2026-VIL-229-GSTAT-DEL-NAPA
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  2. 2026-VIL-229-GSTAT-DEL-NAPA

SGST Tribunal

GST - Anti-Profiteering - Applicability of Section 171 of CGST Act where supplier obtained GST registration after rate reduction following demerger - Respondent supplied modular kitchens and related goods, and contended that it obtained GST registration only from 21.11.2017, that pre-rate-reduction transactions were undertaken by the transferor company, and that Section 171 applies only to transitional contracts, whereas the DGAP relied on a quotation of the transferor and a later invoice of the Respondent - Whether the transactions could be examined under Section 171 of CGST Act in view of the later GST registration and the demerger under the NCLT order, and whether absence of any pre-rate-reduction supply by the Respondent affects such determination - HELD - The date of registration is a relevant circumstance but is not by itself determinative of the applicability of Section 171. The NCLT order treats the income and expenditure of the demerged Home Retail Business Undertaking as that of the Respondent, but it cannot be read in isolation as conclusively fixing the identity of the supplier for each transaction. The question must be decided on the cumulative effect of the demerger arrangement, invoices, registration particulars and pricing documents showing continuity of the business transferred. The absence of a pre-rate-reduction tax invoice in the name of the Respondent is not conclusive against Section 171, as the provision requires the benefit of reduction in rate of tax to be passed on and does not restrict itself to transitional contracts. A quotation, however, cannot by itself establish the price for comparison unless its nexus with the later supply is shown from the record - The objection that the transactions cannot be examined under Section 171 merely because of the later registration is rejected and the issue is decided against the Respondent - Scope of investigation by the DGAP beyond the goods or services covered in the complaint - The Respondent contended that the DGAP exceeded its jurisdiction by examining goods and services beyond the subject matter of the complaint, and that the later inserted Rule 129(5) confines the investigation - Whether the DGAP's investigation is restricted to the specific goods or services identified in the complaint - HELD - Rule 129(2) of the CGST Rules empowers the DGAP to investigate whether the benefit of reduction in rate of tax or of input tax credit has been passed on in respect of any supply of goods or services. Following the Delhi High Court decision, Section 171 is widely worded, the expression 'any' includes some as well as all, and the investigative power is not limited to goods or services in respect of which the complaint is received. The extension of investigation to other supplies does not render it without jurisdiction where the DGAP does not travel outside the statutory purpose of determining whether the benefit was passed on, and the Respondent failed to show otherwise. The subsequent insertion of Rule 129(5) does not alter the scope of power under Rule 129(2) - The objection that the DGAP acted without jurisdiction is not sustainable and the issue is decided against the Respondent - Reliability of methodology for customised and composite supplies after remand by the NAA - The NAA remanded the matter for examination of entries taxed at lower rates, variations in pre and post rate-reduction base prices including a credit note and sale of damaged goods, mismatch in State-wise totals, and the legal identity of the supplier. The Respondent contended that customised modular kitchens supplied for a lump-sum consideration cannot be compared component-wise, that quotations do not evidence the pre-rate-reduction price, and that the DGAP prescribed a methodology contrary to Rule 126 - Whether the customised and composite nature of the supplies, the lump-sum arrangement and the manner of evidencing prices affect comparability, and whether the methodology adopted by the DGAP is sustainable - HELD - No fixed or uniform formula can be laid down for determining profiteering, and the methodology must be fair, reasonable and responsive to the peculiarities of the case. Customised nature of supplies does not by itself exclude them from Section 171. Quotations furnished by the Respondent do not establish the price at which supply was made, and are not taken into account as the DGAP compared the tax invoices issued before and after the rate reduction. The calculation compared base prices exclusive of GST and applied the reduced rate to determine the commensurate price. Entries taxed at lower rates fell within the rate reductions examined. A credit note carried no profiteering, and in the absence of cogent evidence that sales of damaged goods were unrelated to the normal sales, variations in individual transactions do not justify their wholesale exclusion. The mismatch in State-wise totals arose from an inadvertent error in one State figure, which on correction left an insignificant residual difference that is ignored. The contention on Rule 126 has no merit, as Rule 126 empowers the Authority to determine methodology while the DGAP applies it during investigation - The methodology is held to be a permissible basis for determining the benefit to be passed on under Section 171(1) and the issue is decided against the Respondent - Effect of withdrawal of complaint on continuation of proceedings under Section 171 of CGST Act - The Applicant withdrew the complaint after the matter was referred to the DGAP for investigation under Rule 129, and the Respondent contended that no grievance survived - Whether the subsequent withdrawal of the complaint affects the continuation or validity of the proceedings under Section 171 - HELD - Once the matter is taken up under the statutory mechanism and referred for investigation, the proceedings must be examined in accordance with the Act and the Rules. Proceedings under Section 171 are not a purely private dispute depending on the complainant's continued grievance, as the obligation to pass on the benefit is statutory and its compliance is determined by the competent authorities. Anti-profiteering provisions are a consumer-welfare measure, and withdrawal cannot retrospectively invalidate the proceedings already undertaken or extinguish the statutory obligation - The withdrawal does not bring the proceedings to an end or invalidate the investigation, and the issue is decided against the Respondent - Failure to pass on benefit of rate reduction and need for proof of wilful retention - The DGAP determined, on invoice-wise data, the benefit not passed on, while the Respondent contended that earning profit or increase in selling price is not profiteering, that no intention was established, and that input costs, market conditions, demand, supply and labour costs explained the price increase - Whether the Respondent failed to pass on the benefit arising from reduction in rate of tax by commensurate reduction in prices in contravention of Section 171(1), and whether profiteering can be sustained in the absence of proof of wilful retention - HELD - Section 171(1) casts a statutory obligation to pass on the benefit, and the enquiry is directed to the existence and extent of the benefit and whether it was passed on. A finding of intention or wilful retention is not a condition precedent. A mere increase in price or earning of profit, without establishing the quantum of benefit and its non-passing on, is not profiteering. The presumption that a rate reduction must result in a reduction in prices is rebuttable only by cogent, clear and unequivocal evidence, and the supplier must justify offsetting factors. General assertion of commercial factors without contemporaneous and transaction-specific evidence cannot displace the invoice-wise computation - The Respondent failed to pass on the benefit in contravention of Section 171(1), and the issue is answered in the affirmative - Appropriate
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