i. That he had undertaken various measures to pass on the benefit to his recipients including MRP reduction, addition of higher grammage on free of cost basis and higher post supply price reduction (discounts) etc. and he had also communicated the same to his customers i.e. distribution channels.

ii. That every month, he was raising thousands of invoices for sale of the complained product and other products. He had not raised separate invoices for the complained product and the invoices had been raised on the Purchase Order(s) received from the distributors. His Chartered Accountant had inspected the books of accounts/sale maintained by the Respondent No. 1.

iii. That a copy of the certificate issued by his Chartered Accountant was enclosed stating that the Respondent No. 1 had passed on the benefit of GST rate reduction by way of increase in the grammage of the complained product. The Respondent No. 1 had increased the volume of the complained product by giving an additional 200 ml quantity of the value of about ₹ 70 Lacs.

30. This Authority has carefully examined the DGAP’s Reports, the written submissions of the Respondents and the complaint filed by the Applicant No. 1. The issues to be decided by this Authority in the present case are as under:-

1) Whether there was reduction in the rate of tax in respect of the above product?

2) Whether the above Respondents were liable to pass on the benefit of tax reduction to the buyers in terms of Section 171 of the CGST Act, 2017?

3) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 by the Respondent No. 1 & 2?

4) What was the quantum of profiteering?

31. In this connection it would be appropriate to refer to the provisions of Section 171 of the CGST Act, 2017 which provide as under:-

“(1). Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.”

(2). The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether ITCs availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.”

(3). The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.

(3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered:

PROVIDED that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority.

Explanation:- For the purpose of this section, the expression “profiteered” shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both.”

32. It is apparent from the DGAP’s Report that there has been reduction in the rate of tax from 28% to 18% w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 and the above product was impacted by the rate reduction and hence, the benefit of the rate reduction was required to be passed on to the customers by the Respondents. It is also revealed that the DGAP vide his report dated 19.09.2019 has calculated the amount of net higher sales realization due to increase in the base price of the impacted goods, despite the reduction in the GST rate from 28% to 18% as ₹ 63,14,901/- in respect of the Respondent No. 1 and ₹ 2,33,456/- in respect of the Respondent No. 2. The said profiteered amount has been arrived at by the DGAP by comparing the actual invoice-wise base price of the complained product sold during the period from 15.11.2017 to 31.03.2019 with the commensurate price based on the average of the base prices of the product sold during the period from 01.11.2017 to 14.11.2017. The excess GST so collected from the recipients has also been included by the DGAP in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased base price.

33.One of the contentions of the Respondent No. 1 is that the Standing Committee on Anti-Profiteering had not considered the complaint filed by the Applicant No. 1 within the period of limitation of 2 months prescribed under Rule 128 (1) of the CGST Rules, 2017. In this connection perusal of Annexure-1 attached with the Report of the DGAP shows that a complaint dated 30.07.2018 addressed to the Standing Committee was sent by e-mail by the Applicant No. 1 by stating that “Attached please find GST profiteering complaint from the Anti-Profiteering Circle against Reckitt Benckiser.” The complaint was filed in the Form prescribed for filing such complaints in which address, mobile number, email id and details of the Voter Identity Card of the Applicant No. 1 and name of the Respondent No. 1 was duly mentioned. The product against which the complaint was filed was mentioned as “Handwash dettol HW Liquid original 900 ml”. It was also mentioned in the complaint that the Earlier Price/ Value per unit of the above product was ₹ 189.00, Present Price/ Value per unit was ₹ 192.00, Earlier MRP was ₹ 189.00 and Present MRP was 192.00. It was further mentioned that “After GST rates were reduced from 28% to 18% the MRP of Dettol product increased”. It was also stated that the benefit of tax reduction had not been passed on. Additional information was also provided in the Form by stating that “The supplier Reckitt Benckiser seems to have increased the MRP of the product despite reduction in GST from 28% to 18%. The above complaint is received from a member of Local Circles. Local Circles is India’s leading Community Social Media Platform”. A copy of the complaint received from Sh. Anil Mehta, a member of the Local Circles, was also attached with the e-mail which stated as under:-

“Profiteering Complaint against Reckitt Benckiser/Dettol Have also received information from Big Bazaar on Dettol or Reckitt Benckiser which indicates another profiteering scenario.

Handwash dettol HW Liquid original 900 ml was sold to Biq Bazaar Inderlok on 7/11/17 via PO 8115009618 for MRP 189. Then after Nov 15 GST rate reduction from 28% to 18% on MRP 209 on 21/12/17 via PO 4514107805.

On 20/6/18 same product supplied via PO 4518283635 for MRP 192.

So net net after 10% GST rate cut the manufacturer instead of reducing the MRP of product actually increased it and engaged in profiteering according to me.” (Emphasis supplied)

34.This Authority in the proceedings being held by it in the case of M/s J. K. Helen Curtis Ltd. and another, on the complaint dated 30.07.2018 filed by the Applicant No. 1, had opportunity to examine the record of the meetings of the Standing Committee held on 07.08.2018 and 08.08.2018 when the present complaint made against the Respondent No 1 was also discussed in detail by the members of the Standing Committee comprising of Sh. 0. P. Dadhich, Principal Commissioner, Customs (Preventive) Delhi, Sh. Himanshu Gupta Principal Commissioner SGST Delhi North and Sh. H. Rajesh Prasad Commissioner, SGST Delhi. The following observations were made in respect of the above complaint at Sr. No. 20 of Annexure-3 attached with the minutes of the above meetings:

“Return to the complainant for re-submitting with Pre & Post 15.11.2017 invoices showing the price.”

35. It is also revealed from the record that the Applicant No. 1 vide his e-mail dated 22.02.2019 addressed to the Standing Committee on Anti-Profiteering had stated that “Attached, please find 57 complaints that have been shared with you. Kindly advise status of these complaints as so far we have only received further information on one complaint in this list”. The complaint made against the Respondent No. 1 was mentioned at Sr. No. 6 of the Annexure attached to the above e-mail. In the meantime the Standing Committee had been constituted afresh by the GST Council vide its OM dated 21.02.2019 under Rule 123 (1) of the CGST Rules, 2017. The above e-mail sent by the Applicant No. 1 was discussed in detail by the Standing Committee on Anti-Profiteering comprising of S/Sh. H. Rajesh Prasad Commissioner, Department of Trade & Taxes, Govt. of NCT of Delhi, Amit Kumar Aggarwal, Excise & Taxation Commissioner, Govt. of Haryana, Sanjay Mangal, Commissioner Central Tax (Audit) and Pranesh Pathak, Commissioner Central Tax in its meeting held on 11.03.2019 and vide Sr. No. 29 of the minutes of the meeting recorded in respect of the above complaint which was mentioned in Annexure-1C, it was decided to forward the above complaint to the DGAP for detailed investigation under Rule 129 (1). The minutes of the above meeting have been attached as Exhibit-6 by the Respondent No. 1 with his submissions dated 08.11.2019. It is also apparent from the perusal of the minutes of the above meeting that the complaint was treated to have been received in the month of February, 2019 by the above Committee.

36.It is therefore, abundantly clear from the above facts that the complaint made by the Applicant No. 1 vide his e-mail dated 30.07.2018 had been returned by the Standing Committee to the Applicant No. 1, as per the minutes of the meetings of the Committee held on 07.08.2018 and 08.08.2018 and hence, the proceedings in respect of the above complaint had come to an end w.e.f. 08.08.2019. It is also revealed from the record that the above Applicant had made a fresh complaint to the Standing Committee vide his e-mail dated 22.02.2019 which was considered by the above Committee in its meeting held on 11.03.2019 i.e. after a lapse of a period of 17 days which is well within the period of limitation of 2 months prescribed under Rule 128 (1) of the CGST Rules, 2017 and was referred to the DGAP for detailed investigation as per Rule 129 (1) of the above Rules. Therefore, the allegation of the Respondents that the above complaint was not recommended by the Standing Committee within the prescribed period of limitation is not correct and hence the same cannot be accepted.

37. The Respondent No. 1 has also placed reliance on the judgment passed by the Hon’ble Supreme Court in the case of Chhatisgarh State Electricity Board v. Central Electricity Regulatory Commission and others (2010) 5 SCC 23) which has been followed in the case of Suryachakra Power Corporation Limited v. Electricity Department (2016) 16 SCC 152), in his support. But since the complaint filed by the Applicant No. 1 has been considered by the Standing Committee and recommended for detailed investigation well within the prescribed period of 2 months as per Rule 128 (1) of the above Rules, the law settled in the above cases cannot be relied upon.

38.The Respondent No. 1 has also contended that the period of investigation taken by the DGAP was arbitrary. In this regard it would be pertinent to refer to Section 171 (1) which provides that the benefit of tax reduction is required to be passed on by a registered person which implies that the Respondent is liable to be investigated till the date he does not pass on the benefit of tax reduction. The Respondent has failed to produce evidence to the effect that he has passed on the benefit of tax reduction. Rather the Respondent has not passed on the benefit even once after 15.11.2017. The DGAP had received the reference from the Standing Committee to launch investigation against the Respondent on 27.03.2019 and during the investigation, he has not found evidence of passing on the benefit of tax reduction and therefore, he has rightly investigated the Respondent till 31.03.2019. Had the Respondent passed on the benefit before the above date the DGAP would not have investigated him beyond that date. The Respondent is liable to be investigated even now as he has not shown proof to establish that he has passed on the benefit of tax reduction. However, he has continued to increase his price without reducing his price commensurately and hence, any amount realised by him due to such price increase is liable to be included in the profiteered amount. Accordingly, the present investigation has been rightly conducted by the DGAP till 31.03.2019 and there is no ground to limit it till 31.03.2018 as has been claimed by the Respondent.

39. The Respondent has further contended that he had been revising the price of the complained product at regular intervals based on the market factors and increase in the costs which were ignored by the DGAP. The Respondent No. 1 has also submitted Cost Accountant’s certificate stating that there was 10.42% increase in the cost of production. It would be pertinent to mention here that the provisions of Section 171 (1) of the above Act require the Respondent No. 1 to pass on the benefit of tax reduction to the consumers only and have no mandate to look into the fixing of prices of the products which the Respondent No. 1 is free to fix. If there was any increase in his costs he should have increased his price before 15.11.2017 however, it cannot be accepted that his costs had suddenly increased on the intervening night of 14.11.2017/15.11.2017 when the rate reduction had occurred which had forced him to increase his prices exactly equal to the reduction in the rate of the tax. Such an uncanny coincidence is unheard off and hence there is no doubt that the Respondent has increased his price for appropriating the benefit of tax reduction with the intention of denying the above benefit to the consumers.

40. The Respondent No. 1 has also argued that he had immediately worked out the benefit to be passed on to the recipients and accordingly reduced the MRP of the product by 8.1% from ₹ 209/- to ₹ 192/- w.e.f. 24.11.2017. However, perusal of Table-A of the DGAP’s Report shows that the above Respondent was selling the above product at the total price of ₹ 161.85 per unit including the GST between the period from 01.11.2017 to 14.11.2017, during the pre-rate reduction period and he was selling it © ₹ 179.41 per unit after the rate reduction on 17.11.2017 and hence he had increased the price by ₹ 17.57 per unit which completely belies his claim that he had reduced his price by 8.1%. It is also revealed from the record that the Respondent had further increased his price w.e.f. 01.06.2018 without reducing it even once after the rate reduction. At no stage he has come with clean hands hence, the above contention of the Respondent is not tenable. His repeated claim of increase in his costs is also not correct as he had no ground to increase his price from the same date from which the rate of tax was reduced. Therefore, he cannot be given the benefit of increase in the price made on 01.06.2018 and hence, the profiteered amount cannot be reduced by ₹ 15,76,325/- as per Exhibit-9.

41.The Respondent No. 1 has also relied upon the order passed by this Authority in the case of Kumar Gandhary v. KRBL Ltd. 2018 VIL 02 NAA and also in the case of Jijrushu N. Bhattacharya v. M/s NP Foods 2018 VIL 08 NAA. In this context, it is pertinent to mention that in the above cases no benefit of increase in the cost was given. In the first case the rate of tax had been increased and hence the provisions of Section 171 (1) were not applicable as there was no tax reduction. In the second case the rates fixed after rate reduction were commensurate with the denial of ITC. However, in the instant case, no such benefit of ITC has been denied to the above Respondent nor the rate of tax has been increased rather the rate has been reduced and hence, the Respondent was liable to reduce his price commensurately as per the provisions of Section 171 (1) of the CGST Act, 2017. Therefore, the facts of both the above cases referred by the Respondent No. 1 are different from his case and hence, they cannot help him.

42.The Respondent has further argued that the DGAP has followed an incorrect approach to compute the amount of profiteering by comparing the average supply value of the product for the period from 01.11.2017 to 14.11.2017 with the actual invoice value for the period from 15.11.2017 to 31.03.2019. However, he should have compared the average of all the invoices in the pre and the post rate reduction periods. In this regard, it would be appropriate to mention that the DGAP has computed the average base price of the product on the basis of the details of the invoices and their reconciliation with his GSTR-1 Return for the period from 01.11.2017 to 14.11.2017, submitted by the Respondent No. 1 himself. The DGAP has computed the average pre rate reduction base price as the Respondent No. 1 was not selling his product on a single base price and was charging different prices from different channels of distribution viz. CSD, Distributors, Direct Modern Trade, E-Commerce Trade, Indirect Modern Trade and Super Stockists. The DGAP has computed the average base price for each of the above channels separately for computation of profiteering. It was also not possible to compare the actual pre rate reduction price with the post rate reduction actual price for every customer as the same customer may not have bought the product either during the pre or the post reduction period. The DGAP has further calculated the average base price of the product by considering a short period of 14 days which gives more accurate and representative pre rate reduction average price. The DGAP was also required to compare the pre rate reduction average base price with the actual post rate reduction price as the benefit was required to be passed on to each buyer and it could not have been calculated by computing the average base price post rate reduction. In case the average base price is computed for the post rate reduction period then all the units of the product which have been sold below such average base price will get excluded from the computation of benefit of tax reduction although they might have been sold by the Respondent at a higher base price than the commensurate base price. As a consequence of which all those buyers who might have purchased such units of the product would not get the benefit of tax reduction which they are legally entitled to receive as per the provisions of Section 171 (1). Further, the DGAP has computed the amount of benefit which has been denied by the Respondent by using the methodology which has been approved by this Authority in all such similar cases. Hence, the above mathematical methodology adopted by the DGAP is logical, reasonable and correct and is in consonance with the provisions of Section 171 (1) of the CGST Act, 2017 and hence the same can be relied upon. Accordingly, the profiteered amount cannot be reduced by ₹ 5,67,313/- as per Exhibit-10.

43.The Respondent has further contended that the credit notes issued by him in respect of the return of sales were not considered by the DGAP while calculating profiteering. In this context, perusal of the DGAP’s Report dated 19.09.2019 and Supplementary Report dated 27.11.2019, shows that the DGAP has considered all such credit notes which had been issued by the Respondent No. 1 in respect of the sales where the product was returned after sale and the benefit of such credit notes has been duly given to the above Respondent while computing the profiteered amount. Hence, the above claim of the Respondent No. 1 is wrong and hence the same cannot be accepted. Accordingly, an amount of ₹ 37,411/- claimed by the above Respondent on this ground cannot be reduced from the profiteered amount as per Annexure-11.

44.The Respondent No. 1 has also contended that the supplies made by him to the Institutional Distributor Channel Partner were liable to be excluded from the scope of investigation as was done in the case of CSD. In this regard, the DGAP vide his supplementary Report dated 27.11.2019 has stated that the terms and conditions in respect of the supplies made to CSD and Institutional Distributor were completely different and hence, the supplies made to the Institutional Distributor were not excluded from the scope of investigation. In this connection it would be relevant to note that an Institutional Distributor cannot be compared with the CSD as the former is a normal commercial channel whereas the later is dedicated to the welfare of the personnel of the Armed Forces. Moreover, mere charging of reduced rate of tax does not amount to passing of the benefit of tax reduction when the base price of the product has been increased by the Respondent to offset the benefit of tax reduction. Any negotiation or agreement executed by the Respondent while fixing prices with the Institutional Distributor Channel Partners cannot override the provisions of Section 171 (1) and hence, the Respondent is legally bound to pass on the benefit of tax reduction. Therefore, the DGAP has rightly included the supplies made to the Institutional Distributor Channel Partners while computing the profiteered amount, hence the contention of the Respondent made in this regard is not correct and accordingly, an amount of ₹ 2,30,335/- as per Exhibit-13 cannot be excluded from the profiteered amount.

45.The Respondent has further contended that Section 171 of the CGST Act or Chapter XV of the CGST Rules or ‘Methodology and Procedure’ dated 19.07.2018 issued by this Authority did not prescribe the methodology or guidelines for passing on the benefit of tax reduction or computation of profiteered amount. In this regard, it is submitted that the ‘Procedure and Methodology’ for passing on the benefits of reduction in the rate of tax and ITC has been clearly provided in Section 171 (1) of the CGST Act, 2017 itself which states 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.” It is clear from the perusal of the above provision that it mentions “reduction in the rate of tax or benefit of ITC” which means that the benefit of tax reduction or ITC has to be passed on by a registered dealer to his customers since it is a concession which has been granted from the public exchequer which cannot be misappropriated by a supplier. It also means that the above benefits are to be passed on each product or unit of construction or service to each buyer and in case they are not passed on, the profiteered amount has to be calculated for which investigation has to be conducted on all such impacted products/units/services. The definition of profiteered amount has been amply made clear in the explanation attached to Section 171 which has been quoted supra. These benefits can also not be passed on at the entity/organisation/branch level as the benefits have to be passed on to each recipient at each product/unit/service level. Further, the above Section mentions any supply” which denotes each taxable supply made to each recipient thereby clearly stating that a supplier cannot claim that he has passed on more benefit to one customer therefore he would pass less benefit to another customer than the benefit which is actually due to that customer. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him. The word “commensurate” mentioned in the above Section gives the extent of benefit to be passed on by way of reduction in the prices which has to computed in respect of each product or unit or service based on the tax reduction as well as the existing base price or the additional ITC available. The computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product or unit to unit or service to service and hence no fixed methodology can be prescribed to determine the amount of benefit which a supplier is required to pass on to a recipient or for computation of the profiteered amount. However, to further explain this legislative intent behind the above provision, this Authority has been empowered to determine the ‘Procedure and Methodology’ which has been done by it vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. However, no fixed mathematical formula which can be applied in all the cases of profiteering can be fixed while determining such a “Methodology and Procedure” as the facts of each case vary. In the case of one real estate project, date of start and completion of the project, price of the house/commercial unit, mode of payment of price, stage of completion of the project, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realised before and after the GST implementation would always be different than the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to another project.

Therefore, no set guidelines can be framed for determining methodology to compute the benefit of additional ITC which would be required to be passed on to the buyers of such units. Moreover this Authority under Rule 126 has power to ‘determine’ Methodology & Procedure and not to ‘prescribe’ it. However, fixation of commensurate price is purely a mathematical exercise which can be easily done by a supplier keeping in view the reduction in the rate of tax and his price before such reduction or the availability of additional ITC post implementation of GST. Further, the facts of the cases relating to the Fast Moving Consumer Goods (FMCGs), restaurants, construction and cinema houses are completely different from each other and therefore, the mathematical methodology employed in the case of one sector cannot be applied in the other sector otherwise it would result in denial of benefit to the eligible recipients. Moreover, both the above benefits have been granted by the Central as well as the State Governments by sacrificing their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and hence they have to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous and mandatory which truly reflect the intent of the Central and State legislatures. The Respondent is trying to mislead by giving wrong impression that he was required to carry out massive mathematical computations for passing on the benefit of tax reduction which he could not do in the absence of the procedure and methodology. However, the same is not correct as he was only required to continue to charge the same base price which he was charging before the tax reduction and charge GST at the reduced rate of 18%. However, the Respondent had intentionally increased his base price post rate reduction and then charged GST @ 18% whereby the ultimate price charged to the customer was the same which he was paying before the tax reduction which has resulted in denial of the above benefit. Hence, no methodology and procedure or guidelines or elaborate mathematical calculations were required to be carried out for passing on the benefit of tax reduction. Therefore, the above contention of the Respondent is frivolous and hence the same cannot be accepted. The Respondent cannot deny the benefit of tax reduction to his customers on the above untenable ground as Section 171 provides clear cut methodology and procedure to compute both the above benefits.

46.The Respondent has also alleged that the DGAP has used subjective methodology and procedure to determine the alleged profiteering amount which was illegal. In this connection it is mentioned that the DGAP has computed the amount of benefit which has been denied by the Respondent by using the methodology which has been discussed in para supra and has been repeatedly approved by this Authority in all such cases and hence, the Respondent cannot claim that the DGAP has devised his own methodology and procedure.

47.The Respondent has also contested that the Methodology and Procedure issued by this Authority on 19.07.2018 only provided the procedure pertaining to investigation and hearings. However, as has been mentioned supra the ‘Methodology & Procedure’ to determine profiteered amount has already been provided in Section 171 (1) itself and hence, no Methodology & Procedure is required to be determined by this Authority separately. This Authority has already notified the ‘Procedure and Methodology’ vide its Notification dated 28.03.2018 under Rule 126 and not on 19.07.2018 as has been claimed by the Respondent which is available on its website. As discussed above computation of profiteered amount has to be done product wise or in technical terms each Stock Keeping Unit (SKU) wise and not invoice-wise, business vertical-wise or state-wise etc. as every buyer has fundamental right to get the benefit which is due to him on each SKU/unit/service which he has bought. It is also clear from the Explanation attached to Section 171 what is to be construed as the profiteered amount and hence the Respondent should have no difficulty in computing and passing on the benefit of tax reduction.

48.The Respondent has also pointed out that the Malaysian Government has introduced the Price Control and Anti-Profiteering (Mechanism To Determine Unreasonably High Profits for Goods) (Net Profit Margin) Act, 2014 which provided the mechanism to calculate profiteering. The anti-profiteering measures in Australia revolved around the Net Dollar Margin Rule’ serving as the fundamental principle as its guideline. However, no such provision has been made under the CGST Act and the Rules. In this regard it would be appropriate to mention that the above Act has been repealed by Malaysia as it was not found to be working properly. Moreover, this Act was promulgated to control prices after introduction of GST in the above Country whereas no provision for controlling prices has been made in the CGST Act, 2017. Similarly, the ‘Net Dollar Margin Rule’ applicable in Australia also provides mechanism for price control which is not the intent of Section 171. This Authority has also not been mandated to work as a price controller or regulator and it is only empowered to ensure that the benefits of tax reduction and ITC are passed to the consumers as per the specific provisions of Section 171 (1) of the CGST Act, 2017. It is strange that the Respondent is advocating implementation of the price control measures under the CGST Act, 2017. The above claim of the Respondent also runs contrary to the argument of the Respondent which claims that no fetters can be placed on his power to fix prices of his products in violation of the provisions of Article 19 (1) (g) of the Constitution. Therefore, the above contention of the Respondent is untenable and hence it cannot be accepted.

49.The Respondent has also relied upon the judgements passed by Hon’ble Apex Court and the Hon’ble High Courts of Allahabad and Madras in the cases of Commissioner of Income Tax Bangalore v. B. C. Srinivasa Setty (1981) 2 SCC 460, Samsung (India) Electronics Pvt. Ltd. v. Commissioner of Commercial Taxes U. P. Lucknow 2018 [11] G.S.T.L. 367 and Eternit Everest Ltd. v. UOI 1997 (89) E.L.T. 28 (Mad.) and claimed that in the absence of the machinery provisions the provisions of Section 171 could not be implemented. In this connection it is stated that no tax has been imposed under Section 171 and hence no machinery or methodology and procedure is required to be framed separately under Section 171 as it itself prescribes such methodology and procedure. Moreover Rule 122 of the CGST Rules, 2017 provides for constitution of this Authority for determination whether the benefits of tax reduction or ITC have been passed, Rule 123 provides for the constitution of the Screening and Standing Committee on Anti-Profiteering to prima facie look in the complaints made under Section 171 (1) and Rule 129 stipulates creation of the office of DGAP to carry out detailed investigation in respect of the cases where the above benefits are required to be passed on. Under Rule 136 this Authority has been empowered to get its orders monitored through the vast network of field Tax Officers of the Central and the State Governments. Hence, there is more than enough machinery to implement the provisions of Section 171. Therefore, the above judgements are not being relied upon.

50.The Respondent No. 1 has further pointed out that the benefit of tax reduction was not required to be passed on by commensurate reduction in the price only. However, the above contention of the Respondent runs contrary to the provisions of Section 171 which clearly state that “Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.” Therefore, all the claims made by the Respondent on the basis of the provisions of the Indian Contract Act, 1872 are not tenable.

51.The Respondent has also claimed that he has passed on the benefit of reduction in the rate of GST to his recipients by supplying additional quantity of the product free of cost. He has also submitted a copy of the certificate issued by his Chartered Accountant to support his claim. However, the Respondent has not supplied the following details to prove his above contention:-

1. He has not submitted the details of the base price and the final price which he was charging on the above product before the tax reduction.

2. He has not supplied the details of the base price and the final price which he was required to charge commensurate to the rate reduction after the rate reduction.

3. He has not supplied the details of the quantity which he was supplying of the above product before the tax reduction.

4. He has not supplied the details of the additional quantity which was required to be supplied, commensurate with the benefit of rate reduction.

5. He has not explained whether the additional quantity supplied by him was proportionate to the rate reduction.

6. He has not produced any evidence to prove from which date the additional quantity was supplied post rate reduction.

7. He has also not supplied copy of even a single invoice which could prove that he has passed on the benefit of tax reduction by supplying additional quantity of the above product.

8. He has not supplied copy of any advertisement or notice vide which the customers were informed that he was passing on the benefit of tax reduction by supplying additional quantity of the above product.

In the absence of the above details the claim of the Respondent made on this respect is frivolous and hence the certificate issued by the Chartered Accountant cannot be relied upon.

52. Reliance has also been placed by the Respondent No. 1 on the order passed by this Authority in the case of Ankit Kumar Bajoria vs. M/s Hindustan Unilever Limited 2019 (21) GSTLJ 74 (N. A. P. A.) wherein this Authority has accepted the argument of additional grammage being a correct way of passing on the benefit of tax reduction in terms of Section 171 of the CGST Act, 2017. Perusal of the above cited order shows that onetime benefit of grammage was allowed to M/s Hindustan Unilever Limited as it had provided the complete details regarding the passing on of the benefit by way of increase in grammage. However, in the present case the Respondent No. 1 has not submitted any information regarding the benefit passed on by way of increase in additional quantity as has been mentioned in para supra. He has also not supplied any evidence to prove that the additional quantity supplied by him was proportionate to the reduction in the rate of tax, it was supplied on account of the rate reduction and it was not part of any existing scheme of sale promotion, as was provided by M/s Hindustan Unilever Limited. Therefore, the above cited case is of no help to the Respondent No. 1.

53. The Respondent has further contended that there was no stipulation in Section 171 which required that the benefit of rate reduction should be passed on to the customers by “commensurate reduction” only in cash and methods like increase in the quantity of goods supplied and promotional offer of giving an item free along with main product etc. were not to be followed. He has also claimed that the provisions of the above Section could not be constructed to come to the above conclusion. As has been discussed in para supra the benefits mentioned in Section 171 (1) have to be passed on by way of commensurate reduction in prices only and the above Section does not provide for any other method of passing on the benefit. Therefore, the provisions of the above Section cannot be construed in any other manner. He has also relied upon the judgement passed by the Hon’ble Supreme Court in the case of Southern Petrochemical Industries Company Ltd. v. Electricity Inspector and ETIO and others (2007) (5 5CC) 447 in his support. However, in view of the express provisions of Section 171 (1) of the CGST Act, 2017, the above judgement does not help the cause of the Respondent.

54. The Respondent No. 1 has further contended that the additional GST charged has been included in the profiteered amount whereas it has been deposited with the Government. In this connection it would be appropriate to mention that the Respondent No. 1 has not only collected excess base price from the customers which they were not required to pay due to the reduction in the rate of tax but he has also compelled them to pay additional GST on the excess base price which they should not have paid. By doing so the Respondent No. 1 has defeated the very purpose of both the Central and the State Governments which aimed to provide the benefit of rate reduction to the general public. The Respondent No. 1 was legally not required to collect the excess GST and therefore, he has not only violated the provisions of the CGST Act, 2017 but has also acted in contravention of the provisions of Section 171 (1) of the above Act as he has denied the benefit of tax reduction to his buyers by charging excess GST. Had he not charged the excess GST the customers would have paid less price while purchasing the above product from the Respondent and hence the above amount has rightly been included in the profiteered amount as it denotes the amount of benefit denied by the Respondent No. 1 as price includes tax also. The above amount can also not be ordered to be transferred to the CWFs as the Respondent No. 1 has deposited it in the Government Treasury and it can be refunded only to the Respondent if he is found eligible to claim it. The above amount has to be deposited in the CWFs as the buyers are not identifiable as per the provisions of Rule 133 (3) (c). Therefore, the above contention of the Respondent No. 1 is untenable and hence the same cannot be accepted.

55. The Respondent No. 1 has relied upon the case of R. S. Joshi Sales Tax Officer Gujarat v. Ajit Mills Limited (1977) 4 SCC 98 in this regard, wherein the Hon’ble Supreme Court had analysed what the term ‘collected’ meant in the context of the sales tax legislation of Gujarat. However, in view of the reasons given in para supra the law settled in the above case is not applicable in the facts of the present case.

56. The Respondent No. 2 has also contended that the investigation was beyond the period of limitation and was without jurisdiction. He has further contended that the methodology and period of investigation had not been provided in the CGST Act or the Rules. In this context it is mentioned that the issues raised by the Respondent No. 2 have already been discussed and findings recorded on them in the paras supra. Accordingly, the computation of profiteered amount made in respect of the Respondent No. 2 is held to be correct in terms of Section 171 of the CGST Act, 2017.

57. The Respondent No. 2 has further contended that he has passed on the benefit of rate reduction by way of increasing the grammage to the recipients as has been done by the Respondent No. 1. However, as has been mentioned above there is no evidence on record to prove the above claim of the Respondent No. 1. Hence, the above contention of the Respondent No. 2 is not maintainable.

58. Based on the above facts the profiteered amount is determined as ₹ 63,14,901/- in respect of the Respondent No. 1 and ₹ 2,33,456/- in respect of the Respondent No. 2 in terms of Rule 133 (1) of the CGST Rules, 2017, during the period from 15.11.2017 to 31.03.2019. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent No. 1 & 2 shall reduce their prices commensurately as has been detailed above. The Respondent No. 1 & 2 are also directed to deposit an amount of ₹ 63,14,901/- and ₹ 2,33,456/- respectively in the CWF of the Central and the concerned State Governments, as the recipients are not identifiable, as per the provisions of Rule 133 (3) (c) of the above Rules alongwith 18% interest payable from the dates from which the above amount was realised by them from their recipients till the date of deposit. The above amount shall be deposited within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned Commissioners CGST/SGST. The State/Union Territory wise amount of benefit to be deposited by the Respondent No. 1 in the concerned CWFs is as under:-

59. Since the Respondent No. 2 has made supplies in the NOT of Delhi only the profiteered amount shall be deposited by him in the CWF of the Central Government and the Government of NCT of Delhi respectively, as per the provisions of Rule 133 (3) (o) along with the interest @ 18% within a period of 3 months failing which the same shall be recovered by the concerned Commissioner CGST/SGST as per the provisions of their respective Acts.

60. It is evident from the above narration of facts that the Respondent No. 1 and 2 have denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and have thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, both the Respondents are apparently liable for the imposition of penalty under Section 171 (3A) of the CGST Act, 2017. Therefore, a show cause notice be issued directing them to explain why the penalty prescribed under the above sub-Section should not be imposed on him.

61. Further, this Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondents as ordered by this Authority is  deposited in the CWFs of the Central and the State Governments as per the details given above in Para-58. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioner within a period of 4 months from the date of receipt of this order.

62.A copy each of this order be supplied to the Applicants, the Respondents and all the concerned Commissioners CGST /SGST for necessary action. File be consigned after completion.