2026-VIL-227-GSTAT-DEL-NAPA
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SGST Tribunal

GST - Anti-Profiteering - Validity of investigation where the notice alleged non-reduction of MRP but profiteering was computed on the base price and the methodology was not communicated to the Respondent - Application alleged that the Respondent, a public sector enterprise, did not pass on the benefit of reduction in rate of tax from pre-GST to post-GST in respect of packaged drinking water, as the MRP fixed by the Railway Board was not reduced - Respondent contended that the computation based on the average base price differed from the allegation of non-reduction of MRP in the notice, that it was denied an effective opportunity to rebut, and that the methodology was not communicated at the notice stage - Whether the investigation and computation based on the transfer price and base price are vitiated for want of notice of the allegation and methodology - HELD - The notice informed the Respondent of the reference and the allegations, and the DGAP did not allege that the MRP was not reduced since it recorded that the MRP is fixed by the Railway Board. The entire computation was based on the transfer price, which the Respondent admitted to be the base price plus taxes, and not on the MRP. The Respondent actively participated in the investigation and produced invoice-wise sales details, returns and sample invoices. The DGAP is not required to communicate the methodology adopted for investigation. Following the Hon'ble High Court of Delhi, no fixed or uniform formula can be laid down for determining profiteering, the authority may adopt a methodology case by case so long as it is fair and reasonable, and comparison of the pre-GST average base price with the post-GST selling price was a correct methodology - The contentions of the Respondent regarding the notice and methodology are rejected - Contravention of Section 171 of CGST Act, 2017 by a Government enterprise supplying packaged drinking water at transfer price while MRP is fixed by the Ministry of Railways - Whether the Respondent has contravened Section 171 by not passing on the benefit of reduction in rate of tax - HELD - The competent authority had granted the Respondent the discretion to fix the transfer price, and the Respondent was required to reduce the transfer price and not the MRP on the reduction in tax rate. Section 171 does not distinguish between complimentary or subsidised supplies or between private and Government organisations, and the Respondent as a registered person filing returns and collecting tax is bound by the Act. The price of the product forms part of the fare collected from passengers of premium trains. The Respondent accepted the bids of the public private partnership plants and sold the product to licensees at the same price, hence all plants were rightly considered. Following the Hon'ble High Court of Delhi, costing and market factors are irrelevant as the authority only examines whether the reduction in tax rate has been passed on by commensurate reduction in price, and any offsetting cost must be established on a cogent basis. The Respondent never reduced its basic prices commensurately after 01.07.2017 - Profiteering is established and the Respondent has contravened Section 171. The DGAP report is accepted and the Respondent is directed to deposit the profiteered amount in the Central and State Consumer Welfare Funds in equal ratio - Period of investigation under Section 171 of CGST Act, 2017 where no limitation is prescribed - The DGAP investigated the period from the date of implementation of GST up to May 2020 in respect of non-passing on of the benefit of reduction in rate of tax - Respondent contended that the investigation cannot go beyond one year, being the Financial Year 2017-18, since a reasonable period is implied in the law and costs were volatile during the period - Whether the investigation by the DGAP for the period beyond one year is impermissible - HELD - Section 171 does not prescribe any period of investigation, as conceded by the Respondent, and the reasonable period depends on the facts and circumstances of each case. The date of implementation of GST is the relevant date when the benefit of tax reduction becomes due to the recipients. The period of investigation is determined by the DGAP so that the benefit of tax reduction is extended to the maximum number of recipients - The period of investigation was rightly determined by the DGAP and the contention is rejected - Levy of interest under Rule 133(3)(c) of CGST Rules, 2017 and penalty under Section 171(3A) of CGST Act, 2017 on the profiteered amount for a period commencing before the insertion of the provisions - Profiteering by the Respondent was established for the period from 01.07.2017 to 31.05.2020 - The interest provision was inserted with effect from 28.06.2019 and the penalty provision came into force with effect from 01.01.2020 - Whether interest and penalty are leviable on the profiteered amount - HELD - Interest can be imposed only for the period commencing from 28.06.2019 and not for any period prior thereto, as held by the coordinate Bench of this Tribunal. Since the period of contravention extends to a period after 01.01.2020, the provision for penalty of ten per cent of the profiteered amount under Section 171(3A) is attracted, and no penalty is leviable if the profiteered amount is deposited within thirty days of the order - The Respondent is liable to pay interest at 18% from 28.06.2019 till the date of deposit, the share of the States where State Consumer Welfare Funds are not created is to be deposited in the Central Consumer Welfare Fund, and the penalty at ten per cent shall not be payable if the profiteered amount with interest is deposited within thirty days.
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