Fact: M/s Excel Rasayan Pvt. Ltd (“the respondent”) was a SSI unit, manufacturing synthetic detergents falling under Chapter 34 of the erstwhile Central Excise Tariff Act, 1944 and respondent is availing SSI exemption and charging VAT @ 12.5 % on the base prices.
Respondent Interpretation of Law: The respondent submitted that on introduction of the GST, 28% tax was levied and since this disturbed his pricing pattern he had reduced the base prices. Further w.e.f. November 15, 2017, the GST rate on his products was reduced from 28% to 18%, though the base prices were increased, they were much less than the base prices in the Pre-GST era. The respondent further quoted the Hon’ble Finance Minister stating that the GST rate of 28% was tax neutral and only pertained to those unit which are paying 12% central excise duty and 12.5% VAT, however these rates were not applicable to them as they were availing exemption under SSI Exemption.
Held: The Directorate General of Anti-Profiteering (DGAP) vide Case No. 02/2019 dated January 16, 2019 which state that the respondent was fully aware of the Notification No. 41/2017-Central Tax (Rate) dated November 14, 2017 whereby the rate of GST was reduced from 28% to 18% and he was also fully aware of Section 171 of the CGST Act 2017, and was bound to pass on the benefit of reduction in the rate of tax by commensurate reduction in the prices of the products, therefore he is liable for penalty. The Respondent has deliberately defied the law on the pretext that he had not increased the prices of his products when the rate of tax was increased to 28% and increased the base prices to maintain the same old selling price prior to reduction of rate of tax from 28% to 18%, by issuing wrong invoices to his recipients. Further the respondent was indulged in profiteering in violation of the provisions of Sec 171 of the CGST Act, 2017 and has not passed on the benefit of reduction of tax as per Notification No. 41/2017- CT (R) dated November 14, 2017 in respect of the above products to his customers and therefore he is liable for penalty under rule 133(3)(d) of the CGST Rules, 2017.
Citation: [TS-8-NAA-2019-NT]