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Delhi HC stays NAA Order against Johnson & Johnson

Johnson & Johnson - Taxscan

The Delhi High Court has stayed the order for a penalty by National Anti-Profiteering Authority ( NAA ) against Johnson and Johnson for allegedly resorting to profiteering by not passing on the benefit of tax reduction to buyers of sanitary napkins through commensurate price cut.

A Divison Bench of Justice Vipin Sanghi and Justice Sanjeev Narula has also sought response of the Centre, NAPA, and Director General of Anti-Profiteering on the company’s petition challenging the show cause notice and penalty notice to it.

The company has challenged NAPA’s November 21, 2019 order that it did not pass on the commensurate benefit of reduction in the rate of tax to its recipients between July 27, 2018 and September 30, 2018 and hence profiteered Rs 42.7 crore in contravention to the provision of the Central Goods and Services Tax Act.

The DGAP had stated that the respondents were immediately given effect to the reduction of GST rate from 12% to Nil on sanitary napkins appears to be correct, but based on the invoice issued by the distributors to the ultimate consumers it was observed that the base price of the product has been increased and the final selling price had remained the same despite the GST rate reduction. On account of the reduction in GST rate from 12% to nil the ITC reversed on the closing stock had become a cost to the respondent and no ITC was available as sanitary napkins were exempted. Since the cost of the ITC was more compared to the excess realisation made during such period and the allegation of profiteering by the respondent was not sustainable

The NAA held that the respondent has denied the benefit of rate reduction to the buyers of the product of sanitary napkin, he had increased the base price more than what he was entitled to increase in contravention of section 171(1) of CGST Act 2017 and has thus resorted to profiteering which is an offence under section 171(3a) of the act and therefore he liable for imposition of penalty under the act.

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